(2_FIDELITY_LOGOS)FIDELITY
GOVERNMENT SECURITIES
FUND
SEMIANNUAL REPORT
MARCH 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on bond market
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 last six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 13 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 17 Footnotes to the financial
statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The past few months have been an unsettling time for bond investors. The
bond market declined after the Federal Reserve Board raised short-term
interest rates in February and March. These rate hikes caused bond yields
to rise and bond prices to fall. While nobody knows whether rates will
continue to go up, this may be a good time to review the effect rising
rates have on your bond fund investment, and consider how well your current
bond fund holdings match your original investment goals.
Most investors choose bond funds to generate income and to help diversify
their investment portfolios. Despite the recent market downturn, bond
mutual funds still satisfy these needs. Where investors have felt the
negative effect of rising rates is in the market value of their investment,
which has eroded as bond prices have fallen. It's important to remember,
however, that this loss in principal is only "on paper" until you choose to
sell your shares. That's why your investing time horizon is key.
If your time horizon is short - one year or less - you may want to consider
shifting all or part of your bond fund investment into a money market fund.
If you can't keep your investment in the bond fund until yields start
falling again and bond prices rise, you increase your risk of not recouping
the full value of the shares. A money market fund provides a stable $1
share price and a yield that becomes more attractive as rates go up.
If you don't need your money within the next year, staying in your bond
fund may be the appropriate strategy for you. The longer your investing
time frame, the better your chances of retaining your principal investment
through periods of rising AND falling rates. For example, if you plan to
use your money in one to two years, a short-term bond fund may be the right
choice. If your time frame is two to four years, a fund with an
intermediate length average maturity may be best. If you have a longer-term
goal - say a child's college education that's ten years away - you may be
willing to ride out the bond market's peaks and valleys in exchange for the
higher potential returns of a longer-term fund.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.
We look forward to hearing from you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1994 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Government Securities Fund -4.48% 2.24% 64.55% 168.11%
Lehman Brothers Government Bond
Index -3.34% 2.69% 63.07% 184.94%
Average General U.S. Government
Bond Fund -3.56% 1.63% 55.54% 159.19%
Consumer Price Index 1.45% 2.51% 20.36% 43.47%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one, five, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, you would end up with $1,050. You can compare these figures to
the Lehman Brothers Government Bond Index - a broad measure of the
performance of U.S. government bonds. To measure how the fund stacked up
against its peers, you can compare it to the average general U.S.
government bond fund, which reflects the performance of 149 funds tracked
by Lipper Analytical Services. This benchmark includes reinvested dividends
and capital gains, if any. Comparing the fund's performance to the consumer
price index helps show how your fund did compared to inflation.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Government Securities Fund 2.24% 10.47% 10.36%
Lehman Brothers Government Bond
Index 2.69% 10.27% 11.04%
Average General U.S. Government
Bond Fund 1.63% 9.20% 9.94%
Consumer Price Index 2.51% 3.78% 3.68%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
03/31/84 10000.00 10000.00
04/30/84 9959.09 10005.00
05/31/84 9655.65 9779.89
06/30/84 9773.62 9882.58
07/31/84 10143.01 10257.13
08/31/84 10274.28 10409.96
09/30/84 10462.26 10621.28
10/31/84 10752.87 11027.01
11/30/84 10924.09 11217.78
12/31/84 11101.33 11382.68
01/31/85 11268.49 11605.78
02/28/85 11085.84 11407.32
03/31/85 11253.68 11624.06
04/30/85 11455.74 11855.38
05/31/85 11885.27 12401.91
06/30/85 12023.04 12529.65
07/31/85 11934.88 12493.32
08/31/85 12139.16 12696.96
09/30/85 12225.94 12779.49
10/31/85 12409.06 13019.74
11/30/85 12671.75 13304.88
12/31/85 13070.80 13708.01
01/31/86 13125.21 13782.04
02/28/86 13604.04 14334.70
03/31/86 14053.80 14895.18
04/30/86 14134.18 14957.74
05/31/86 13859.71 14616.71
06/30/86 14230.65 15091.75
07/31/86 14355.25 15200.41
08/31/86 14757.54 15630.58
09/30/86 14517.87 15386.74
10/31/86 14733.37 15599.08
11/30/86 14943.75 15778.47
12/31/86 14982.12 15806.87
01/31/87 15123.05 15979.17
02/28/87 15174.02 16087.82
03/31/87 15100.37 15992.91
04/30/87 14698.80 15599.48
05/31/87 14626.14 15532.40
06/30/87 14823.17 15714.13
07/31/87 14840.71 15681.13
08/31/87 14754.32 15593.32
09/30/87 14513.26 15290.81
10/31/87 14909.36 15885.62
11/30/87 15008.41 15963.46
12/31/87 15141.34 16153.43
01/31/88 15559.71 16681.64
02/29/88 15752.64 16860.14
03/31/88 15644.13 16686.48
04/30/88 15598.90 16598.04
05/31/88 15506.26 16480.19
06/30/88 15739.88 16844.40
07/31/88 15710.36 16729.86
08/31/88 15727.74 16763.32
09/30/88 15994.09 17128.76
10/31/88 16225.42 17430.23
11/30/88 16078.45 17224.55
12/31/88 16104.58 17290.01
01/31/89 16302.93 17509.59
02/28/89 16215.03 17367.76
03/31/89 16293.88 17473.70
04/30/89 16605.68 17847.64
05/31/89 16905.31 18268.85
06/30/89 17382.56 18879.03
07/31/89 17697.64 19277.37
08/31/89 17452.90 18953.51
09/30/89 17521.55 19035.01
10/31/89 17880.85 19528.02
11/30/89 18044.37 19717.44
12/31/89 18136.72 19750.96
01/31/90 17902.05 19472.47
02/28/90 17971.59 19511.42
03/31/90 17993.48 19507.52
04/30/90 17930.09 19335.85
05/31/90 18301.74 19875.32
06/30/90 18556.09 20189.35
07/31/90 18793.10 20447.77
08/31/90 18695.33 20163.55
09/30/90 18835.21 20357.12
10/31/90 19116.39 20688.94
11/30/90 19539.41 21148.23
12/31/90 19865.75 21476.03
01/31/91 20009.76 21705.83
02/28/91 20167.30 21829.55
03/31/91 20251.70 21940.88
04/30/91 20439.49 22182.23
05/31/91 20543.77 22268.74
06/30/91 20495.82 22237.56
07/31/91 20749.60 22502.19
08/31/91 21282.92 23024.24
09/30/91 21769.12 23507.75
10/31/91 21955.83 23714.62
11/30/91 22160.27 23951.76
12/31/91 23036.47 24768.52
01/31/92 22642.18 24382.13
02/29/92 22688.06 24477.22
03/31/92 22539.62 24335.25
04/30/92 22679.83 24488.57
05/31/92 23146.40 24941.60
06/30/92 23541.51 25298.27
07/31/92 24265.48 25935.79
08/31/92 24474.62 26176.99
09/30/92 24798.87 26546.08
10/31/92 24396.02 26163.82
11/30/92 24413.29 26119.34
12/31/92 24872.65 26558.15
01/31/93 25461.95 27123.84
02/28/93 26086.07 27666.31
03/31/93 26224.52 27757.61
04/30/93 26483.69 27971.34
05/31/93 26378.09 27940.58
06/30/93 27027.63 28560.86
07/31/93 27200.48 28735.08
08/31/93 27958.13 29375.87
09/30/93 28068.39 29487.50
10/31/93 28214.10 29599.55
11/30/93 27813.85 29273.96
12/31/93 27937.37 29388.12
01/31/94 28387.18 29790.74
02/28/94 27544.89 29159.18
03/31/94 26810.96 28494.00
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Government Securities Fund on March 31, 1984. As the chart shows, by March
31, 1994, the value of your investment would have grown to $26,811 - a
168.11% increase on your initial investment. For comparison, look at how
the Lehman Brothers Government Bond Index did over the same period. With
dividends reinvested the same $10,000 investment would have grown to
$28,494 - a 184.94% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, 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)
INCOME
SIX MONTHS YEARS ENDED SEPTEMBER 30,
ENDED
MARCH 31,
1994 1993 1992 1991 1990
Income return 2.92% 7.06% 8.07% 9.37% 8.98%
Capital gain return 2.72% 2.60% - - -
Change in share -10.12% 3.52% 5.85% 6.21% -1.48%
price
Total return -4.48% 13.18% 13.92% 15.58% 7.50%
Income returns, capital gain returns, and changes in share price are all
part of a bond fund's total return. An income return reflects the dividends
paid by the fund. A capital gain return reflects the amount paid by the
fund to shareholders based on profits realized from selling bonds that have
grown in value. Both returns assume the dividends or gains are reinvested.
Changes in the fund's share price include changes in the prices of the
bonds owned by the fund.
DIVIDENDS AND YIELD
PERIODS ENDED MARCH 31, 1994 PAST 30 PAST 6 PAST 1
DAYS MONTHS YEAR
Dividends per share n/a 32.60(cents) 66.17(cents)
Annualized dividend rate n/a 6.27% 6.28%
Annualized yield 5.47% n/a n/a
Dividends per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.42 over
the past six months or $10.53 over the past year, you can compare the
fund's income over these two periods. The 30-day annualized yield is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Curt Hollingsworth,
Portfolio Manager of Fidelity Government Securities Fund
Q. CURT, HOW DID THE FUND PERFORM?
A. It turned in mixed results. The best way to measure the fund's
performance is by its total return. This reflects interest payments, plus
capital gains - which occur when the fund profits from selling bonds that
have grown in value - and changes in share price. For the six months and
year ended March 31, 1994, the fund had total returns of -4.48% and 2.24%.
According to Lipper Analytical Services, the fund underperformed the
average general government bond fund, which returned -3.56%, over the last
six months of this period. However, over the full year it beat the average
fund, which returned 1.63%.
Q. IT SOUNDS LIKE THE BOND MARKET HAD A WEAK SIX MONTHS FOR THE PERIOD
ENDED MARCH 31. WHAT HAPPENED?
A. Bond prices fell during this time for several reasons. First, the
economy started growing more quickly and commodity prices began rising.
This situation was bad news for bond investors because the improving
economy increased concerns about inflation - which eats away at a bond's
fixed interest payment. Another reason bond prices dropped was that the
Federal Reserve Board raised short-term interest rates in February and
March of 1994. In response, yields on intermediate and long-term Treasuries
also rose. During the last six months of the period, the yield on the
30-year Treasury bond increased from 6.0% to 7.1%. Keep in mind that bond
yields and prices move in opposite directions. So the rise in yields meant
the prices of bonds would fall.
Q. WHY DID THE DOWNTURN HURT THE FUND MORE THAN SOME OF ITS COMPETITORS?
A. The fund fell more than similar funds because it had a longer duration
than most of those funds. Duration is a way to measure how sensitive a bond
is to changes in interest rates. It looks at a bond's maturity, or how much
time remains until the issuer is scheduled to pay off the principal, as
well as the frequency and amount of interest payments. The longer the
average duration of the fund, the more its share price will move up as
rates fall, or down as rates rise. For example, if the fund had a duration
of five years and interest rates rose 1%, its share price would fall
roughly 5%. Conversely, if interest rates fell 1%, its share price would
rise about 5%. While having a longer duration than similar funds over the
last six months caused the fund to underperform, I believe that keeping the
fund's duration fairly long will pay off if interest rates turn around and
the market improves.
Q. DID YOU CHANGE THE FUND'S STRATEGY IN LIGHT OF WHAT WAS HAPPENING IN THE
BOND MARKET?
A. No, the fund's overall strategy remains the same. The fund is still
using duration averaging - a disciplined approach to managing the fund's
duration. Using this strategy, I lengthen the average maturity and duration
of the fund after interest rates rise, causing the fund to become more
aggressively positioned after bond prices fall. Conversely, I invest in
bonds with shorter maturities after interest rates fall, causing the fund
to become more defensively positioned after bond prices rise. This
strategy, which is contrary to that of many other bond funds, has been very
effective in helping the fund outperform most of its competitors over the
long haul. That said, I have made some changes to the way the fund uses
duration averaging.
Q. HOW DID YOU CHANGE DURATION
AVERAGING?
A. I'm now using a more disciplined approach to forecast the average yield
on the 30-year Treasury bond. Essentially, I compare bond yields available
today with average bond yields over the last 40 years. This new approach
looks at both nominal yields and real yields. Nominal yields are the yields
to maturity you see quoted in the newspaper. Real yields are simply these
yields minus the inflation rate. For example, at the end of the period on
March 31, 1994, 30-year Treasury bonds yielded 7.1%, and consumer prices
rose 2.5% over the previous 12 months. This gave us a real yield of 4.6%.
Q. HOW DO THESE YIELDS COMPARE WITH YIELDS OVER THE LAST 40 YEARS?
A. The average nominal yield was 6.25%, and 60% of the time it was lower
than today's yield of 7.1%. The average real yield was 2.6%, and 80% of the
time real yields were lower than today's real yield of 4.6%. So, when
compared to historical averages, today's nominal yields are modestly
attractive, and today's real yields are very attractive. As a result, the
fund's duration is now six years, longer than its neutral duration of five
years, but shorter than its target maximum duration of 7.5 years.
Q. IT'S SOMEWHAT CONFUSING TO THINK ABOUT HIGH YIELDS AS BEING ATTRACTIVE
FOR THE FUND BECAUSE HIGH BOND YIELDS MEAN LOW BOND PRICES.
A. I think the best way to understand the concept of yields is to remember
that the fund buys bonds when yields are high and sells them after yields
have fallen. So when bond yields are relatively high, like they are today,
they make great buys. Shareholders also should remember that most of the
average total return for bonds over the long term comes from income, or
interest payments, not from capital gains. When yields are high, bonds
produce more income, which can compensate shareholders for falling bond
prices.
Q. THINKING BACK OVER THE LAST SIX MONTHS, WOULD YOU CHANGE SOME OF YOUR
INVESTMENT DECISIONS?
A. Yes. I wish the average duration of the fund had been shorter when
interest rates reached their low point of the year on October 15, 1993.
That way the fund would have been able to respond better to the rise in
interest rates after that date.
Q. HOW DOES THE FUND LOOK GOING
FORWARD?
A. Forecasting interest rates is extraordinarily difficult. However, I'm
feeling fairly optimistic because I think that inflation will remain under
control. Over the long haul, inflation is the single most important
variable affecting bond market performance.
FUND FACTS
GOAL: high current income
free from state and local
taxes
START DATE: April 4, 1979
SIZE: as of March 31, 1994,
over $717 million
MANAGER: Curt
Hollingsworth, since
February 1990; also
manages Fidelity Advisor
Government Investment;
Fidelity Short-Intermediate
Government; Spartan
Limited Maturity
Government; Spartan
Long-Term Government
Bond, and Spartan
Short-Intermediate
Government Funds
(checkmark)
CURT HOLLINGSWORTH ON THE
CURRENT BOND MARKET
"Bond prices fell considerably
over the six months ended
March 31, 1994. Because
yields had risen and prices
had fallen, the end of the
period was an ideal time to
buy bonds, not to sell them.
As a general rule, this fund
invests for the long term and
is not dramatically affected by
the ups and downs of the
bond market."
(bullet) As of March 31, 1994, the
fund held 41.9% of its assets
in government agency
obligations, with the
remainder in U.S. Treasury
securities.
(bullet) The fund's share price
fluctuated between $11.02
and $9.77 from September
30, 1993 to March 31, 1994.
(bullet) At the end of the period, the
fund's duration was six years.
That means that if interest
rates fell one percentage
point, the fund's share price
- - - $9.77 on March 31 -
would rise roughly 6% to
about $10.36. If rates rose
one percentage point,
however, the fund's share
price would fall about 6% to
about $9.18.
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF MARCH 31, 1994
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Under 6% 25.9 1.5
6 - 6.99% 4.6 13.5
7 - 7.99% 7.5 6.8
8 - 8.99% 34.2 43.9
9 - 9.99% 6.7 19.9
10 - 10.99% 5.8 6.2
Over 11% 10.0 0.0
Zero coupon bonds 5.3 8.2
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF MARCH 31, 1994
6 MONTHS AGO
Years 14.2 13.0
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF MARCH 31, 1994
6 MONTHS AGO
Years 6.0 6.8
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL
LOSE ABOUT 5% OF ITS VALUE.
ASSET ALLOCATION
AS OF MARCH 31, 1994 AS OF SEPTEMBER 30, 1993
Row: 1, Col: 1, Value: 41.9
Row: 1, Col: 2, Value: 58.1
Row: 1, Col: 1, Value: 45.4
Row: 1, Col: 2, Value: 54.6
U.S. Treasury
obligations 58.1%
U.S. government
agency
obligations 41.9%
U.S. Treasury
obligations 54.6%
U.S. government
agency
obligations 45.4%
INVESTMENTS MARCH 31, 1994 (UNAUDITED)
Showing Percentage of Total Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 100%
PRINCIPAL VALUE (NOTE 1)
AMOUNT
U.S. TREASURY OBLIGATIONS - 58.1%
U.S. Treasury bills, yields at date of purchase
3.3124%-3.3261%, 5/5/94 $ 187,000,000 $ 186,452,090 912794K4
8 3/8%, 8/15/00 35,000,000 36,514,845 912810BV
12%, 8/15/13 50,400,000 72,198,000 912810DF
8 1/8%, 8/15/19 62,795,000 68,839,019 912810ED
7 1/4%, 2/15/23 500,000 494,060 912810EP
6 1/4%, 8/15/23 19,150,000 17,142,314 912810EQ
stripped coupon payment:
2/15/08 21,900,000 7,979,046 912833CT
2/15/11 102,550,000 29,523,119 912833CZ
419,142,493
U.S. GOVERNMENT AGENCY OBLIGATIONS - 41.9%
Federal Farm Credit Bank:
9%, 4/7/99 5,000,000 5,537,500 31331MHF
8.65%, 10/1/99 3,580,000 3,932,415 313311VY
8.35%, 12/13/00 1,250,000 1,353,687 31331MFE
Federal Home Loan Bank:
8.375%, 10/25/99 13,230,000 14,598,511 313388WM
7.93%, 11/1/01 1,900,000 2,106,625 31339AXE
stripped principal 0%, 2/25/04 1,800,000 882,000 31339KBG
Financing Corporation:
10.70%, 10/6/17 5,900,000 7,924,437 317705AA
9.80%, 11/30/17 3,285,000 4,089,825 317705AC
9.80%, 4/6/18 28,845,000 35,957,095 317705AE
10.35%, 8/3/18 17,750,000 23,224,769 317705AG
9.65%, 11/2/18 1,245,000 1,533,684 317705AH
9.70%, 4/5/19 1,000,000 1,237,812 317705AM
8.60%, 9/26/19 11,005,000 12,277,453 317705AP
Student Loan Marketing Association 10 1/2%, 11/1/95 10,000,000 10,695,000
863871AU
Tennessee Valley Authority:
8 1/4%, 11/15/96 64,500,000 68,409,990 880591BC
8 3/8%, 10/1/99 37,568,000 40,855,200 880591BA
7.25%, 7/15/43 46,500,000 42,856,725 880591BW
6.875%, 12/15/43 18,000,000 15,746,040 880591BY
Twelve Federal Land Banks:
7.95%, 10/21/96 1,500,000 1,581,555 901178BT
7.35%, 1/20/97 7,035,000 7,325,194 901178BV
302,125,517
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $736,723,349) $ 721,268,010
INCOME TAX INFORMATION
At March 31, 1994, the aggregate cost of investment securities for income
tax purposes was $736,896,914. Net unrealized depreciation aggregated
$15,628,904, of which $6,030,299 related to appreciated investment
securities and $21,659,203 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $736,723,349) $ 721,268,010
(Note 1) - See accompanying schedule
Interest receivable 10,067,900
TOTAL ASSETS 731,335,910
LIABILITIES
Payable to custodian bank $ 1,138,501
Payable for investments purchased 11,234,451
Dividends payable 901,514
Accrued management fee 277,551
Other payables and accrued expenses 166,667
TOTAL LIABILITIES 13,718,684
NET ASSETS $ 717,617,226
Net Assets consist of (Note 1):
Paid in capital $ 737,898,176
Distributions in excess of net investment income (439,149)
Accumulated undistributed net realized gain (loss) on (4,386,462)
investments
Net unrealized appreciation (depreciation) on investment (15,455,339)
securities
NET ASSETS, for 73,439,741 shares outstanding $ 717,617,226
NET ASSET VALUE, offering price and redemption price per $9.77
share ($717,617,226 (divided by) 73,439,741 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MARCH 31, 1994 (UNAUDITED)
INVESTMENT INCOME $ 25,625,733
Interest
EXPENSES
Management fee (Note 3) $ 1,726,997
Transfer agent fees (Note 3) 653,802
Accounting fees and expenses (Note 3) 123,928
Non-interested trustees' compensation 2,754
Custodian fees and expenses 5,400
Registration fees 21,922
Audit 11,902
Legal 5,238
Interest (Note 4) 3,453
Miscellaneous 5,110
TOTAL EXPENSES 2,560,506
NET INVESTMENT INCOME 23,065,227
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1,420,824)
(NOTES 1 AND 2)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (56,486,356)
investment securities
NET GAIN (LOSS) (57,907,180)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ (34,841,953)
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1994 1993
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 23,065,227 $ 39,434,076
Net investment income
Net realized gain (loss) on investments (1,420,824) 24,081,109
Change in net unrealized appreciation (depreciation) (56,486,356) 14,112,509
on
investments
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (34,841,953) 77,627,694
FROM OPERATIONS
Distributions to shareholders (23,381,689) (39,891,593)
From net investment income
From net realized gain (21,495,517) (13,892,772)
TOTAL DISTRIBUTIONS (44,877,206) (53,784,365)
Share transactions 307,439,742 400,379,561
Net proceeds from sales of shares
Reinvestment of distributions from: 17,072,553 27,884,175
Net investment income
Net realized gain 17,075,201 10,382,570
Cost of shares redeemed (273,071,450) (315,253,452)
Net increase (decrease) in net assets resulting from 68,516,046 123,392,854
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (11,203,113) 147,236,183
NET ASSETS
Beginning of period 728,820,339 581,584,156
End of period (including distributions in excess of net $ 717,617,226 $ 728,820,339
investment income of $439,149 and $349,246,
respectively)
OTHER INFORMATION
Shares
Sold 29,365,408 38,060,588
Issued in reinvestment of distributions from: 1,648,540 2,658,292
Net investment income
Net realized gain 1,648,343 1,031,040
Redeemed (26,243,875) (30,096,524)
Net increase (decrease) 6,418,416 11,653,396
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL SIX YEAR NINE YEARS ENDED DECEMBER 31,
HIGHLIGHTS MONTHS ENDED MONTHS
ENDED SEPTEMBER ENDED
MARCH 31, 30, SEPTEMBER
1994 30,
(UNAUDITED 1993 1992 1991 1990 1989
)
SELECTED PER-SHARE DATA
Net asset value, $ 10.870 $ 10.500 $ 10.300 $ 9.640 $ 9.610 $ 9.270
beginning of period
Income from .322 .672 .556 .801 .832 .784
Investment
Operations
Net investment
income
Net realized and (.786) .627 .198 .660 .030 .340
unrealized gain
(loss) on invest-
ments
Total from (.464) 1.299 .754 1.461 .862 1.124
investment
operations
Less Distributions (.326) (.679) (.554) (.801) (.832) (.784)
From net
investment
income
From net realized (.310) (.250) - - - -
gain on invest-
ments
Total distributions (.636) (.929) (.554) (.801) (.832) (.784)
Net asset value, end $ 9.770 $ 10.870 $ 10.500 $ 10.300 $ 9.640 $ 9.610
of period
TOTAL RETURN(dagger)(dagger) (4.48) 13.18 7.65% 15.96 9.53 12.62
% % % % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 717,617 $ 728,820 $ 581,584 $ 521,605 $ 468,683 $
period (000 omitted) 560,351
Ratio of expenses to .69% .69 .70% .70 .66 .73
average net assets * % * % % %
Ratio of net 6.18% 6.40 7.31% 8.23 8.84 8.29
investment income * % * % % %
to average net
assets
Portfolio turnover rate 461% 323 219% 257 302 312
* % * % % %
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Government Securities Fund (the fund) 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
and is authorized to issue an unlimited number of shares. 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 are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities for which market quotations are not readily available are valued
at their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
market discount.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of September 30, 1993 have been reclassified to
reflect a decrease in paid in capital of
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
$30,300,769, a decrease in undistributed net investment income of $226,559
and a decrease in accumulated net realized (loss) on investments of
$30,074,210.
2. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $1,586,692,828 and $1,704,840,640, respectively.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates ranging from .15% to .37% and is based on the
monthly average net assets of all the mutual funds advised by FMR. The
annual individual fund fee rate is .30%. For the period, the management fee
was equivalent to an annualized rate of .46% of average net assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .1325% to .3700%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $106,499 for the
period.
TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the
fund's transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEE. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
4. 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,
4. BANK BORROWINGS -
CONTINUED
the fund must pledge to the bank securities having a market value in
excess of 220% of the total bank borrowings. The interest rate on the
borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $8,955,000 and $5,917,167,
respectively. The weighted average interest rate was 3.5%.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(Registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. FOR MORE
INFORMATION ON ANY
FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888
FOR A FREE
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO WRITE FIDELITY
Please locate the address that is closest to you. We'll give your
correspondence immediate attention and send you written confirmation upon
completion of your request. Please send ALL correspondence about retirement
accounts to Dallas.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 2269
Boston, MA 02107-2269
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30280
Salt Lake City, UT 84130-0280
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
Additional Payments
P.O. Box 2656
Boston, MA 02293-0656
Fidelity Investments
Additional Payments
P.O. Box 620024
Dallas, TX 75262-0024
Fidelity Investments
Additional Payments
P.O. Box 31455
Salt Lake City, UT 84131-0455
OVERNIGHT EXPRESS
Fidelity Investments
Additional Payments
World Trade Center
164 Northern Avenue
Boston, MA 02210
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02103-0878
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02101-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 620024
Dallas, TX 75262-0024
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
2249 Galiano Street
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
175 East 400 South Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Curt Hollingsworth, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income Fund
Ginnie Mae Portfolio
Global Bond Fund
Government Securities Fund
Intermediate Bond Fund
Investment Grade Bond Fund
Mortgage Securities Portfolio
New Markets Income Fund
Short-Intermediate Government Fund
Short-Term Bond Portfolio
Short-Term World Income Fund
Spartan(Registered trademark) Ginnie Mae Portfolio
Spartan Government Income Fund
Spartan High Income Fund
Spartan Investment Grade Bond Fund
Spartan Limited Maturity Government
Fund
Spartan Long-Term Government Bond
Fund
Spartan Short-Intermediate Government Fund
Spartan Short-Term Bond Fund
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
AUTOMATED LINES FOR QUICKEST SERVICE
