(registered trademark)
ISIGII-ANN-0196
7758
FIDELITY INSTITUTIONAL
SHORT-INTERMEDIATE
GOVERNMENT
PORTFOLIO
CLASS II
ANNUAL REPORT
NOVEMBER 30, 1995
CHECK PAGE NUMBERS !!!
CONTENTS
<TABLE>
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<S> <C> <C>
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 13 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 18 Notes to the financial statements.
REPORT OF INDEPENDENT ACCOUNTANTS 21 The auditors' opinion.
DISTRIBUTIONS 22
</TABLE>
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, FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY, AND
ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING CHARGES AND EXPENSES,
CALL 1-800-843-3001. READ THE PROSPECTUS
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although the markets were fairly positive in 1995, no one can predict what
lies ahead for investors. The previous year, stocks posted below-average
returns and bonds had one of the worst years in history. This downturn
followed a period in which the investing environment was generally very
positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $100,000 investment. A fund's total return
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells investments that have grown in value). You can also look at income to
measure performance. On December 30, 1993 the fund commenced sale of Class
II shares. Class II shares bear a .25% 12b-1 shareholder service fee. This
fee is not reflected in returns prior to that date. Returns prior to
December 30, 1993 reflect Class I's performance. Had Class II's 12b-1 fee
been reflected, prior returns would have been lower.
CUMULATIVE TOTAL RETURNS
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PERIODS ENDED NOVEMBER 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Institutional Short-Intermediate Government Portfolio - Class II 11.63% 41.26% 91.77%
Lehman Brothers 1-3 Year Government Bond Index 10.22% 39.88% n/a
Salomon Brothers Treasury/Agency 1-5 Year Index 11.96% 44.62% n/a
Average Short U.S. Government Fund 10.73% 38.77% n/a
Consumer Price Index 2.47% 14.80% 39.26%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class II's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
began on November 10, 1986. 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 II's returns to the performance of the
Lehman Brothers 1-3 Year Government Bond Index and the Salomon Brothers
Treasury/Agency 1-5 Year Index - both broad measures of the performance of
U.S. government bonds. To measure how Class II stacked up against its
peers, you can compare it to the average short U.S. government fund, which
reflects the performance of 136 funds with similar objectives tracked by
Lipper Analytical Services over the past 12 months. These benchmarks
include reinvested dividends and capital gains, if any. Comparing Class
II'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
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PERIODS ENDED NOVEMBER 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Institutional Short-Intermediate Government Portfolio - Class II 11.63% 7.15% 7.45%
Lehman Brothers 1-3 Year Government Bond Index 10.22% 6.94% n/a
Salomon Brothers Treasury/Agency 1-5 Year Index 11.96% 7.66% n/a
Average Short U.S. Government Fund 10.73% 6.76% n/a
Consumer Price Index 2.47% 2.80% 3.71%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take Class II shares' actual (or cumulative)
return and show you what would have happened if Class II had performed at a
constant rate each year.
$100,000 OVER LIFE OF FUND
$195,527
$190,822
$100,000 OVER LIFE OF FUND: Let's say you invested $100,000 in Fidelity
Institutional Short-Intermediate Government Portfolio - Class II on
November 30, 1986, shortly after the fund started. As the chart shows, by
November 30, 1995, the value of your investment would have grown to
$190,822 - a 90.82% increase on your initial investment. For comparison,
look at how the Salomon Brothers Treasury/Agency 1-5 Year Index did over
the same period. With dividends reinvested, the same $100,000 would have
grown to $195,527 - a 95.53% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite
direction of interest rates. In turn, the share
price, return, and yield of a fund that invests in
bonds will vary. That means if you sell your
shares during a market downturn, you might
lose money. But if you can ride out the market's
ups and downs, you may have a gain.
(checkmark)
Class II shares bear a .25% 12b-1 fee that is not reflected in returns
prior to December 30, 1993. Returns prior to that date are those of Class
I, the original class of the fund. Had Class II's 12b-1 fee been reflected,
prior returns would have been lower.
TOTAL RETURN COMPONENTS
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YEARS ENDED NOVEMBER 30,
1995 1994 A 1993 1992 1991
Dividend return 7.29% 5.37% 6.12% 6.90% 8.25%
Capital appreciation return 4.34% -6.78% 0.41% 0.82% 3.06%
Total return 11.63% -1.41% 6.53% 7.72% 11.31%
</TABLE>
A FOR THE PERIOD 12/30/93 THROUGH 11/30/94.
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.
DIVIDENDS AND YIELD
PERIODS ENDED NOVEMBER 30, 1995 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.36(cents) 31.25(cents) 63.89(cents)
Annualized dividend rate 6.80% 6.53% 6.78%
DIVIDENDS per share show the income paid by Class II for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $9.59 over the past month, $9.54
over the past six months, and $9.43 over the past year, you can compare
Class II's income over these three periods.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
The U.S. bond markets posted strong returns for
the 12 months ended November 30, 1995. For the
12-month period, the Lehman Brothers Aggregate
Bond Index - a broad measure of U.S. taxable
bonds - posted a total return of 17.64%. A strong
rally starting in November 1994 helped bonds
recover from the effects of the sharply rising
interest rate environment seen earlier that year.
Indications of a slowing economy and a relative
absence of inflation pressures encouraged bond
investors, helping to push interest rates lower.
Monetary policy also played a role in the bond
market's performance. In an effort to thwart the
possibility of a recession, the Federal Reserve
Board lowered the fed funds rate - the rate banks
charge each other for overnight loans - by 0.25%
in July to 5.75%. This policy reversal followed a
string of seven successive interest rate increases
in 1994 and early 1995. Mortgage-backed securities
also benefited from this environment, as illustrated
by the performance of the Salomon Brothers
Mortgage Index, which returned 16.30% during the
period. Markets outside of the U.S. had mixed
returns. Emerging markets recovered from the
lows initiated by Mexico's peso devaluation in
December 1994. The J.P. Morgan Emerging
Markets Bond Index returned 10.67% during the
12-month period. Declining interest rates and a
global economic slowdown helped the Salomon
Brothers World Government Bond Index - which
includes U.S. issues - to post an 18.13% return.
An interview with
Curt
Hollingsworth,
Portfolio Manager
of Fidelity
Institutional
Short-Intermediate
Government
Portfolio
Q. CURT, HOW DID THE FUND PERFORM?
A. It has done well. For the 12 months ended November 30, 1995, Class II
had a total return of 11.63%. That beat the total return for the average
short-term U.S. Government bond fund tracked by Lipper Analytical Services,
which returned 10.73% for the same period. The Salomon Brothers
Treasury/Agency 1-5 Year Index posted a return of 11.96% for the 12-month
period.
Q. WHAT IS MEANT BY TOTAL RETURN?
A. Total return is simply the "total" amount of return to the fund's
shareholder, and reflects a sum of income and changes in share price.
Interest income is the main source of return for a bond fund over the long
term. However, over the shorter term, changes in a bond fund's share price
can play a significant role. Fortunately, total return is easy to explain
using a "dollars in, dollars out" example. If someone invested $100 in this
bond fund a year ago and reinvested all dividends and capital gains, the
investment would have been worth $111.63 as of November 30, 1995. That is
what is meant by a total return of 11.63%.
Q. WHAT HELPED THE FUND TOP THE LIPPER AVERAGE OVER THE PAST YEAR?
A. My sense is that as interest rates were rising in 1994, other bond funds
within this peer group were structured so that they had shorter and shorter
durations. Duration is a measure of a bond's or a bond fund's sensitivity
to changes in interest rates. The longer a fund's duration, the more
sensitive its share price is to changes in interest rates. This fund did
not undergo a marked decrease in duration when interest rates rose in 1994.
It stayed the course and maintained a duration that was in line with the
market for Treasury and agency notes maturing in one to five years. As a
result, it appears the fund was better able to participate in the bond
market rally we've seen since November 1994, as interest rates have come
down significantly.
Q. THE FUND'S INVESTMENTS IN MORTGAGE-BACKED SECURITIES INCREASED TO 23.3%
AT THE END OF THE PERIOD. WHERE DID YOU FIND OPPORTUNITIES?
A. There were two areas: agency mortgage-backed securities with coupon
rates significantly lower than current interest rates, and agency
mortgage-backed securities with coupon rates significantly higher than
current interest rates.
Q. WHY WERE THE MORTGAGE-BACKED SECURITIES WITH LOWER COUPON RATES
ATTRACTIVE?
A. They were attractive because they generally tend to perform more like
Treasury securities in that their durations don't lengthen or shorten as
much as other mortgage-backed securities with changes in interest rates.
Q. AND WHY WERE MORTGAGE-BACKED SECURITIES WITH COUPON RATES HIGHER THAN
PREVAILING MARKET RATES ATTRACTIVE?
A. These are securities that were issued ten to fifteen years ago. As with
all mortgage-backed securities, prepayment risk - the risk that mortgages
within a security will be paid off early - is an issue with these bonds,
particularly since reinvesting the principal at lower prevailing rates
could reduce the fund's income. However, prepayment risk with these
securities typically is muted by the fact that homeowners in these mortgage
pools have had numerous chances to refinance at lower rates, but have not.
Perhaps they have credit problems, or have such a small amount to pay back
that going through the refinancing process is not worth it to them.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook is that both inflation and interest rates will be more stable
in the coming year than they have been in recent years. As a result, I plan
to spend more time looking for opportunities in the mortgage-backed
securities market. These securities tend to perform better during periods
of stability because they offer a yield advantage over Treasuries with
similar maturities. If I am successful in uncovering these opportunities,
they could add yield and return that would benefit the fund's shareholders.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER,
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to provide a high level of current income
consistent with preserving principal
START DATE: November 10, 1986
SIZE: as of November 30, 1995, more than
$348 million
MANAGER: Curt Hollingsworth, since 1987;
manager, the Spartan Limited Maturity
Government, Fidelity Short-Intermediate
Government and Spartan Short-Intermediate
Government funds, and North Carolina Capital
Management Trust: Term Portfolio; previously
managed the Spartan Long-Term Government
Bond, Fidelity Government Securities and
Fidelity Advisor Government Investment funds;
joined Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON MANAGING THROUGH THE
UPS AND DOWNS OF THE MARKET:
"The fund benefited from the bond market's
rally because it did not become more
defensive, even when things looked the worst for
bonds. When the bond market finally turned
and started rising in 1994, it helped this fund,
apparently more than others. If the fund had
shifted into shorter securities, it wouldn't have
fully participated in 1995's rebound of the bond
market when it turned.
"It can be difficult to stay the course when
things look the bleakest; the overwhelming
temptation can be to do the opposite. When
you've determined something can add value
going forward, it's important to maintain
discipline and not sell it just because it has
gone down in price. Holding on to an
investment and riding out the short-term
fluctuations often can help you achieve better
investment results."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF NOVEMBER 30, 1995
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Under 5% 3.7 7.0
5 - 5.99% 7.4 13.5
6 - 6.99% 7.3 13.6
7 - 7.99% 14.6 13.3
8 - 8.99% 31.9 26.0
9 - 9.99% 27.4 9.9
10% and over 4.8 5.4
Zero Coupon Bonds 0.1 0.1
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1995
6 MONTHS AGO
Years 3.1 3.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF NOVEMBER 30, 1995
6 MONTHS AGO
Years 2.3 2.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF NOVEMBER 30, 1995 AS OF MAY 31, 1995
U.S. government
agency mortgage-
backed securities 23.3%
U.S. government
and government
agency obligations 73.0%
Collateralized
mortgage obligations
(CMOs) 0.9%
Short-term
investments 2.8%
U.S. government
agency mortgage-
backed securities 19.3%
U.S. government
and government
agency obligations 67.6%
Collateralized
mortgage obligations
(CMOs) 1.9%
Short-term
investments 11.2%
Row: 1, Col: 1, Value: 2.8
Row: 1, Col: 2, Value: 1.9
Row: 1, Col: 3, Value: 73.0
Row: 1, Col: 4, Value: 22.3
Row: 1, Col: 1, Value: 11.2
Row: 1, Col: 2, Value: 1.9
Row: 1, Col: 3, Value: 67.59999999999999
Row: 1, Col: 4, Value: 19.3
INVESTMENTS NOVEMBER 30, 1995
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 73.0%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 51.5%
4 3/8%, 11/15/96 $ 5,450,000 $ 5,397,190
7 1/4%, 11/15/96 19,815,000 20,143,136
8 1/2%, 5/15/97 56,888,000 59,323,375
8 3/4%, 10/15/97 15,600,000 16,518,996
9%, 5/15/98 25,550,000 27,630,026
9 1/4%, 8/15/98 39,810,000 43,591,950
8 7/8%, 11/15/98 6,400,000 6,990,016
9 1/8%, 5/15/99 360,000 400,442
7 3/4%, 12/31/99 7,160,000 7,732,800
TOTAL U.S. TREASURY OBLIGATIONS 187,727,931
U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.5%
Federal Agricultural Mortgage Corporation:
6.44%, 5/28/96 3,500,000 3,513,685
6.92%, 8/10/00 1,040,000 1,089,733
Federal Home Loan Bank:
6.52%, 4/24/97 830,000 840,765
6.20%, 7/17/02 960,000 972,525
4 3/4%, 2/24/27 (callable) 900,000 890,010
Federal Home Loan Mortgage Corporation:
4.78%, 2/10/97 (callable) 440,000 435,428
6.55%, 10/2/02 720,000 745,650
Federal National Mortgage Association:
3%, 7/13/98 (a) 640,000 654,300
9.40%, 8/10/98 600,000 656,718
0%, 11/30/99 610,000 482,638
6.33%, 8/11/00 1,240,000 1,267,880
Government Trust Certificates:
(assets of Trust guaranteed by U.S.
Government through Defense Security
Assistance):
Class 1-B, 9 1/8%, 11/15/96 359,426 365,418
Class 1-C, 9 1/4%, 11/15/01 1,349,000 1,492,763
Class 2-E, 9.40%, 5/15/02 2,870,000 3,190,292
Class G-2, 8%, 5/15/98 2,885,696 2,964,648
Class T-2, 9 5/8%, 5/15/02 877,000 975,663
(assets of the Trust guaranteed by U.S.
Government through Export-Import Bank):
Series 1992-A 7.02%, 9/1/04 1,201,500 1,250,904
Series 1993-A 4.86%, 4/1/98 415,000 408,983
Series 1993-C 5.20%, 10/15/04 340,800 330,416
Series 1993-D 5.23%, 5/15/05 582,128 562,936
Series 1994-F 8.178%, 12/15/04 13,238,324 14,263,130
Series 1995-A 6.28%, 6/15/04 3,900,000 3,948,750
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Private Export Funding Corporation secured:
5 3/4%, 4/30/98 $ 750,000 $ 751,846
9.10%, 10/30/98 130,000 141,863
9 1/2%, 3/31/99 4,109,000 4,568,263
5.65%, 3/15/03 997,500 992,712
5.80%, 2/1/04 170,000 168,708
6.86%, 4/30/04 390,150 401,964
State of Israel (guaranteed by
U.S. Government through Agency
for International Development):
5 1/4%, 3/15/98 760,000 755,250
7 3/4%, 4/1/98 4,510,354 4,623,131
4 7/8%, 9/15/98 5,750,000 5,645,781
6%, 2/15/99 240,000 242,575
7 1/8%, 8/15/99 1,640,000 1,716,624
7 3/4%, 11/15/99 10,279,000 10,980,542
5 3/4%, 3/15/00 1,000,000 1,000,625
6.05%, 8/15/00 4,520,000 4,580,704
Student Loan Marketing Association
7.56%, 12/9/96 290,000 295,585
Twelve Federal Land Banks
7.95%, 10/21/96 410,000 418,134
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 78,587,542
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $262,945,210) 266,315,473
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 23.3%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 10.2%
5 1/2%, 5/1/98 93,876 92,702
6%, 2/1/98 to 5/1/98 424,801 425,065
6 1/2%, 4/1/98 to 5/1/08. 1,964,855 1,958,678
7%, 2/1/97 to 12/1/97. 398,341 404,440
7 1/2%, 12/1/96 to 11/1/12 3,009,703 3,098,593
8%, 9/1/07 to 12/1/09 4,312,526 4,454,024
8 1/2%, 5/1/06 to 5/1/17 3,936,258 4,094,171
9%, 12/1/07 to 3/1/22 3,616,269 3,812,241
9 1/2%, 6/1/17 to 2/1/23 5,644,324 6,043,884
10%, 1/1/09 to 12/1/19 1,682,226 1,827,516
10 1/2%, 1/1/16 to 5/1/21 5,097,731 5,594,203
11%, 6/1/13 to 1/1/19 70,096 77,371
11 3/4%, 7/1/13 55,530 61,781
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - CONTINUED
12%, 9/1/11 to 10/1/13 $ 55,569 $ 62,893
12 1/4%, 11/1/14 148,610 165,355
12 1/2%, 8/1/10 to 6/1/19 4,301,040 4,940,542
37,113,459
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 11.7%
5 1/2%, 9/1/00 to 12/1/01 22,707,958 22,216,070
6%, 12/1/10 640,000 628,397
6 1/2%, 7/1/00 to 2/1/10. 3,031,253 3,034,542
7%, 6/1/00 to 1/1/10. 2,397,868 2,429,673
8%, 5/1/99 to 8/1/09. 1,084,039 1,122,826
8 1/4%,12/1/01 1,893,501 2,047,347
8 1/2%, 10/1/98 to 9/1/23 3,573,248 3,733,038
9%, 11/1/97 to 8/1/21 4,236,636 4,484,598
9 1/2%, 5/1/09 to 11/1/21 598,930 641,122
10%, 1/1/17 1,641,311 1,803,505
12 1/2%, 3/1/16 271,231 314,880
12 3/4%, 10/1/13 29,868 34,600
42,490,598
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.4%
8 1/2%, 5/15/16 to 4/15/17 615,770 648,660
9%, 1/15/05 to 2/15/17 1,703,950 1,811,924
10%, 11/15/09 to 9/15/19 1,296,086 1,421,522
11%, 10/15/13 67,055 74,892
11 1/2%, 3/15/13 to 8/15/13. 186,079 211,831
12%, 1/15/14 to 3/15/14 246,565 281,237
12 1/2%, 11/15/14. 169,119 198,824
13%, 8/15/14 to 11/15/14. 334,679 392,400
13 1/2%, 7/15/11 86,393 103,455
5,144,745
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $83,201,124) 84,748,802
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY - 0.9%
Federal Home Loan Mortgage Corporation:
sequential pay Series 1353 Class A,
5 1/2%, 11/15/04 $ 260,015 $ 256,333
planned amortization class Series
1722-PC, 6 1/2%, 3/15/12 3,000,000 3,026,250
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $3,256,324) 3,282,583
REPURCHASE AGREEMENTS - 2.8%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.90%,
dated 11/30/95 due 12/1/95 $10,239,678 $10,238,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $359,640,658) $ 364,584,858
LEGEND
1. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
INCOME TAX INFORMATION
At November 30, 1995, the aggregate cost of investment securities for
income tax purposes was $359,716,687. Net unrealized appreciation
aggregated $4,868,171, of which $5,250,886 related to appreciated
investment securities and $382,715 related to depreciated investment
securities.
At November 30, 1995, the fund had a capital loss carryforward of
approximately $18,104,000 of which $14,816,000 and $3,288,000 will expire
on November 30, 2002 and 2003, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1995
ASSETS 2. 3.
4.Investment in securities, at value (including repurchase agreements of $10,238,000) 5. $ 364,584,858
(cost $359,640,658) - See accompanying schedule
6.Cash 7. 422
8.Receivable for investments sold 9. 1,048,064
10.Interest receivable 11. 3,685,490
12. TOTAL ASSETS 13. 369,318,834
LIABILITIES 14. 15.
16.Payable for investments purchased $ 20,330,732 17.
18.Payable for fund shares redeemed 104,742 19.
20.Distributions payable 183,097 21.
22.Accrued management fee 129,837 23.
24.Distribution fees payable 23 25.
26. TOTAL LIABILITIES 27. 20,748,431
28.NET ASSETS 29. $ 348,570,403
30.Net Assets consist of: 31. 32.
33.Paid in capital 34. $ 361,322,360
35.Undistributed net investment income 36. 484,470
37.Accumulated undistributed net realized gain (loss) on investments 38. (18,180,627)
39.Net unrealized appreciation (depreciation) on investments 40. 4,944,200
41.NET ASSETS 42. $ 348,570,403
CLASS I: 43. $9.60
NET ASSET VALUE, offering price and redemption price per share ($348,570,403 (divided by) 36,300,106 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1995
INVESTMENT INCOME 45. $ 26,047,703
44.Interest
EXPENSES 46. 47.
48.Management fee $ 1,541,845 49.
50.Distribution fees - Class II 258
51.Non-interested trustees' compensation 1,690
52.Interest 1,821 53.
54. TOTAL EXPENSES 55. 1,545,614
56.NET INVESTMENT INCOME 57. 24,502,089
REALIZED AND UNREALIZED GAIN (LOSS) 59. (3,161,030)
58.Net realized gain (loss) on investment securities
60.Change in net unrealized appreciation (depreciation) on investment securities 61. 16,819,220
62.NET GAIN (LOSS) 63. 13,658,190
64.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 65. $ 38,160,279
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
66.Operations $ 24,502,089 $ 24,960,165
Net investment income
67. Net realized gain (loss) (3,161,030) (17,869,674)
68. Change in net unrealized appreciation (depreciation) 16,819,220 (9,160,828)
69. NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 38,160,279 (2,070,337)
70.Distributions to shareholders (24,108,710) (22,380,525)
From net investment income
71. Class I
72. Class II (7,054) (5,500)
73. In excess of net realized gain - Class I - (314,479)
74. TOTAL DISTRIBUTIONS (24,115,764) (22,700,504)
75.Share transactions - net increase (decrease) (5,361,165) 19,722,651
76. TOTAL INCREASE (DECREASE) IN NET ASSETS 8,683,350 (5,048,190)
NET ASSETS 77. 78.
79. Beginning of period 339,887,053 344,935,243
80. End of period (including undistributed net investment income of $484,470 and $219,388, $ 348,570,403 $ 339,887,053
respectively).
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS I
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
81. YEARS ENDED NOVEMBER 30,
82. 1995 1994 A 1993 1992 1991
83.SELECTED PER-SHARE DATA
84.Net asset value, beginning of period $ 9.210 $ 9.890 $ 9.850 $ 9.770 $ 9.480
85.Income from Investment Operations
86. Net investment income .669 .597 .654 .721 .747
87. Net realized and unrealized gain (loss) .383 (.665) (.022) .014 .286
88. Total from investment operations 1.052 (.068) .632 .735 1.033
89.Less Distributions
90. From net investment income (.662) (.602) (.592) (.655) (.743)
91. From net realized gain - (.010) - - -
92. Total distributions (.662) (.612) (.592) (.655) (.743)
93.Net asset value, end of period $ 9.600 $ 9.210 $ 9.890 $ 9.850 $ 9.770
94.TOTAL RETURN 11.79% (.71) 6.53% 7.72% 11.31%
%
95.RATIOS AND SUPPLEMENTAL DATA
96.Net assets, end of period (000 omitted) $ 348,570 $ 339,788 $ 344,935 $ 188,918 $ 171,228
97.Ratio of expenses to average net assets .45% .45% .45% .45% .45%
98.Ratio of net investment income to average net assets 7.14% 7.06% 7.14% 7.29% 7.77%
99.Portfolio turnover 214% 303% 351% 355% 192%
</TABLE>
A EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS - CLASS II
100. YEARS ENDED NOVEMBER 30,
<TABLE>
<CAPTION>
<S> <C> <C>
101. 1995 1994 B
102.SELECTED PER-SHARE DATA
103.Net asset value, beginning of period $ 9.210 $ 9.880
104.Income from Investment Operations
105. Net investment income .647 .524
106. Net realized and unrealized gain (loss) .392 (.662)
107. Total from investment operations 1.039 (.138)
108.Less Distributions from net investment income (.639) (.532)
109.Share liquidation (Note 7) (9.610) -
110.Net asset value, end of period $ - $ 9.210
111.TOTAL RETURN C 11.63% (1.41)%
112.RATIOS AND SUPPLEMENTAL DATA
113.Net assets, end of period (000 omitted) $ - $ 99
114.Ratio of expenses to average net assets .70% .70% A
115.Ratio of net investment income to average net assets 6.89% 6.79% A
116.Portfolio turnover 214% 303%
</TABLE>
A ANNUALIZED
B FOR THE PERIOD DECEMBER 30, 1993 (COMMENCEMENT OF SALE OF CLASS II
SHARES) TO NOVEMBER 30, 1994.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1995
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.
Until November 30, 1995, the fund offered Class I and Class II shares. On
November 30, 1995, the sole shareholder of Class II redeemed all of its
outstanding shares and Class II was liquidated (see Note 7). Each class had
equal rights as to assets and voting privileges. Each class had exclusive
voting rights with respect to its distribution plan. Investment income,
realized and unrealized capital gains and losses, and the common expenses
of the fund were allocated on a pro rata 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 differed in its respective distribution 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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Income dividends were declared
separately for each class, while capital gain distributions were declared
at the fund level and allocated to each class on a pro rata 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.
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.
2. OPERATING POLICIES.
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 U.S. Treasury or Federal Agency Securities, the market
value of which is required to be
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
at least equal to the repurchase price. For term repurchase agreement
transactions, the underlying securities are marked-to-market daily and
maintained at a value at least equal to the repurchase price. FMR, the
fund's investment adviser, is responsible for determining that the value of
the underlying securities remains in accordance with the market value
requirements stated above.
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. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $710,857,360 and $691,315,573, 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, extraordinary
expenses and Class II's 12b-1 fees. 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. In accordance with Rule 12b-1 of the 1940
Act, the Trustees adopted separate distribution plans with respect to the
fund's Class I shares (Class I Plan) and Class II shares (Class II Plan).
Under the Class I Plan, FMR may use its resources, including management
fees, to pay administrative and promotional expenses related to the sale of
the fund's Class I shares. The Class I 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 under the Class I Plan
during the period.
Under the Class II Plan, the fund paid Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee based on an
annual rate of .25% of the average net assets of Class II. For the period,
the fund paid FDC $258 under the Class II Plan, all of which was paid to
securities dealers, banks and other financial institutions for the
distribution of Class II shares, and providing 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 period for
which loans were outstanding amounted to $9,433,000 and $5,273,500,
respectively. The weighted average interest rate was 6.21%.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
SHARES DOLLARS
YEARS ENDED NOVEMBER 30, YEARS ENDED NOVEMBER 30,
1995 1994 A 1995 1994 A
CLASS I
Shares sold 12,333,233 14,781,825 $ 116,350,330 $ 142,171,327
Reinvestment of distributions 2,322,163 2,187,213 21,910,066
20,788,384
Shares redeemed (15,234,016) (14,977,070) (143,518,588) (143,342,560)
Net increase (decrease) (578,620) 1,991,968 $ (5,258,192) $ 19,617,151
CLASS II
Shares sold 4,814 10,121 $ 45,690 $ 100,000
Reinvestment of distributions 684 581 6,444 5,500
Shares redeemed (16,200) - (155,107) -
Net increase (decrease) (10,702) 10,702 $ (102,973) $ 105,500
A SHARE TRANSACTIONS FOR CLASS II ARE FOR THE PERIOD DECEMBER 30, 1993
(COMMENCEMENT OF SALES OF SHARES) TO NOVEMBER 30, 1994.
7. SHARE LIQUIDATION.
On November 30, 1995, the sole shareholder of Class II redeemed all of its
outstanding shares, thereby liquidating the class. The fund will continue
with a single class of shares.
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, 1995, 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 year then
ended (Class II) and the period December 30, 1993 (commencement of sale of
Class II shares) to November 30, 1994. 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, 1995 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, 1995, 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
year then ended (Class II) and the period December 30, 1993 (commencement
of sale of Class II shares) to November 30, 1994, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 10, 1996
DISTRIBUTIONS
A total of 53.63% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1996 of the applicable
percentage for use in preparing 1995 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Curtis Hollingsworth, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $100,000 investment. A fund's total return
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells investments that have grown in value). You can also look at income to
measure performance.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Institutional Short-Intermediate Government Fund
(formerly Fidelity Institutional Short-Intermediate Government Portfolio - 11.79% 41.79% 92.48%
Class I)
Lehman Brothers 1-3 Year Government Bond Index 10.22% 39.88% n/a
Salomon Brothers Treasury/Agency 1-5 Year Index 11.96% 44.62% n/a
Average Short U.S. Government Fund 10.73% 38.77% n/a
Consumer Price Index 2.47% 14.80% 39.26%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class I's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
began on November 10, 1986. 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 I's returns to the performance of the
Lehman Brothers 1-3 Year Government Bond Index and the Salomon Brothers
Treasury/Agency 1-5 Year Index - both broad measures of the performance of
U.S. government bonds. To measure how Class I stacked up against its peers,
you can compare it to the average short U.S. government fund, which
reflects the performance of 136 funds with similar objectives tracked by
Lipper Analytical Services over the past 12 months. These benchmarks
include reinvested dividends and capital gains, if any. Comparing Class I'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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Institutional Short-Intermediate Government Fund
(formerly Fidelity Institutional Short-Intermediate Government Portfolio - 11.79% 7.23% 7.49%
Class I)
Lehman Brothers 1-3 Year Government Bond Index 10.22% 6.94% n/a
Salomon Brothers Treasury/Agency 1-5 Year Index 11.96% 7.66% n/a
Average Short U.S. Government Fund 10.73% 6.76% n/a
Consumer Price Index 2.47% 2.80% 3.71%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take Class I shares' actual (or cumulative)
return and show you what would have happened if Class I had performed at a
constant rate each year.
$100,000 OVER LIFE OF FUND
$195,527
$191,537
$100,000 OVER LIFE OF FUND: Let's say you invested $100,000 in Fidelity
Institutional Short-Intermediate Government Fund (formerly Fidelity
Institutional Short-Intermediate Government Portfolio - Class I) on
November 30, 1986, shortly after the fund started. As the chart shows, by
November 30, 1995, the value of your investment would have grown to
$191,537 - a 91.54% increase on your initial investment. For comparison,
look at how the Salomon Brothers Treasury/Agency 1-5 Year Index did over
the same period. With dividends reinvested, the same $100,000 would have
grown to $195,527 - a 95.53% increase. Henceforth, the fund will compare
its performance to the Salomon Brothers Treasury/Agency 1-5 Year 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 1-5 Year Index includes fewer securities and is
more straightforward to monitor on a daily basis. For comparison purposes,
both indexes are shown in "Performance: The Bottom Line," Page A-1.
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>
YEARS ENDED NOVEMBER 30,
1995 1994 1993 1992 1991
Dividend return 7.56% 6.07% 6.12% 6.90% 8.25%
Capital appreciation return 4.23% -6.78% 0.41% 0.82% 3.06%
Total return 11.79% -0.71% 6.53% 7.72% 11.31%
</TABLE>
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.
DIVIDENDS AND YIELD
PERIODS ENDED NOVEMBER 30, 1995 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.56(cents) 32.44(cents) 66.24(cents)
Annualized dividend rate 7.06% 6.78% 7.02%
30-day annualized yield 5.76% - -
DIVIDENDS per share show the income paid by Class I for a set period and do
not reflect any tax reclassifications. If you annualize this number, based
on an average net asset value of $9.58 over the past month, $9.54 over the
past six months, and $9.43 over the past year, you can compare Class I's
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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
The U.S. bond markets posted strong returns for
the 12 months ended November 30, 1995. For the
12-month period, the Lehman Brothers Aggregate
Bond Index - a broad measure of U.S. taxable
bonds - posted a total return of 17.64%. A strong
rally starting in November 1994 helped bonds
recover from the effects of the sharply rising
interest rate environment seen earlier that year.
Indications of a slowing economy and a relative
absence of inflation pressures encouraged bond
investors, helping to push interest rates lower.
Monetary policy also played a role in the bond
market's performance. In an effort to thwart the
possibility of a recession, the Federal Reserve
Board lowered the fed funds rate - the rate banks
charge each other for overnight loans - by 0.25%
in July to 5.75%. This policy reversal followed a
string of seven successive interest rate increases
in 1994 and early 1995. Mortgage-backed securities
also benefited from this environment, as illustrated
by the performance of the Salomon Brothers
Mortgage Index, which returned 16.30% during the
period. Markets outside of the U.S. had mixed
returns. Emerging markets recovered from the lows
initiated by Mexico's peso devaluation in December
1994. The J.P. Morgan Emerging Markets Bond
Index returned 10.67% during the 12-month period.
Declining interest rates and a global economic
slowdown helped the Salomon Brothers World
Government Bond Index - which includes U.S.
issues - to post an 18.13% return.
An interview with
Curt
Hollingsworth,
Portfolio Manager
of Fidelity
Institutional
Short-Intermediate
Government
Portfolio
Q. CURT, HOW DID THE FUND PERFORM?
A. It has done well. For the 12 months ended November 30, 1995, Class I had
a total return of 11.79%. That beat the total return for the average
short-term U.S. Government bond fund tracked by Lipper Analytical Services,
which returned 10.73% for the same period. The Salomon Brothers
Treasury/Agency 1-5 Year Index posted a return of 11.96% for the 12-month
period.
Q. WHAT IS MEANT BY TOTAL RETURN?
A. Total return is simply the "total" amount of return to the fund's
shareholder, and reflects a sum of income and changes in share price.
Interest income is the main source of return for a bond fund over the long
term. However, over the shorter term, changes in a bond fund's share price
can play a significant role. Fortunately, total return is easy to explain
using a "dollars in, dollars out" example. If someone invested $100 in this
bond fund a year ago and reinvested all dividends and capital gains, the
investment would have been worth $111.79 as of November 30, 1995. That is
what is meant by a total return of 11.79%.
Q. WHAT HELPED THE FUND TOP THE LIPPER AVERAGE OVER THE PAST YEAR?
A. My sense is that as interest rates were rising in 1994, other bond funds
within this peer group were structured so that they had shorter and shorter
durations. Duration is a measure of a bond's or a bond fund's sensitivity
to changes in interest rates. The longer a fund's duration, the more
sensitive its share price is to changes in interest rates. This fund did
not undergo a marked decrease in duration when interest rates rose in 1994.
It stayed the course and maintained a duration that was in line with the
market for Treasury and agency notes maturing in one to five years. As a
result, it appears the fund was better able to participate in the bond
market rally we've seen since November 1994, as interest rates have come
down significantly.
Q. THE FUND'S INVESTMENTS IN MORTGAGE-BACKED SECURITIES INCREASED TO 23.3%
AT THE END OF THE PERIOD. WHERE DID YOU FIND OPPORTUNITIES?
A. There were two areas: agency mortgage-backed securities with coupon
rates significantly lower than current interest rates, and agency
mortgage-backed securities with coupon rates significantly higher than
current interest rates.
Q. WHY WERE THE MORTGAGE-BACKED SECURITIES WITH LOWER COUPON RATES
ATTRACTIVE?
A. They were attractive because their durations don't lengthen or shorten
as much as other mortgage-backed securities with changes in interest rates.
Q. AND WHY WERE MORTGAGE-BACKED SECURITIES WITH COUPON RATES HIGHER THAN
PREVAILING MARKET RATES ATTRACTIVE?
A. These are securities that were issued ten to fifteen years ago. As with
all mortgage-backed securities, prepayment risk - the risk that mortgages
within a security will be paid off early - is an issue with these bonds,
particularly since reinvesting the principal at lower prevailing rates
could reduce the fund's income. However, prepayment risk with these
securities typically is muted by the fact that homeowners in these mortgage
pools have had numerous chances to refinance at lower rates, but have not.
Perhaps they have credit problems, or have such a small amount to pay back
that going through the refinancing process is not worth it to them.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook is that both inflation and interest rates will be more stable
in the coming year than they have been in recent years. As a result, I plan
to spend more time looking for opportunities in the mortgage-backed
securities market. These securities tend to perform better during periods
of stability because they offer a yield advantage over comparable
Treasuries. If I am successful in uncovering these opportunities, they
could add yield and return that would benefit the fund's shareholders.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER,
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to provide a high level of current income
consistent with preserving principal
START DATE: November 10, 1986
SIZE: as of November 30, 1995, more than
$348 million
MANAGER: Curt Hollingsworth, since 1987;
manager, the Spartan Limited Maturity
Government, Fidelity Short-Intermediate
Government and Spartan Short-Intermediate
Government funds, and North Carolina Capital
Management Trust: Term Portfolio; previously
managed the Spartan Long-Term Government
Bond, Fidelity Government Securities and
Fidelity Advisor Government Investment funds;
joined Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON MANAGING THROUGH THE
UPS AND DOWNS OF THE MARKET:
"The fund benefited from the bond market's
rally because it did not become more
defensive, even when things looked the worst for
bonds. When the bond market finally turned
and started rising in 1994, it helped this fund,
apparently more than others. If the fund had
shifted into shorter securities, it wouldn't have
fully participated in 1995's rebound of the bond
market when it turned.
"It can be difficult to stay the course when
things look the bleakest; the overwhelming
temptation can be to do the opposite. When
you've determined something can add value
going forward, it's important to maintain
discipline and not sell it just because it has
gone down in price. Holding on to an
investment and riding out the short-term
fluctuations often can help you achieve better
investment results."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF NOVEMBER 30, 1995
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Under 5% 3.7 7.0
5 - 5.99% 7.4 13.5
6 - 6.99% 7.3 13.6
7 - 7.99% 14.6 13.3
8 - 8.99% 31.9 26.0
9 - 9.99% 27.4 9.9
10% and over 4.8 5.4
Zero Coupon Bonds 0.1 0.1
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1995
6 MONTHS AGO
Years 3.1 3.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF NOVEMBER 30, 1995
6 MONTHS AGO
Years 2.3 2.2
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF NOVEMBER 30, 1995 AS OF MAY 31, 1995
U.S. government
agency mortgage-
backed securities 23.3%
U.S. government
and government
agency obligations 73.0%
Collateralized
mortgage obligations
(CMOs) 0.9%
Short-term
investments 2.8%
U.S. government
agency mortgage-
backed securities 19.3%
U.S. government
and government
agency obligations 67.6%
Collateralized
mortgage obligations
(CMOs) 1.9%
Short-term
investments 11.2%
Row: 1, Col: 1, Value: 2.8
Row: 1, Col: 2, Value: 1.9
Row: 1, Col: 3, Value: 73.0
Row: 1, Col: 4, Value: 22.3
Row: 1, Col: 1, Value: 11.2
Row: 1, Col: 2, Value: 1.9
Row: 1, Col: 3, Value: 67.59999999999999
Row: 1, Col: 4, Value: 19.3
INVESTMENTS NOVEMBER 30, 1995
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 73.0%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 51.5%
4 3/8%, 11/15/96 $ 5,450,000 $ 5,397,190
7 1/4%, 11/15/96 19,815,000 20,143,136
8 1/2%, 5/15/97 56,888,000 59,323,375
8 3/4%, 10/15/97 15,600,000 16,518,996
9%, 5/15/98 25,550,000 27,630,026
9 1/4%, 8/15/98 39,810,000 43,591,950
8 7/8%, 11/15/98 6,400,000 6,990,016
9 1/8%, 5/15/99 360,000 400,442
7 3/4%, 12/31/99 7,160,000 7,732,800
TOTAL U.S. TREASURY OBLIGATIONS 187,727,931
U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.5%
Federal Agricultural Mortgage Corporation:
6.44%, 5/28/96 3,500,000 3,513,685
6.92%, 8/10/00 1,040,000 1,089,733
Federal Home Loan Bank:
6.52%, 4/24/97 830,000 840,765
6.20%, 7/17/02 960,000 972,525
4 3/4%, 2/24/27 (callable) 900,000 890,010
Federal Home Loan Mortgage Corporation:
4.78%, 2/10/97 (callable) 440,000 435,428
6.55%, 10/2/02 720,000 745,650
Federal National Mortgage Association:
3%, 7/13/98 (a) 640,000 654,300
9.40%, 8/10/98 600,000 656,718
0%, 11/30/99 610,000 482,638
6.33%, 8/11/00 1,240,000 1,267,880
Government Trust Certificates:
(assets of Trust guaranteed by U.S.
Government through Defense Security
Assistance):
Class 1-B, 9 1/8%, 11/15/96 359,426 365,418
Class 1-C, 9 1/4%, 11/15/01 1,349,000 1,492,763
Class 2-E, 9.40%, 5/15/02 2,870,000 3,190,292
Class G-2, 8%, 5/15/98 2,885,696 2,964,648
Class T-2, 9 5/8%, 5/15/02 877,000 975,663
(assets of the Trust guaranteed by U.S.
Government through Export-Import Bank):
Series 1992-A 7.02%, 9/1/04 1,201,500 1,250,904
Series 1993-A 4.86%, 4/1/98 415,000 408,983
Series 1993-C 5.20%, 10/15/04 340,800 330,416
Series 1993-D 5.23%, 5/15/05 582,128 562,936
Series 1994-F 8.178%, 12/15/04 13,238,324 14,263,130
Series 1995-A 6.28%, 6/15/04 3,900,000 3,948,750
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Private Export Funding Corporation secured:
5 3/4%, 4/30/98 $ 750,000 $ 751,846
9.10%, 10/30/98 130,000 141,863
9 1/2%, 3/31/99 4,109,000 4,568,263
5.65%, 3/15/03 997,500 992,712
5.80%, 2/1/04 170,000 168,708
6.86%, 4/30/04 390,150 401,964
State of Israel (guaranteed by
U.S. Government through Agency
for International Development):
5 1/4%, 3/15/98 760,000 755,250
7 3/4%, 4/1/98 4,510,354 4,623,131
4 7/8%, 9/15/98 5,750,000 5,645,781
6%, 2/15/99 240,000 242,575
7 1/8%, 8/15/99 1,640,000 1,716,624
7 3/4%, 11/15/99 10,279,000 10,980,542
5 3/4%, 3/15/00 1,000,000 1,000,625
6.05%, 8/15/00 4,520,000 4,580,704
Student Loan Marketing Association
7.56%, 12/9/96 290,000 295,585
Twelve Federal Land Banks
7.95%, 10/21/96 410,000 418,134
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 78,587,542
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $262,945,210) 266,315,473
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 23.3%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 10.2%
5 1/2%, 5/1/98 93,876 92,702
6%, 2/1/98 to 5/1/98 424,801 425,065
6 1/2%, 4/1/98 to 5/1/08. 1,964,855 1,958,678
7%, 2/1/97 to 12/1/97. 398,341 404,440
7 1/2%, 12/1/96 to 11/1/12 3,009,703 3,098,593
8%, 9/1/07 to 12/1/09 4,312,526 4,454,024
8 1/2%, 5/1/06 to 5/1/17 3,936,258 4,094,171
9%, 12/1/07 to 3/1/22 3,616,269 3,812,241
9 1/2%, 6/1/17 to 2/1/23 5,644,324 6,043,884
10%, 1/1/09 to 12/1/19 1,682,226 1,827,516
10 1/2%, 1/1/16 to 5/1/21 5,097,731 5,594,203
11%, 6/1/13 to 1/1/19 70,096 77,371
11 3/4%, 7/1/13 55,530 61,781
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - CONTINUED
12%, 9/1/11 to 10/1/13 $ 55,569 $ 62,893
12 1/4%, 11/1/14 148,610 165,355
12 1/2%, 8/1/10 to 6/1/19 4,301,040 4,940,542
37,113,459
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 11.7%
5 1/2%, 9/1/00 to 12/1/01 22,707,958 22,216,070
6%, 12/1/10 640,000 628,397
6 1/2%, 7/1/00 to 2/1/10. 3,031,253 3,034,542
7%, 6/1/00 to 1/1/10. 2,397,868 2,429,673
8%, 5/1/99 to 8/1/09. 1,084,039 1,122,826
8 1/4%,12/1/01 1,893,501 2,047,347
8 1/2%, 10/1/98 to 9/1/23 3,573,248 3,733,038
9%, 11/1/97 to 8/1/21 4,236,636 4,484,598
9 1/2%, 5/1/09 to 11/1/21 598,930 641,122
10%, 1/1/17 1,641,311 1,803,505
12 1/2%, 3/1/16 271,231 314,880
12 3/4%, 10/1/13 29,868 34,600
42,490,598
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.4%
8 1/2%, 5/15/16 to 4/15/17 615,770 648,660
9%, 1/15/05 to 2/15/17 1,703,950 1,811,924
10%, 11/15/09 to 9/15/19 1,296,086 1,421,522
11%, 10/15/13 67,055 74,892
11 1/2%, 3/15/13 to 8/15/13. 186,079 211,831
12%, 1/15/14 to 3/15/14 246,565 281,237
12 1/2%, 11/15/14. 169,119 198,824
13%, 8/15/14 to 11/15/14. 334,679 392,400
13 1/2%, 7/15/11 86,393 103,455
5,144,745
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $83,201,124) 84,748,802
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY - 0.9%
Federal Home Loan Mortgage Corporation:
sequential pay Series 1353 Class A,
5 1/2%, 11/15/04 $ 260,015 $ 256,333
planned amortization class Series
1722-PC, 6 1/2%, 3/15/12 3,000,000 3,026,250
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $3,256,324) 3,282,583
REPURCHASE AGREEMENTS - 2.8%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.90%,
dated 11/30/95 due 12/1/95 $10,239,678 $10,238,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $359,640,658) $ 364,584,858
LEGEND
1. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
INCOME TAX INFORMATION
At November 30, 1995, the aggregate cost of investment securities for
income tax purposes was $359,716,687. Net unrealized appreciation
aggregated $4,868,171, of which $5,250,886 related to appreciated
investment securities and $382,715 related to depreciated investment
securities.
At November 30, 1995, the fund had a capital loss carryforward of
approximately $18,104,000 of which $14,816,000 and $3,288,000 will expire
on November 30, 2002 and 2003, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1995
ASSETS 2. 3.
4.Investment in securities, at value (including repurchase agreements of $10,238,000) 5. $ 364,584,858
(cost $359,640,658) - See accompanying schedule
6.Cash 7. 422
8.Receivable for investments sold 9. 1,048,064
10.Interest receivable 11. 3,685,490
12. TOTAL ASSETS 13. 369,318,834
LIABILITIES 14. 15.
16.Payable for investments purchased $ 20,330,732 17.
18.Payable for fund shares redeemed 104,742 19.
20.Distributions payable 183,097 21.
22.Accrued management fee 129,837 23.
24.Distribution fees payable 23 25.
26. TOTAL LIABILITIES 27. 20,748,431
28.NET ASSETS 29. $ 348,570,403
30.Net Assets consist of: 31. 32.
33.Paid in capital 34. $ 361,322,360
35.Undistributed net investment income 36. 484,470
37.Accumulated undistributed net realized gain (loss) on investments 38. (18,180,627)
39.Net unrealized appreciation (depreciation) on investments 40. 4,944,200
41.NET ASSETS 42. $ 348,570,403
CLASS I: 43. $9.60
NET ASSET VALUE, offering price and redemption price per share ($348,570,403 (divided by) 36,300,106 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1995
INVESTMENT INCOME 45. $ 26,047,703
44.Interest
EXPENSES 46. 47.
48.Management fee $ 1,541,845 49.
50.Distribution fees - Class II 258
51.Non-interested trustees' compensation 1,690
52.Interest 1,821 53.
54. TOTAL EXPENSES 55. 1,545,614
56.NET INVESTMENT INCOME 57. 24,502,089
REALIZED AND UNREALIZED GAIN (LOSS) 59. (3,161,030)
58.Net realized gain (loss) on investment securities
60.Change in net unrealized appreciation (depreciation) on investment securities 61. 16,819,220
62.NET GAIN (LOSS) 63. 13,658,190
64.NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 65. $ 38,160,279
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
66.Operations $ 24,502,089 $ 24,960,165
Net investment income
67. Net realized gain (loss) (3,161,030) (17,869,674)
68. Change in net unrealized appreciation (depreciation) 16,819,220 (9,160,828)
69. NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 38,160,279 (2,070,337)
70.Distributions to shareholders (24,108,710) (22,380,525)
From net investment income
71. Class I
72. Class II (7,054) (5,500)
73. In excess of net realized gain - Class I - (314,479)
74. TOTAL DISTRIBUTIONS (24,115,764) (22,700,504)
75.Share transactions - net increase (decrease) (5,361,165) 19,722,651
76. TOTAL INCREASE (DECREASE) IN NET ASSETS 8,683,350 (5,048,190)
NET ASSETS 77. 78.
79. Beginning of period 339,887,053 344,935,243
80. End of period (including undistributed net investment income of $484,470 and $219,388, $ 348,570,403 $ 339,887,053
respectively).
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS I
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
81. YEARS ENDED NOVEMBER 30,
82. 1995 1994 A 1993 1992 1991
83.SELECTED PER-SHARE DATA
84.Net asset value, beginning of period $ 9.210 $ 9.890 $ 9.850 $ 9.770 $ 9.480
85.Income from Investment Operations
86. Net investment income .669 .597 .654 .721 .747
87. Net realized and unrealized gain (loss) .383 (.665) (.022) .014 .286
88. Total from investment operations 1.052 (.068) .632 .735 1.033
89.Less Distributions
90. From net investment income (.662) (.602) (.592) (.655) (.743)
91. From net realized gain - (.010) - - -
92. Total distributions (.662) (.612) (.592) (.655) (.743)
93.Net asset value, end of period $ 9.600 $ 9.210 $ 9.890 $ 9.850 $ 9.770
94.TOTAL RETURN 11.79% (.71) 6.53% 7.72% 11.31%
%
95.RATIOS AND SUPPLEMENTAL DATA
96.Net assets, end of period (000 omitted) $ 348,570 $ 339,788 $ 344,935 $ 188,918 $ 171,228
97.Ratio of expenses to average net assets .45% .45% .45% .45% .45%
98.Ratio of net investment income to average net assets 7.14% 7.06% 7.14% 7.29% 7.77%
99.Portfolio turnover 214% 303% 351% 355% 192%
</TABLE>
A EFFECTIVE DECEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
FINANCIAL HIGHLIGHTS - CLASS II
100. YEARS ENDED NOVEMBER 30,
<TABLE>
<CAPTION>
<S> <C> <C>
101. 1995 1994 B
102.SELECTED PER-SHARE DATA
103.Net asset value, beginning of period $ 9.210 $ 9.880
104.Income from Investment Operations
105. Net investment income .647 .524
106. Net realized and unrealized gain (loss) .392 (.662)
107. Total from investment operations 1.039 (.138)
108.Less Distributions from net investment income (.639) (.532)
109.Share liquidation (Note 7) (9.610) -
110.Net asset value, end of period $ - $ 9.210
111.TOTAL RETURN C 11.63% (1.41)%
112.RATIOS AND SUPPLEMENTAL DATA
113.Net assets, end of period (000 omitted) $ - $ 99
114.Ratio of expenses to average net assets .70% .70% A
115.Ratio of net investment income to average net assets 6.89% 6.79% A
116.Portfolio turnover 214% 303%
</TABLE>
A ANNUALIZED
B FOR THE PERIOD DECEMBER 30, 1993 (COMMENCEMENT OF SALE OF CLASS II
SHARES) TO NOVEMBER 30, 1994.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
On December 14, 1995, the Board of Trustees approved a change in the fund's
name from Fidelity Institutional Short-Intermediate Government Portfolio to
Fidelity Institutional Short-Intermediate Government Fund. Fidelity
Institutional Short-Intermediate Government Fund (the fund) is a fund of
Fidelity Advisor Series IV (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
Until November 30, 1995, the fund offered Class I and Class II shares. On
November 30, 1995, the sole shareholder of Class II redeemed all of its
outstanding shares and Class II was liquidated (see Note 7). Each class had
equal rights as to assets and voting privileges. Each class had exclusive
voting rights with respect to its distribution plan. Investment income,
realized and unrealized capital gains and losses, and the common expenses
of the fund were allocated on a pro rata 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 differed in its respective distribution 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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Income dividends were declared
separately for each class, while capital gain distributions were declared
at the fund level and allocated to each class on a pro rata 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.
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.
2. OPERATING POLICIES.
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.
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency Securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
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. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $710,857,360 and $691,315,573, 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, extraordinary
expenses and Class II's 12b-1 fees. 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. In accordance with Rule 12b-1 of the 1940
Act, the Trustees adopted separate distribution plans with respect to the
fund's Class I shares (Class I Plan) and Class II shares (Class II Plan).
Under the Class I Plan, FMR may use its resources, including management
fees, to pay administrative and promotional expenses related to the sale of
the fund's Class I shares. The Class I 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 under the Class I Plan
during the period.
Under the Class II Plan, the fund paid Fidelity Distributors Corporation
(FDC), an affiliate of FMR, a distribution and service fee based on an
annual rate of .25% of the average net assets of Class II. For the period,
the fund paid FDC $258 under the Class II Plan, all of which was paid to
securities dealers, banks and other financial institutions for the
distribution of Class II shares, and providing 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 period for
which loans were outstanding amounted to $9,433,000 and $5,273,500,
respectively. The weighted average interest rate was 6.21%.
6. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
SHARES DOLLARS
YEARS ENDED NOVEMBER 30, YEARS ENDED NOVEMBER 30,
1995 1994 A 1995 1994 A
CLASS I
Shares sold 12,333,233 14,781,825 $ 116,350,330 $ 142,171,327
Reinvestment of distributions 2,322,163 2,187,213 21,910,066
20,788,384
Shares redeemed (15,234,016) (14,977,070) (143,518,588) (143,342,560)
Net increase (decrease) (578,620) 1,991,968 $ (5,258,192) $ 19,617,151
CLASS II
Shares sold 4,814 10,121 $ 45,690 $ 100,000
Reinvestment of distributions 684 581 6,444 5,500
Shares redeemed (16,200) - (155,107) -
Net increase (decrease) (10,702) 10,702 $ (102,973) $ 105,500
A SHARE TRANSACTIONS FOR CLASS II ARE FOR THE PERIOD DECEMBER 30, 1993
(COMMENCEMENT OF SALES OF SHARES) TO NOVEMBER 30, 1994.
7. SHARE LIQUIDATION.
On November 30, 1995, the sole shareholder of Class II redeemed all of its
outstanding shares, thereby liquidating the class. The fund will continue
with a single class of shares.
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, 1995, 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 year then
ended (Class II) and the period December 30, 1993 (commencement of sale of
Class II shares) to November 30, 1994. 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, 1995 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, 1995, 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
year then ended (Class II) and the period December 30, 1993 (commencement
of sale of Class II shares) to November 30, 1994, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 10, 1996
DISTRIBUTIONS
A total of 53.63% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1996 of the applicable
percentage for use in preparing 1995 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Curtis Hollingsworth, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES