(2_FIDELITY_LOGOS)FIDELITY
GOVERNMENT SECURITIES
FUND
SEMIANNUAL REPORT
MARCH 31, 1995
CONTENTS
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 17 Notes 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. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING
CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU
INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last 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.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for 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, 1995 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Government Securities Fund 5.01% 3.55% 54.29% 146.70%
Lehman Brothers Government Bond 5.07% 4.31% 52.39% 155.72%
Index
Average General U.S. Government
Bond Fund 4.75% 2.95% 45.32% 128.02%
Consumer Price Index 1.34% 2.85% 17.64% 42.29%
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, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Lehman Brothers Government
Bond Index - a broad measure of the performance of U.S. government bonds.
To measure how the fund's performance stacked up against its peers, you can
compare it to the average general U.S. government bond fund, which reflects
the performance of 174 funds with similar objectives tracked by Lipper
Analytical Services over the past six months. Both benchmarks include
reinvested dividends and capital gains, if any. Comparing the fund's
performance to the consumer price index (CPI) helps show how your fund did
compared to inflation. (The CPI returns begin on the month end closest to
the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Government Securities Fund 3.55% 9.06% 9.45%
Lehman Brothers Government Bond Index 4.31% 8.79% 9.84%
Average General U.S. Government Bond Fund 2.95% 7.74% 8.56%
Consumer Price Index 2.85% 3.30% 3.59%
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
Government Sec. (054Government Bond Inde
03/31/85 10000.00 10000.00
04/30/85 10179.55 10199.05
05/31/85 10561.23 10669.48
06/30/85 10683.65 10779.65
07/31/85 10605.31 10748.07
08/31/85 10786.83 10923.25
09/30/85 10863.95 10994.12
10/31/85 11026.67 11200.51
11/30/85 11260.10 11446.20
12/31/85 11614.70 11793.24
01/31/86 11663.04 11856.78
02/28/86 12088.53 12331.99
03/31/86 12488.19 12814.54
04/30/86 12559.61 12869.26
05/31/86 12315.71 12576.57
06/30/86 12645.33 12984.21
07/31/86 12756.05 13077.49
08/31/86 13113.52 13447.67
09/30/86 12900.55 13237.24
10/31/86 13092.04 13419.76
11/30/86 13278.99 13574.37
12/31/86 13313.09 13599.34
01/31/87 13438.32 13748.44
02/28/87 13483.62 13841.35
03/31/87 13418.17 13759.09
04/30/87 13061.34 13420.49
05/31/87 12996.76 13362.47
06/30/87 13171.84 13518.91
07/31/87 13187.43 13491.00
08/31/87 13110.66 13414.98
09/30/87 12896.46 13154.98
10/31/87 13248.43 13666.54
11/30/87 13336.44 13734.12
12/31/87 13454.57 13897.91
01/31/88 13826.33 13897.91
02/29/88 13997.76 14506.06
03/31/88 13901.33 14356.22
04/30/88 13861.14 14279.47
05/31/88 13778.82 14177.75
06/30/88 13986.41 14491.00
07/31/88 13960.18 14392.58
08/31/88 13975.63 14421.23
09/30/88 14212.31 14736.32
10/31/88 14417.88 14995.96
11/30/88 14287.28 14818.58
12/31/88 14310.49 14875.14
01/31/89 14486.75 15064.27
02/28/89 14408.65 14941.61
03/31/89 14478.71 15033.05
04/30/89 14755.77 15355.49
05/31/89 15022.02 15717.59
06/30/89 15446.10 16242.01
07/31/89 15726.08 16585.02
08/31/89 15508.60 16305.91
09/30/89 15569.60 16376.06
10/31/89 15888.87 16799.85
11/30/89 16034.17 16962.54
12/31/89 16116.24 16991.19
01/31/90 15907.71 16750.64
02/28/90 15969.51 16784.06
03/31/90 15988.96 16780.39
04/30/90 15932.63 16632.39
05/31/90 16262.89 17096.22
06/30/90 16488.90 17366.87
07/31/90 16699.51 17589.06
08/31/90 16612.63 17344.11
09/30/90 16736.93 17510.47
10/31/90 16986.77 17796.55
11/30/90 17362.67 18190.97
12/31/90 17652.65 18472.27
01/31/91 17780.62 18670.58
02/28/91 17920.61 18777.45
03/31/91 17995.60 18872.93
04/30/91 18162.46 19080.06
05/31/91 18255.12 19154.24
06/30/91 18212.52 19127.07
07/31/91 18438.02 19354.02
08/31/91 18911.93 19802.79
09/30/91 19343.97 20218.14
10/31/91 19509.87 20395.15
11/30/91 19691.54 20599.71
12/31/91 20470.13 21301.51
01/31/92 20119.77 20969.89
02/29/92 20160.53 21051.78
03/31/92 20028.63 20928.76
04/30/92 20153.22 21060.59
05/31/92 20567.82 21449.14
06/30/92 20918.91 21756.52
07/31/92 21562.23 22304.81
08/31/92 21748.07 22512.67
09/30/92 22036.19 22831.07
10/31/92 21678.21 22501.65
11/30/92 21693.56 22462.72
12/31/92 22101.76 22840.98
01/31/93 22625.40 23326.11
02/28/93 23179.99 23793.24
03/31/93 23303.01 23872.93
04/30/93 23533.31 24056.56
05/31/93 23439.47 24030.11
06/30/93 24016.66 24563.35
07/31/93 24170.25 24713.18
08/31/93 24843.49 25264.78
09/30/93 24941.48 25361.37
10/31/93 25070.94 25457.22
11/30/93 24715.27 25178.11
12/31/93 24825.04 25275.43
01/31/94 25224.74 25621.37
02/28/94 24476.28 25078.96
03/31/94 23824.12 24514.87
04/30/94 23597.16 24322.07
05/31/94 23576.98 24290.86
06/30/94 23452.13 24235.03
07/31/94 23975.72 24680.50
08/31/94 23961.45 24685.27
09/30/94 23492.21 24337.50
10/31/94 23400.83 24319.13
11/30/94 23380.09 24274.70
12/31/94 23532.75 24422.33
01/31/95 23974.55 24876.97
02/28/95 24533.85 25412.41
03/31/95 24670.05 25571.80
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Government Securities Fund on March 31, 1985. As the chart shows, by March
31, 1995, the value of your investment would have grown to $24,670 - a
146.70% 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
$25,572 - a 155.72% 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)
TOTAL RETURN COMPONENTS
SIX
MONTHS
ENDED YEARS ENDED SEPTEMBER 30,
MARCH 31,
1995 1994 1993 1992 1991 1990
Dividend return 3.40% 5.76% 7.06% 8.07% 9.37% 8.98%
Capital appreciation 1.61% -11.57% 6.12% 5.85% 6.21% -1.48%
return
Total return 5.01% -5.81% 13.18% 13.92% 15.58% 7.50%
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 MARCH 31, 1995 PAST PAST 6 PAST
MONTH MONTHS YEAR
Dividends per share 5.25(cents) 30.68(cents) 61.31(cents)
Annualized dividend rate 6.53% 6.64% 6.52%
30-day annualized yield 6.65% - -
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 $9.46 over
the past month, $9.27 over the past six months and $9.41 over the past
year, you can compare the fund's income over these three 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
NOTE TO SHAREHOLDERS:
On February 13, Robert Ives became portfolio manager of Fidelity Government
Securities Fund. The following is an interview with Curt Hollingsworth -
who managed the fund during most of the period covered by this report -
with some comments from Bob Ives on his outlook and strategy:
Q. CURT, HOW HAS THE FUND PERFORMED?
C.H. For the six and 12 months ended March 31, 1995, the fund had total
returns of 5.01% and 3.55%, respectively. During the same periods, the
average general government bond fund returned 4.75% and 2.95%,
respectively, according to Lipper Analytical Services.
Q. HOW WOULD YOU CHARACTERIZE THE BOND MARKET ENVIRONMENT OVER THE PAST SIX
MONTHS?
A. I would say that the bond market has found its feet. Longer-term
interest rates, in particular, have rallied a fair amount, meaning that
they have fallen, and bonds within that maturity spectrum have increased in
price. Yields on the shorter end of the spectrum have come down - and
prices have risen - but not as much. The reason behind this general
stability and the rally in certain parts of the bond market was that the
Federal Reserve Board increased short-term interest rates only twice during
the period, after having raised them five times during early 1994. In
addition, there were indications that the economy was slowing down, so the
market became less fearful about possible inflation, which eats away at a
bond's fixed payments.
Q. WHERE DID YOU FIND OPPORTUNITIES BEFORE HANDING THE FUND OVER TO BOB?
A. I kept the fund's investments in a laddered maturity structure, meaning
that the maturities of the fund's bonds were evenly distributed. I sought
to help performance by choosing the most attractively priced securities and
selling those that had performed well. During my last four months on the
fund, that meant buying short- and intermediate-term U.S. agency securities
and selling longer-maturity agency securities.
Q. WHY WERE THE SHORTER-TERM AGENCY ISSUES MORE ATTRACTIVE?
A. Because they offered significantly higher yields than U.S. Treasury
notes with similar maturities. This yield advantage, which is called the
yield spread, increased because of an oversupply of these shorter-term
bonds. Banks - usually heavy investors in these two- to five-year agency
securities - have been selling them to meet increased demand for loans
brought on by the strong economic growth we've seen over the past year and
a half. Because of the greater supply of these types of securities, their
yield spread widened.
Q. AND WHAT ABOUT LONGER-TERM AGENCY ISSUES?
A. Long-term agency bonds historically have offered investors more generous
yield spreads than short- and intermediate-term agency notes. That's
because investors generally prefer to be rewarded with higher yields for
taking on the added risk of a longer-maturity security. Today, however,
yield spreads on intermediate-term agencies are almost as wide as yield
spreads on long-term agencies. So, investors can get the same yields on
intermediate-term notes as they would with longer-term issues, without the
added risk. The forces of supply and demand are responsible for this lack
of yield spread widening at the longer end of the maturity spectrum. There
hasn't been much new issuance in the longer end of the agency market. For
example, two agencies involved with the rescue of the savings and loan
industry - Financing Corporation (FICO) and Resolution Funding Corporation
(REFCORP) - had been issuing a steady stream of agency bonds, but have
ceased doing so. At the same time, demand - especially from insurance
companies - for longer-term investment grade debt has stayed fairly steady.
As a result, these bonds performed well, making them more attractive sell
candidates.
Q. TURNING TO YOU, BOB, WHAT CHANGES HAVE YOU MADE TO THE PORTFOLIO SINCE
TAKING OVER?
B.I. Let me start by saying that my strategy probably will be similar to
Curt's, so there should be a fair amount of continuity. Since taking over
the fund, I've continued to focus on agency notes. Specifically, I've
bought more callable - or redeemable before scheduled maturity - agency
securities. Earlier this year, many investors sold these issues, so
there's been a relatively large supply. I've found them to be cheap when I
look at their price history. I also put the fund in a barbelled structure
at the end of the period.
Q. WHAT KIND OF STRUCTURE IS THAT?
A. It's somewhat of a defensive strategy that involves heavily weighting
two ends of a maturity spectrum and investing little in between. I believe
the market - through its pricing - is placing too high a probability that
the Federal Reserve Board has reached the end of its interest rate
increases, because the economy has slowed down. I'm not as certain that
more increases aren't on the way. Looking at all of the possibilities over
the next few months, I believe the barbell can help reduce downside risk,
while at the same time it can help increase the fund's potential for gains.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. The big question is where the economy goes from here: will we move back
into a recession or will the economy pick up again? I'll be looking at
economic data over the coming months, trying to see if the economy is
moving one way or another. Consumers drive about two-thirds of the
economy. Their spending has slowed, and what consumers do going forward
will have very important implications for the economy.
FUND FACTS
GOAL: high current income
free from state and local
taxes
START DATE: April 4, 1979
SIZE: as of March 31, 1995,
more than $845 million
MANAGER: Curt Hollingsworth,
1990-February 1995; Robert
Ives, starting February 13,
1995; manager, Fidelity
Advisor Government
Investment and Fidelity
Advisor Annuity Government
Investment funds since
February 1995, and Spartan
Government Income Fund
since 1993; Fidelity Mortgage
Securities Portfolio January
1993-August 1993; Fidelity
Ginnie Mae Portfolio,
1993-February 1995; Spartan
Ginnie Mae Fund,
1993-February 1995; joined
Fidelity in 1991
(checkmark)
BOB IVES ON HIS INVESTMENT
APPROACH:
"In general, I don't take a view
one way or another on the
direction of the market.
Rather, I make decisions
based on the relative value
between sectors or relative
values within a sector. In
addition to increasing the
potential for the income I
seek, this tactic allows me to
buy the least expensive
bonds available, with the
intention that the market will
come around to realizing their
value and help to provide the
fund with further gain. I look
for opportunities with good
risk/reward trade-offs -
those situations where I feel
there is a combination of low
risk and higher potential for
gain. I also seek to diversify
my investments, so that all of
my eggs won't be in one
basket. "
(solid bullet) At the end of the period, the
fund's duration was 4.7 years,
compared to 6.3 years six
months ago. That means if
comparable interest rates fell
1%, the fund's share price
likely would rise roughly 4.7%.
If, however, rates rose 1%,
the fund's share price likely
would fall roughly 4.7%.
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF MARCH 31, 1995
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Under 6% 27.7 15.8
6 - 6.99% 3.3 1.9
7 - 7.99% 25.8 14.7
8 - 8.99% 29.1 29.0
9 - 9.99% 6.3 4.3
10 - 10.99% 1.2 1.7
11% and over 6.5 32.5
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 MARCH 31, 1995
6 MONTHS AGO
Years 8.5 13.8
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 MARCH 31, 1995
6 MONTHS AGO
Years 4.7 6.3
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 MARCH 31, 1995 AS OF SEPTEMBER 30, 1994
Row: 1, Col: 1, Value: 2.4
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 44.3
Row: 1, Col: 4, Value: 53.3
U.S. Treasury
obligations 55.8%
U.S. government
agency
obligations 44.2%
Short-term
investments 0.0%
U.S. Treasury
obligations 53.3%
U.S. government
agency
obligations 44.3%
Short-term
investments 2.4%
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 44.2
Row: 1, Col: 4, Value: 55.8
INVESTMENTS MARCH 31, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 100%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 55.7%
8%, 10/15/96 $ 73,100,000 $ 74,458,929
6 3/4%, 2/28/97 3,070,000 3,068,557
8 1/2%, 5/15/97 18,500,000 19,098,290
5 3/8%, 5/31/98 27,300,000 26,071,500
6 3/4%, 6/30/99 24,300,000 24,015,204
7 3/4%, 11/30/99 49,300,000 50,563,066
7 7/8%, 8/15/01 5,000,000 5,182,050
5 3/4%, 8/15/03 240,000 217,726
11 7/8%, 11/15/03 6,500,000 8,390,070
11 5/8%, 11/15/04 14,420,000 18,676,207
9%, 11/15/18 45,560,000 52,522,024
8 7/8%, 2/15/19 110,390,000 125,826,938
8 1/8%, 8/15/19 6,300,000 6,669,117
12%, 8/15/13 19,420,000 26,729,882
U.S. Treasury Bills
yields at date of purchase 5.10% to 5.72%,
4/13/95 to 5/4/95 20,400,000 20,321,620
TOTAL U.S. TREASURY OBLIGATIONS 461,811,180
U.S. GOVERNMENT AGENCY OBLIGATIONS - 44.3%
Federal Farm Credit Bank:
4 3/4%, 12/7/98 (callable) (a) 2,000,000 1,885,250
8.65%, 10/1/99 3,580,000 3,762,902
8.35%, 12/13/00 1,250,000 1,302,913
Federal Home Loan Bank:
4 1/2%, 5/20/96 (a) 1,000,000 974,650
4.80%, 7/12/96 (a) 1,000,000 974,837
7.59%, 12/23/96 4,570,000 4,618,556
4.75%, 2/24/97 (callable) 16,000,000 15,345,600
4.30%, 6/30/97 6,665,000 6,294,226
7.23%, 10/28/97 28,025,000 28,108,198
4.55%, 7/30/98 (callable) (a) 100,000,000 93,910,000
4.55%, 8/3/98 (callable) (a) 50,000,000 46,935,000
7.30%, 10/20/98 1,050,000 1,052,174
5.53%, 12/21/98 5,300,000 4,996,840
5.60%, 2/22/99 (callable) 9,000,000 8,424,144
5.92%, 3/18/99 3,000,000 2,871,570
7.65%, 10/28/99 27,500,000 27,835,500
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Federal Home Loan Bank - continued
7.93%, 11/1/01 $ 1,900,000 $ 1,948,316
7.59%, 5/20/04 35,010,000 35,150,859
stripped principal 0%, 2/25/04 1,800,000 928,688
Student Loan Marketing Association:
10 1/2%, 11/1/95 10,000,000 10,220,800
7.56%, 12/9/96 50,000,000 50,464,840
7.93%, 10/15/01 600,000 612,844
8.14%, 10/15/03 330,000 340,738
8.14%, 5/17/04 1,500,000 1,551,738
Tennessee Valley Authority 8 1/4%, 11/15/96 7,565,000 7,715,164
Twelve Federal Land Banks:
7.95%, 10/21/96 1,500,000 1,523,910
7.35%, 1/20/97 7,035,000 7,084,456
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 366,834,713
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $827,044,860) $ 828,645,893
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At March 31, 1995, the aggregate cost of investment securities for income
tax purposes was $827,044,860. Net unrealized appreciation aggregated
$1,601,033, of which $5,289,645 related to appreciated investment
securities and $3,688,612 related to depreciated investment securities.
The fund has elected to defer to its fiscal year ending September 30, 1995
$21,101,000 of losses recognized during the period November 1, 1993 to
September 30, 1994.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $827,044,860) - $ 828,645,893
See accompanying schedule
Receivable for investments sold 4,013,387
Interest receivable 19,546,296
TOTAL ASSETS 852,205,576
LIABILITIES
Payable to custodian bank $ 160,819
Payable for investments purchased 4,219,880
Payable for fund shares redeemed 626,384
Dividends payable 819,576
Accrued management fee 323,084
Other payables and accrued expenses 228,776
TOTAL LIABILITIES 6,378,519
NET ASSETS $ 845,827,057
Net Assets consist of:
Paid in capital $ 881,897,388
Distributions in excess of net investment income (595,968)
Accumulated undistributed net realized gain (loss) on (37,075,396)
investments
Net unrealized appreciation (depreciation) on 1,601,033
investments
NET ASSETS, for 89,404,977 shares outstanding $ 845,827,057
NET ASSET VALUE, offering price and redemption price per $9.46
share ($845,827,057 (divided by) 89,404,977 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
INVESTMENT INCOME $ 26,068,187
Interest
EXPENSES
Management fee $ 1,629,381
Transfer agent fees 761,602
Accounting fees and expenses 123,441
Non-interested trustees' compensation 1,826
Custodian fees and expenses 3,447
Registration fees 30,014
Audit 9,369
Legal 5,959
Miscellaneous 5,909
TOTAL EXPENSES 2,570,948
NET INVESTMENT INCOME 23,497,239
REALIZED AND UNREALIZED GAIN (LOSS) (14,876,085)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 32,546,686
investment securities
NET GAIN (LOSS) 17,670,601
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 41,167,840
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 23,497,239 $ 44,269,430
Net investment income
Net realized gain (loss) (14,876,085) (16,944,754)
Change in net unrealized appreciation (depreciation) 32,546,686 (71,976,670)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 41,167,840 (44,651,994)
FROM OPERATIONS
Distributions to shareholders (23,638,640) (44,654,001)
From net investment income
From net realized gain (1,279,266) (21,542,609)
TOTAL DISTRIBUTIONS (24,917,906) (66,196,610)
Share transactions 410,365,458 443,439,151
Net proceeds from sales of shares
Reinvestment of distributions 19,086,149 49,600,153
Cost of shares redeemed (213,499,650) (497,385,873)
Net increase (decrease) in net assets resulting from 215,951,957 (4,346,569)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 232,201,891 (115,195,173)
NET ASSETS
Beginning of period 613,625,166 728,820,339
End of period (including distributions in excess of net $ 845,827,057 $ 613,625,166
investment income of $595,968 and $454,567,
respectively)
OTHER INFORMATION
Shares
Sold 44,574,753 43,597,123
Issued in reinvestment of distributions 2,049,528 4,917,440
Redeemed (23,002,755) (49,752,437)
Net increase (decrease) 23,621,526 (1,237,874)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED NINE MONTHS
ENDED SEPTEMBER 30, ENDED YEARS ENDED DECEMBER 31,
MARCH 31, SEPTEMBER
1995 30,
(UNAUDITED) 1994 1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA
Net asset value,
beginning of period $ 9.330 $ 10.870 $ 10.500 $ 10.300 $ 9.640 $ 9.610 $ 9.270
Income from Investment
Operations .307 .626 .672 .556 .801 .832 .784
Net investment income
Net realized and
unrealized gain (loss) .150 (1.225) .627 .198 .660 .030 .340
Total from investment
operations .457 (.599) 1.299 .754 1.461 .862 1.124
Less Distributions (.307) (.631) (.679) (.554) (.801) (.832) (.784)
From net investment income
From net realized
gain on investments (.020) (.310) (.250) - - - -
Total distributions (.327) (.941) (.929) (.554) (.801) (.832) (.784)
Net asset value,
end of period $ 9.460 $ 9.330 $ 10.870 $ 10.500 $ 10.300 $ 9.640 $ 9.610
TOTAL RETURN B 5.01% (5.81)% 13.18% 7.65% 15.96% 9.53% 12.62%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $ 845,827 $ 613,625 $ 728,820 $ 581,584 $ 521,605 $ 468,683 $ 560,351
Ratio of expenses to
average net assets .72% .69% .69% .70% .70% .66% .73%
A A
Ratio of net investment
income to average 6.60% 6.26% 6.40% 7.31% 8.23% 8.84% 8.29%
net assets A A
Portfolio turnover rate 509% 402% 323% 219% 257% 302% 312%
A A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1995 (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 of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which market quotations are not
readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for 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, which may result in distribution
reclassifications, are primarily due to differing treatments for market
discount. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Distributions in excess of net
investment income and accumulated undistributed net realized gain (loss) on
investments may include temporary book and tax basis differences that will
reverse in a subsequent period. Any taxable income or gain remaining at
fiscal year end is distributed in the following year.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $1,888,323,478 and $1,702,984,891, 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 and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1200% to
.3700% for the period. In the event that these rates were lower than the
contractual rates in effect during the period, FMR voluntarily implemented
the above rates, as they resulted in the same or a lower management fee.
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.
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 $48,551 for the
period.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period October 1, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which FSC receives
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEES. 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.
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.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East 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
90 Alhambra Plaza
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
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
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
8885 Ladue Road
Ladue, 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
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, 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
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State 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
TO WRITE FIDELITY
If more than one address is listed, 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.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
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 02210-0193
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, 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 Service Co.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Income
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate
Government
Spartan Short-Term Income
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)
(registered trademark)
AUTOMATED LINES FOR QUICKEST SERVICE
