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.
Total return reflects the change in the value of an investment,
assuming reinvestment of the fund's dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at income, as reflected in the fund's yield,
to measure performance. If Fidelity had not reimbursed certain fund
expenses, the past five year and past 10 year total returns would have
been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT FUND 5.99% 32.69% 104.77%
LEHMAN BROTHERS 1-5 YEAR U.S. GOVERNMENT BOND INDEX 6.06% 34.35% 110.03%
SALOMON BROTHERS TREASURY/AGENCY 1-5 YEAR INDEX 6.05% 34.33% 110.10%
SHORT-INTERMEDIATE U.S. GOVERNMENT FUNDS AVERAGE 5.48% 30.84% 105.33%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the Lehman Brothers 1-5
Year U.S. Government Bond Index - a market value weighted performance
benchmark for government fixed-rate debt issues with maturities
between one and five years - and the Salomon Brothers Treasury/Agency
1-5 Year Index - a market value weighted index of U.S. Treasury and
U.S. Government agency securities with fixed-rate coupons and weighted
average lives between one and five years. To measure how the fund's
performance stacked up against its peers, you can compare it to the
short-intermediate U.S. government funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past one year average represents a peer
group of 94 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT FUND 5.99% 5.82% 7.43%
LEHMAN BROTHERS 1-5 YEAR U.S. GOVERNMENT BOND INDEX 6.06% 6.08% 7.70%
SALOMON BROTHERS TREASURY/AGENCY 1-5 YEAR INDEX 6.05% 6.08% 7.71%
SHORT-INTERMEDIATE U.S. GOVERNMENT FUNDS AVERAGE 5.48% 5.50% 7.45%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$100,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19971130 19971209 140634 S00000000000001
Inst SHT LB 1-5 Govt
00662 LB069
1987/11/30 100000.000 100000.00
1987/12/31 100857.680 100795.30
1988/01/31 102629.440 102692.52
1988/02/29 103681.470 103673.07
1988/03/31 103589.870 103637.93
1988/04/30 103651.840 103641.13
1988/05/31 103519.590 103382.41
1988/06/30 104695.720 104644.03
1988/07/31 104910.070 104560.99
1988/08/31 105012.390 104701.52
1988/09/30 106321.710 106138.81
1988/10/31 107176.140 107365.29
1988/11/30 107205.510 106796.77
1988/12/31 107458.290 106937.30
1989/01/31 108380.100 107834.81
1989/02/28 108483.790 107646.36
1989/03/31 108889.140 108061.58
1989/04/30 110477.410 110067.39
1989/05/31 112061.910 111840.05
1989/06/30 114111.900 114273.85
1989/07/31 115600.090 116263.69
1989/08/31 115035.660 115149.00
1989/09/30 115708.930 115762.24
1989/10/31 117571.610 117847.90
1989/11/30 118582.980 118956.21
1989/12/31 119111.620 119381.01
1990/01/31 119010.450 119167.01
1990/02/28 119590.670 119713.18
1990/03/31 120118.390 119962.31
1990/04/30 120269.460 119997.44
1990/05/31 122085.640 122140.60
1990/06/30 123323.230 123574.69
1990/07/31 124722.530 125235.56
1990/08/31 125205.520 125369.70
1990/09/30 126052.010 126436.49
1990/10/31 127309.180 128001.53
1990/11/30 128709.100 129486.73
1990/12/31 130161.910 131144.40
1991/01/31 131347.260 132425.18
1991/02/28 132336.960 133252.42
1991/03/31 133161.110 134079.66
1991/04/30 134493.860 135443.48
1991/05/31 135484.570 136248.36
1991/06/30 135772.690 136577.34
1991/07/31 137064.080 137934.78
1991/08/31 139224.000 140199.30
1991/09/30 140392.720 142093.33
1991/10/31 141900.960 143744.61
1991/11/30 143269.430 145367.15
1991/12/31 146747.840 148120.35
1992/01/31 145350.290 147398.51
1992/02/29 146007.190 147784.98
1992/03/31 145946.630 147449.62
1992/04/30 147032.580 148883.71
1992/05/31 148907.690 150710.66
1992/06/30 150676.270 152649.40
1992/07/31 152264.410 154996.97
1992/08/31 153903.600 156533.27
1992/09/30 155788.100 158392.16
1992/10/31 154017.850 156855.86
1992/11/30 154329.380 156335.24
1992/12/31 156043.770 158063.18
1993/01/31 157900.860 160532.12
1993/02/28 159354.660 162410.17
1993/03/31 160099.660 162975.50
1993/04/30 160699.020 164198.79
1993/05/31 161042.800 163671.79
1993/06/30 162323.130 165409.31
1993/07/31 162808.710 165709.54
1993/08/31 163824.900 167670.64
1993/09/30 164216.820 168216.81
1993/10/31 164477.540 168625.63
1993/11/30 164408.670 168267.91
1993/12/31 165197.850 168935.45
1994/01/31 166708.060 170321.63
1994/02/28 165275.880 168625.63
1994/03/31 162505.840 166977.55
1994/04/30 161670.040 166012.97
1994/05/31 161835.580 166188.64
1994/06/30 162027.250 166440.96
1994/07/31 163818.890 168267.91
1994/08/31 164268.790 168791.72
1994/09/30 163530.490 167891.02
1994/10/31 163837.660 168101.82
1994/11/30 163248.720 167261.81
1994/12/31 163781.380 167629.12
1995/01/31 166104.440 170174.71
1995/02/28 168882.460 173055.67
1995/03/31 169732.810 174017.06
1995/04/30 171623.830 175805.68
1995/05/31 175132.390 179830.08
1995/06/30 176246.400 180877.70
1995/07/31 176668.170 181296.11
1995/08/31 178056.460 182548.15
1995/09/30 179053.160 183570.22
1995/10/31 180879.840 185330.10
1995/11/30 182497.750 187252.87
1995/12/31 184159.710 188853.05
1996/01/31 185843.350 190545.85
1996/02/29 184567.550 189258.68
1996/03/31 184118.280 188690.15
1996/04/30 183795.160 188536.84
1996/05/31 183864.900 188664.60
1996/06/30 185655.670 190296.72
1996/07/31 186296.760 190980.23
1996/08/31 186711.290 191462.52
1996/09/30 188717.090 193541.79
1996/10/31 191365.400 196195.98
1996/11/30 193194.860 198026.13
1996/12/31 192830.800 197540.64
1997/01/31 193489.780 198434.95
1997/02/28 194056.870 198811.84
1997/03/31 193303.960 198214.57
1997/04/30 195251.090 200121.37
1997/05/31 196594.510 201565.05
1997/06/30 198110.520 203120.51
1997/07/31 200689.810 206042.99
1997/08/31 200698.260 205806.64
1997/09/30 202398.080 207678.30
1997/10/31 204142.200 209620.24
1997/11/30 204772.190 210032.26
IMATRL PRASUN SHR__CHT 19971130 19971209 140638 R00000000000091
$100,000 OVER 10 YEARS: Let's say hypothetically that $100,000 was
invested in Fidelity Institutional Short-Intermediate Government Fund
on November 30, 1987. As the chart shows, by November 30, 1997, the
value of the investment would have grown to $204,772 - a 104.77%
increase on the initial investment. For comparison, look at how the
Lehman Brothers 1-5 Year U.S. Government Bond Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$100,000 would have grown to $210,032 - a 110.03% increase. Beginning
with this report, the fund will compare its performance to that of the
Lehman Brothers 1-5 Year U.S. Government Bond Index rather than the
Salomon Brothers Treasury/Agency 1-5 Year Index. The indexes include
the same type of bonds, and their performance is not materially
different. The fund is changing to the Lehman Brothers index mainly
because Lehman Brothers indexes are used by most other Fidelity bond
funds. For comparison, both indexes are shown on 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
YEARS ENDED NOVEMBER 30,
1997 1996 1995 1994 1993
DIVIDEND RETURN 6.83% 6.90% 7.56% 6.07% 6.12%
CAPITAL APPRECIATION RETURN -0.84% -1.04% 4.23% -6.78% 0.41%
TOTAL RETURN 5.99% 5.86% 11.79% -0.71% 6.53%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. 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 capital gains paid by the fund are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED NOVEMBER 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.91(CENTS) 30.39(CENTS) 62.72(CENTS)
ANNUALIZED DIVIDEND RATE 6.33% 6.45% 6.69%
30-DAY ANNUALIZED YIELD 6.02% - -
DIVIDENDS per share show the income paid by the fund for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average net asset value of $9.43 over the past one
month, $9.40 over the past six months and $9.38 over the past one
year, you can compare the fund'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
A lack of inflationary pressure resulted in a generally
favorable investing climate for bonds during the 12
months that ended November 30, 1997. The Lehman
Brothers Aggregate Bond Index - a broad measure of
the U.S. taxable bond market - returned 7.55%
during this time. Through the first half of the period,
bonds suffered from the perception of an accelerating
economy and, in turn, that inflation would make an
appearance. In a move largely expected by investors,
the Federal Reserve Board raised a key short-term
interest rate by 0.25% in March to try to curb an
inflation uptick. Spurred on by encouraging economic
data, as well as the Fed's reluctance to raise rates
further, bond markets rallied from April through July.
While some of the market's gains evaporated in August,
a strong September and October helped ease the pain.
When financial trouble erupted in Asia in late October,
the bond market attracted wary stock investors in
search of investments that offered less volatility.
Treasury bonds also fared especially well in this "flight
to quality," as interest rates on the 30-year bond
hovered around - and in some instances below -
the 6% mark toward the end of the period. Sustained
economic growth and demand for higher yields aided
corporate bonds. The Lehman Brothers Corporate Bond
Index returned 7.57% during the period.
Mortgage-backed securities - despite increased
prepayment activity in November due to falling rates -
also performed relatively well. The Salomon Brothers
Mortgage Index returned 7.80% during the
12-month period.
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity
Institutional Short-Intermediate Government Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. For the 12-month period that ended November 30, 1997, the fund had
a total return of 5.99%. To gauge how the fund did relative to its
peer group, the short-intermediate U.S. government funds average had a
total return of 5.48% for the same 12-month period, as tracked by
Lipper Analytical Services. The Lehman Brothers 1-5 Year U.S.
Government Bond Index had a 12-month return of 6.06% for the same
one-year period.
Q. THE PAST 12 MONTHS CAN BE DIVIDED INTO TWO DISTINCT PERIODS: THE
FIRST HALF, WHEN UNCERTAINTY ABOUT THE DIRECTION OF INTEREST RATES
IMPEDED THE BOND MARKET'S PROGRESS, AND THE SECOND HALF, IN WHICH
INTEREST RATES FELL AND THE MARKET POSTED AN IMPRESSIVE RALLY. HOW DID
YOU RESPOND TO THAT SHIFT?
A. In spite of the market's changing direction and the ups and downs
with interest rates, the main thrust of my investment strategy
remained the same throughout the year. I managed the fund to have
approximately the same sensitivity to interest-rate movements as the
market for government securities, as reflected by the fund's benchmark
index used during the period - the Salomon Brothers Treasury/Agency
1-5 Year Index. It's my view that very few people can pinpoint the
direction and magnitude of interest-rate changes with any accuracy and
consistency. Given that, I believe that managing a fund based on the
future level of interest rates can backfire if you place an incorrect
bet. So I keep the fund "duration neutral," meaning that it is
essentially no more or no less sensitive to interest rate changes than
the short-maturity part of the government/agency bond market.
Q. THE FUND'S STAKE IN U.S. GOVERNMENT AGENCY OBLIGATIONS HAD GROWN
SUBSTANTIALLY TO 53.4% OF INVESTMENTS BY THE END OF THE PERIOD
COMPARED TO 35.9% OF INVESTMENTS SIX MONTHS AGO. WHAT PROMPTED THAT
INCREASE?
A. I chose to increase the fund's holding in agency obligations
because they became more attractive in light of their expanding yield
advantage over Treasuries. At the end of the period, the average
agency security offered roughly 15 to 25 basis points - or 0.15% to
0.25% - more in yield than Treasury securities. Six months ago,
agencies offered a smaller yield advantage of only about 10 to 15
basis points. Since a bond's - and ultimately the fund's - total
return is based on both its yield and its price appreciation or
depreciation, having a fairly large stake in high-yielding agency
securities was a plus for the fund.
Q. WITHIN THE AGENCY SECTOR, WHICH SECURITIES DID YOU FIND ATTRACTIVE?
A. I emphasized agency securities that are non-callable - those that
can't be redeemed by their issuer before maturity. Bonds typically are
called when interest rates fall so significantly that the issuer can
save money by issuing new bonds at lower rates. A call is a positive
for an issuer because it cuts its borrowing costs. But holders of
callable bonds are often at a disadvantage because they may have to
reinvest the proceeds from the called bonds in new, lower-yielding
bonds. I prefer non-callable securities because they generally perform
better than callable bonds when interest rates fall and bond prices
rally, and generally fare no worse than callable bonds when interest
rates rise and bond prices fall.
Q. MORTGAGE-BACKED SECURITIES ALSO ARE SUSCEPTIBLE TO BEING PRE-PAID
BEFORE MATURITY AS HOMEOWNERS REFINANCE THEIR MORTGAGES. HOW DOES THAT
AFFECT YOUR CHOICES IN THE MORTGAGE SECTOR?
A. The likelihood of a mortgage security being pre-paid because of
increased refinancing activity is one of the most important factors I
consider, since it can dramatically affect the security's price. I
tend to emphasize mortgage securities where I think the level of
refinancing activity will not change greatly as interest rates rise or
fall. For example, I chose those securities whose underlying loans had
interest rates well above or well below current interest rates,
because they are generally less likely to experience changes in
refinancing activity. I also focused on "seasoned" mortgages - those
that were issued between five and 10 years ago. For a variety of
reasons, homeowners with seasoned mortgages have chosen not to
refinance despite being presented with several attractive
opportunities to do so. Seasoned mortgages stand only a small chance
of being paid off before maturity.
Q. LET'S TALK ABOUT TREASURY SECURITIES AND THE CHOICES YOU MADE THERE
. . .
A. First of all, I reduced the fund's stake in Treasury securities by
about half over the past six months in order to make way for more
agency securities. Within the Treasury sector, I preferred to own
securities that were issued some time ago. Newly-issued Treasuries,
which are known as "off-the-run" securities, typically are priced
higher than older Treasuries with similar maturities. That's because
off-the-run securities command a premium price for being more easily
traded, or liquid.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET AND THE FUND?
A. At present, bonds are priced based on a fairly optimistic view:
Inflation will remain moderate and the Federal Reserve Board won't
hike interest rates. If inflation rises or the Fed raises rates, the
bond markets would be unpleasantly surprised and are likely to react
negatively.
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.
CURT HOLLINGSWORTH ON SELECTING
INDIVIDUAL SECURITIES:
"The direction of interest rates is the primary factor
that determines the performance of bonds. Many
investors try to pick securities that will do well based
on where they feel interest rates are headed. In contrast,
I try to identify those securities that I believe will offer
the best total-return potential in any type of
interest-rate environment - rising, falling or stable.
Because I tend to have a value orientation, I choose
securities that I find to be cheap relative to other
securities because they are currently out of the market's
favor, with the idea that they will appreciate when the
market starts to favor them."
DISTRIBUTIONS:
A total of 32.55% 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 1998 of
the applicable percentage for use in preparing 1997
income tax returns.
FUND FACTS
GOAL: seeks a high level of current income in a
manner consistent with preservation of capital
START DATE: November 10, 1986
SIZE: as of November 30, 1997, more than
$357 million
MANAGER: Curt Hollingsworth, since 1987;
manager, various Fidelity and Spartan
government funds; joined Fidelity in 1983
(checkmark)
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF NOVEMBER 30, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
ZERO COUPON BONDS 10.1 7.2
LESS THAN 5% 0.2 2.8
5 - 5.99% 15.4 13.0
6 - 6.99% 15.6 11.5
7 - 7.99% 7.1 20.4
8 - 8.99% 21.1 14.7
9 - 9.99% 16.9 14.5
10 - 10.99% 2.5 2.3
11 - 11.99% 4.6 3.6
12 - 12.99% 1.4 1.6
13% AND OVER 0.1 5.7
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1997
6 MONTHS AGO
YEARS 3.5 3.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF NOVEMBER 30, 1997
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 (% OF FUND'S INVESTMENTS)
AS OF NOVEMBER 30, 1997 AS OF MAY 31, 1997
ROW: 1, COL: 1, VALUE: 5.0
ROW: 1, COL: 2, VALUE: 53.4
ROW: 1, COL: 3, VALUE: 18.8
ROW: 1, COL: 4, VALUE: 22.8
MORTGAGE-BACKED
SECURITIES 25.2%
U.S. TREASURY
OBLIGATIONS 36.2%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 35.9%
SHORT-TERM
INVESTMENTS 2.7%
MORTGAGE-BACKED
SECURITIES 22.8%
U.S. TREASURY
OBLIGATIONS 18.8%
U.S. GOVERNMENT
AGENCY OBLIGATIONS 53.4%
SHORT-TERM
INVESTMENTS 5.0%
ROW: 1, COL: 1, VALUE: 2.7
ROW: 1, COL: 2, VALUE: 35.9
ROW: 1, COL: 3, VALUE: 36.2
ROW: 1, COL: 4, VALUE: 25.2
INVESTMENTS NOVEMBER 30, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 72.2%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 18.8%
5 7/8%, 4/30/98 $ 17,000,000 $ 17,023,943
6%, 9/30/98 8,500,000 8,522,950
5 1/2%, 11/15/98 7,170,000 7,153,222
8 7/8%, 11/15/98 10,410,000 10,707,622
8%, 8/15/99 9,000,000 9,316,440
7 3/4%, 12/31/99 2,360,000 2,448,878
6 5/8%, 6/30/01 6,280,000 6,433,075
5 3/4%, 8/15/03 5,750,000 5,714,063
TOTAL U.S. TREASURY OBLIGATIONS 67,320,193
U.S. GOVERNMENT AGENCY OBLIGATIONS - 53.4%
Federal Agricultural Mortgage
Corporation:
6.92%, 8/10/00 1,040,000 1,064,700
7.61%, 10/16/00 3,000,000 3,129,690
Federal National Mortgage
Association:
STRIPS 0%, 2/1/00 11,250,000 9,907,875
5.55%, 1/17/01 3,525,000 3,480,938
5.72%, 3/08/01 1,000,000 991,720
Government Trust Certificates (assets of
Trust guaranteed by U.S.
Government through Defense
Security Assistance Agency):
Class 1-C 9 1/4%, 11/15/01 33,396,312 35,555,717
Class 2-E 9.40%, 5/15/02 2,639,806 2,806,695
Class T-3 9 5/8%, 5/15/02 8,470,806 9,008,025
Guaranteed Export Trust Certificates
(assets of Trust guaranteed by
U.S. Government through
Export-Import Bank):
Series 1993-C, 5.20%, 10/15/04 638,400 620,320
Series 1993-D, 5.23%, 5/15/05 555,319 538,529
Series 1994-A, 7.12%, 4/15/06 1,974,265 2,045,678
Series 1994-F, 8.187%,
12/15/04 12,637,683 13,344,547
Guaranteed Trade Trust Certificates
(assets of Trust guaranteed by
U.S. Government through
Export-Import Bank):
Series 1993-A, 4.86%, 4/1/98 683,000 681,217
Series 1992-A, 7.02%, 9/1/04 7,302,750 7,485,027
Series 1997-A, 6.104%, 7/15/03 7,300,000 7,298,175
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Israel Export Trust Certificates
(assets of Trust guaranteed by
U.S. Government through Export-
Import Bank) Series 1994-1,
6.88%, 1/26/03 $ 543,530 $ 552,281
Overseas Private Investment Corp.
U.S. Government guaranteed by
participation certificate
Series 1994-1995,
6.08%, 8/15/04 (callable) 3,330,000 3,317,612
Private Export Funding Corp. secured:
9.10%, 10/30/98 1,100,000 1,130,767
7.30%, 1/31/02 4,000,000 4,184,360
5.65%, 3/15/03 888,643 878,494
5.80%, 2/1/04 3,410,000 3,377,162
6.86%, 4/30/04 2,301,975 2,347,966
State of Israel (guaranteed by U.S.
Government through Agency for
International Development):
6%, 2/15/99 1,420,000 1,421,179
6 1/8%, 8/15/99 4,575,000 4,589,549
7 1/8%, 8/15/99 1,652,000 1,684,606
0%, 11/15/00 22,380,000 18,787,339
0%, 11/15/01 9,415,000 7,454,166
8%, 11/15/01 29,208,000 31,190,639
5 5/8%, 9/15/03 7,271,000 7,130,015
5.89%, 8/15/05 1,390,000 1,371,222
U.S. Department of Housing and
Urban Development government
U.S. guaranteed participation
certificates Series 1996-A:
6.59%, 8/1/00 620,000 628,581
6.67%, 8/1/01 3,600,000 3,670,632
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 191,675,423
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $258,427,275) 258,995,616
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - 21.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.3%
5 1/2%, 5/1/98 89,197 88,772
6%, 2/1/98 to 5/1/98 210,463 209,901
U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL HOME LOAN MORTGAGE CORPORATION - CONTINUED
6 1/4%, 1/1/03 $ 1,259,252 $ 1,254,013
6 1/2%, 7/1/03 to 5/1/08 1,227,050 1,228,153
7%, 5/1/01 to 6/1/01 665,466 673,372
7 1/2%, 11/1/12 2,081,914 2,136,543
8%, 9/1/07 to 12/1/09 2,814,752 2,904,445
8 1/2%, 5/1/06 to 5/1/17 2,600,366 2,701,298
9%, 12/1/07 to 3/1/22 2,081,746 2,222,841
9 1/2%, 1/1/17 to 2/1/23 3,966,735 4,292,143
10%, 1/1/09 to 6/1/20 1,111,305 1,210,306
10 1/4%, 12/1/09 37,136 40,161
10 1/2%, 1/1/16 to 5/1/21 3,121,721 3,469,966
11%, 12/1/11 to 1/1/19 72,958 81,008
11 1/2%, 10/1/15 87,886 98,668
12%, 9/1/11 to 11/1/19 149,475 171,788
12 1/4%, 11/1/14 66,765 77,573
12 1/2%, 8/1/10 to 6/1/19 2,792,576 3,251,156
26,112,107
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 8.7%
5 1/2%, 1/1/09 1,968,345 1,912,641
6%, 10/1/08 10,298,570 10,179,003
6 1/2%, 7/1/00 to 2/1/10 1,936,487 1,932,747
7%, 6/1/00 to 1/1/10 1,603,892 1,625,610
8%, 6/1/02 to 8/1/09 631,161 654,656
8 1/4%, 12/1/01 1,854,606 1,984,169
8 1/2%, 3/1/08 to 9/1/23 2,249,510 2,370,812
9%, 2/1/13 to 8/1/21 3,250,229 3,477,833
9 1/2%, 5/1/09 to 11/1/21 368,955 395,590
10%, 1/1/17 to 1/1/20 985,260 1,072,298
10 1/2%, 5/1/10 to 8/1/20 480,109 534,423
11%, 11/1/10 to 6/1/15 1,893,547 2,120,143
11 1/2%, 12/1/00 to 7/1/19 2,305,692 2,619,351
12%, 4/1/15 126,903 146,374
12 1/2%, 3/1/16 173,640 204,128
12 3/4%, 10/1/13 28,883 34,422
31,264,200
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.0%
8 1/2%, 5/15/16 to 4/15/17 413,112 438,580
9%, 1/15/05 to 12/15/16 1,174,436 1,268,701
9 1/2%, 11/15/09 520,125 563,654
10%, 11/15/09 to 9/15/19 649,592 718,134
10 1/2%, 1/15/16 to 1/15/18 1,680,299 1,884,964
PRINCIPAL VALUE
AMOUNT (NOTE 1)
11%, 1/15/10 to 12/15/18 $ 5,416,521 $ 6,134,160
11 1/2%, 1/15/13 to 12/15/15 4,570,153 5,271,363
12%, 1/15/14 to 2/15/16 927,156 1,086,237
12 1/2%, 11/15/14 118,190 140,871
13%, 8/15/14 to 11/15/14 164,866 196,186
13 1/2%, 7/15/11 59,971 72,082
17,774,932
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $73,583,247) 75,151,239
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.8%
U.S. GOVERNMENT AGENCY - 1.8%
Federal Home Loan Mortgage Corporation
sequential pay Series 1353 Class A,
5 1/2%, 11/15/04 107,699 107,026
Federal Home Loan Mortgage Corp.
planned amortization class:
Series 1722-PC,
6 1/2%, 3/15/12 1,214,367 1,213,608
Series 1993-229 Class PD,
5.60%, 7/25/06 3,000,000 2,964,375
Series 1993-1991 Class PE,
5.80%, 9/25/06 2,000,000 1,985,000
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $6,251,812) 6,270,009
CASH EQUIVALENTS - 5.0%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.70%, dated
11/28/97 due 12/1/97 $ 18,093,590 18,085,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $356,347,334) $ 358,501,864
INCOME TAX INFORMATION
At November 30, 1997, the aggregate cost of investment securities for
income tax purposes was $356,347,879. Net unrealized appreciation
aggregated $2,153,985, of which $3,057,625 related to appreciated
investment securities and $903,640 related to depreciated investment
securities.
At November 30, 1997, the fund had a capital loss carryforward of
approximately $22,374,000 of which $14,816,000, $3,288,000, $4,169,000
and $101,000 will expire on November 30, 2002, 2003, 2004 and 2005,
respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE AGREEMENTS OF $18,085,000) $ 358,501,864
(COST $356,347,334) - SEE ACCOMPANYING SCHEDULE
CASH 402,674
RECEIVABLE FOR INVESTMENTS SOLD 8,542,487
INTEREST RECEIVABLE 3,013,754
TOTAL ASSETS 370,460,779
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 12,991,263
DISTRIBUTIONS PAYABLE 184,380
ACCRUED MANAGEMENT FEE 137,510
OTHER PAYABLES AND ACCRUED EXPENSES 3,279
TOTAL LIABILITIES 13,316,432
NET ASSETS $ 357,144,347
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 376,772,061
UNDISTRIBUTED NET INVESTMENT INCOME 609,722
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS (22,391,966)
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 2,154,530
NET ASSETS $ 357,144,347
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE $9.42
PER SHARE ($357,144,347 (DIVIDED BY) 37,931,212 SHARES)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED NOVEMBER 30, 1997
INVESTMENT INCOME $ 24,765,513
INTEREST
EXPENSES
MANAGEMENT FEE $ 1,541,808
NON-INTERESTED TRUSTEES' COMPENSATION 5,354
TOTAL EXPENSES BEFORE REDUCTIONS 1,547,162
EXPENSE REDUCTIONS (50,624) 1,496,538
NET INVESTMENT INCOME 23,268,975
REALIZED AND UNREALIZED GAIN (LOSS) (382,772)
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES (2,903,614)
NET GAIN (LOSS) (3,286,386)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 19,982,589
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 23,268,975 $ 23,750,194
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) (382,772) (4,684,002)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (2,903,614) 113,944
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 19,982,589 19,180,136
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (22,908,123) (23,101,706)
SHARE TRANSACTIONS 148,797,833 93,172,695
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 20,933,933 21,070,454
COST OF SHARES REDEEMED (146,792,800) (121,761,067)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARES TRANSACTIONS 22,938,966 (7,517,918)
TOTAL INCREASE (DECREASE) IN NET ASSETS 20,013,432 (11,439,488)
NET ASSETS
BEGINNING OF PERIOD 337,130,915 348,570,403
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 357,144,347 $ 337,130,915
INCOME OF $609,722 AND $558,957, RESPECTIVELY)
OTHER INFORMATION
SHARES 15,860,798 9,825,446
SOLD
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 2,231,179 2,228,440
REDEEMED (15,646,982) (12,867,775)
NET INCREASE (DECREASE) 2,444,995 (813,889)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1997 1996 1995 1994 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.500 $ 9.600 $ 9.210 $ 9.890 $ 9.850
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .637 B .641 .669 .597 .654
NET REALIZED AND UNREALIZED GAIN (LOSS) (.090) (.102) .383 (.665) (.022)
TOTAL FROM INVESTMENT OPERATIONS .547 .539 1.052 (.068) .632
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.627) (.639) (.662) (.602) (.592)
FROM NET REALIZED GAIN - - - (.010) -
TOTAL DISTRIBUTIONS (.627) (.639) (.662) (.612) (.592)
NET ASSET VALUE, END OF PERIOD $ 9.420 $ 9.500 $ 9.600 $ 9.210 $ 9.890
TOTAL RETURN A 5.99% 5.86% 11.79% (.71)% 6.53%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 357,144 $ 337,131 $ 348,570 $ 339,788 $ 344,935
RATIO OF EXPENSES TO AVERAGE NET ASSETS .45% .42% C .45% .45% .45%
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER
EXPENSE REDUCTIONS .44% D .41% D .45% .45% .45%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS 6.79% 6.95% 7.14% 7.06% 7.14%
PORTFOLIO TURNOVER RATE 147% 141% 214% 303% 351%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES.
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. The financial statements have been prepared in
conformity with generally accepted accounting principles which permit
management to make certain estimates and assumptions at the date of
the financial statements. 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.
Securities for which quotations are not readily available are valued
at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
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.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
between the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income. Distributions from realized capital
gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, and capital loss carryforwards.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
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 for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $498,855,670 and $488,130,508, 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. FMR receives a fee that is computed daily at
an annual rate of .45% of the fund's average net assets.
5. EXPENSE REDUCTIONS.
FMR has entered into arrangements on behalf of the fund with the
fund's custodian and transfer agent whereby credits realized as a
result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's expenses were
reduced by $50,624 under these arrangements.
6. BENEFICIAL INTEREST.
At the end of the period, one shareholder was record owner of
approximately 19.5% of the total outstanding shares of the fund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders of
Fidelity Institutional Short-Intermediate Government Fund:
We have audited the accompanying statement of assets and liabilities
of Fidelity Advisor Series IV: Fidelity Institutional
Short-Intermediate Government Fund, including the schedule of
portfolio investments, as of November 30, 1997, and the related
statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1997 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 Fund as of November 30,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 13, 1998
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Dwight D. Churchill, VICE PRESIDENT
Curtis Hollingsworth, VICE PRESIDENT
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
