(2_FIDELITY_LOGOS)FIDELITY
GOVERNMENT SECURITIES
FUND
ANNUAL REPORT
SEPTEMBER 30, 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.
REPORT OF INDEPENDENT 19 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 20
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 the markets have been fairly positive this year, 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 SEPTEMBER 30, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Government Securities Fund 13.21% 58.91% 144.82%
Salomon Brothers Treasury/Agency Index 13.56% 57.88% 151.99%
Lehman Brothers Government Bond Index 13.57% 57.84% 151.40%
Average General U.S. Government
Bond Fund 12.74% 50.93% 123.29%
Consumer Price Index 2.54% 15.45% 41.46%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, 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 or
the Salomon Brothers Treasury/Agency Index - both broad measures 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 164 funds with
similar objectives tracked by Lipper Analytical Services over the past 12
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.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Government Securities Fund 13.21% 9.71% 9.37%
Salomon Brothers Treasury/Agency Index 13.56% 9.56% 9.68%
Lehman Brothers Government Bond Index 13.57% 9.56% 9.66%
Average General U.S. Government Bond Fund 12.74% 8.55% 8.33%
Consumer Price Index 2.54% 2.91% 3.53%
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 Salomon Brot
09/30/85 10000.00 10000.00
10/31/85 10149.78 10183.86
11/30/85 10364.65 10411.70
12/31/85 10691.05 10720.11
01/31/86 10735.55 10783.87
02/28/86 11127.20 11213.36
03/31/86 11495.08 11674.99
04/30/86 11560.82 11720.46
05/31/86 11336.32 11433.30
06/30/86 11639.73 11815.85
07/31/86 11741.64 11920.13
08/31/86 12070.68 12247.32
09/30/86 11874.65 12047.15
10/31/86 12050.92 12217.17
11/30/86 12223.00 12366.43
12/31/86 12254.39 12382.74
01/31/87 12369.66 12513.22
02/28/87 12411.35 12609.60
03/31/87 12351.11 12465.77
04/30/87 12022.65 12226.56
05/31/87 11963.21 12168.73
06/30/87 12124.37 12307.12
07/31/87 12138.72 12272.03
08/31/87 12068.06 12220.63
09/30/87 11870.89 11990.31
10/31/87 12194.87 12446.99
11/30/87 12275.89 12506.30
12/31/87 12384.62 12647.65
01/31/88 12726.82 13077.15
02/29/88 12884.63 13216.53
03/31/88 12795.87 13084.56
04/30/88 12758.87 12998.57
05/31/88 12683.10 12937.77
06/30/88 12874.18 13199.23
07/31/88 12850.04 13114.71
08/31/88 12864.26 13135.97
09/30/88 13082.12 13415.71
10/31/88 13271.33 13650.97
11/30/88 13151.12 13501.71
12/31/88 13172.48 13545.69
01/31/89 13334.72 13727.57
02/28/89 13262.83 13621.81
03/31/89 13327.32 13702.37
04/30/89 13582.35 13958.88
05/31/89 13827.42 14313.74
06/30/89 14217.78 14798.60
07/31/89 14475.50 15106.51
08/31/89 14275.32 14850.99
09/30/89 14331.47 14919.19
10/31/89 14625.34 15306.68
11/30/89 14759.09 15451.00
12/31/89 14834.63 15474.23
01/31/90 14642.69 15261.21
02/28/90 14699.57 15274.06
03/31/90 14717.48 15289.38
04/30/90 14665.62 15160.38
05/31/90 14969.61 15567.64
06/30/90 15177.65 15815.75
07/31/90 15371.52 16025.80
08/31/90 15291.54 15794.00
09/30/90 15405.96 15960.56
10/31/90 15635.94 16222.51
11/30/90 15981.94 16570.45
12/31/90 16248.86 16832.90
01/31/91 16366.65 17011.32
02/28/91 16495.51 17083.48
03/31/91 16564.54 17176.89
04/30/91 16718.13 17381.51
05/31/91 16803.43 17442.30
06/30/91 16764.21 17430.93
07/31/91 16971.78 17650.87
08/31/91 17408.00 18043.79
09/30/91 17805.69 18434.24
10/31/91 17958.40 18576.58
11/30/91 18125.62 18769.83
12/31/91 18842.29 19413.83
01/31/92 18519.79 19113.33
02/29/92 18557.31 19189.94
03/31/92 18435.90 19074.28
04/30/92 18550.59 19210.70
05/31/92 18932.22 19544.80
06/30/92 19255.39 19828.99
07/31/92 19847.55 20320.76
08/31/92 20018.61 20529.33
09/30/92 20283.82 20813.03
10/31/92 19954.31 20511.05
11/30/92 19968.44 20473.48
12/31/92 20344.17 20819.45
01/31/93 20826.17 21286.51
02/28/93 21336.67 21701.68
03/31/93 21449.91 21760.00
04/30/93 21661.90 21946.82
05/31/93 21575.52 21913.71
06/30/93 22106.80 22405.48
07/31/93 22248.18 22543.37
08/31/93 22867.89 23044.53
09/30/93 22958.08 23146.35
10/31/93 23077.25 23207.63
11/30/93 22749.87 22952.60
12/31/93 22850.90 23054.91
01/31/94 23218.82 23371.72
02/28/94 22529.88 22885.39
03/31/94 21929.57 22352.59
04/30/94 21720.66 22180.60
05/31/94 21702.09 22159.34
06/30/94 21587.17 22113.87
07/31/94 22069.13 22499.88
08/31/94 22055.99 22505.81
09/30/94 21624.07 22190.48
10/31/94 21539.95 22168.24
11/30/94 21520.86 22119.31
12/31/94 21661.38 22271.54
01/31/95 22068.04 22707.95
02/28/95 22582.87 23183.91
03/31/95 22708.24 23321.80
04/30/95 22991.55 23622.30
05/31/95 23908.47 24591.01
06/30/95 24075.92 24777.34
07/31/95 23982.03 24691.35
08/31/95 24258.15 24973.56
09/29/95 24481.64 25198.93
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Government Securities Fund on September 30, 1985. As the chart shows, by
September 30, 1995, the value of your investment would have grown to
$24,482 - a 144.82% increase on your initial investment. For comparison,
look at how the Salomon Brothers Treasury/Agency Index did over the same
period. With dividends reinvested, the same $10,000 investment would have
grown to $25,199 - a 151.99% increase. Beginning with this report the fund
will compare its performance to the Salomon Brothers Treasury/Agency Index
rather than the Lehman Brothers Government Bond Index. Although the
difference in performance between the two indices is small, the Salomon
Brothers Index includes fewer securities and is more straightforward to
monitor on a daily basis. For comparison purposes, both indices are shown
on page 4.
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 SEPTEMBER 30,
1995 1994 1993 1992 1991
Dividend return 6.98% 5.76% 7.06% 8.07% 9.37%
Capital appreciation return 6.23% -11.57% 6.12% 5.85% 6.21%
Total return 13.21% -5.81% 13.18% 13.92% 15.58%
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 SEPTEMBER 30, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.07(cents) 30.21(cents) 60.89(cents)
Annualized dividend rate 6.25% 6.16% 6.39%
30-day annualized yield 5.67% - -
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 $9.88 over
the past month, $9.78 over the past six months and $9.53 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
MARKET RECAP
U.S. bond markets posted strong
returns during the 12 months
ended September 30, 1995. For
the 12-month period, the Lehman
Brothers Aggregate Bond Index
- - a broad measure of U.S.
taxable bonds - posted a total
return of 14.06%. A strong rally
starting in November 1994
helped bonds recover from the
effects of the sharply rising
interest rate environment seen
earlier that year. Indications of a
slowing economy and a relative
absence of inflation pressures
encouraged bond investors,
helping to push interest rates
down. Monetary policy also
played a role in the bond market's
performance. In an effort to thwart
the possibility of a recession, the
Federal Reserve Board lowered
the fed funds rate - the rate
banks charge each other for
overnight loans - by 0.25% in
July to 5.75%, after a string of
seven successive interest rate
increases in 1994 and early
1995. Mortgage-backed
securities rode along with the
rally. The Salomon Brothers
Mortgage Index returned 13.46%
during the period.
An interview with Robert Ives,
Portfolio Manager of Fidelity
Government Securities Fund
Q. BOB, HOW HAS THE FUND PERFORMED?
A. For the 12 months ended September 30, 1995, the fund had a total return
of 13.21%. That beat the 12.74% return for the average general U.S.
government bond fund, as tracked by Lipper Analytical Services. The Salomon
Brothers Treasury/Agency Index had a return of 13.56% for the 12-month
period.
Q. WHAT HELPED THE FUND TOP THE AVERAGE FUND?
A. My feeling is that other managers may have positioned their funds with
shorter durations in response to the rising interest we saw through the end
of 1994. Duration is a measure of a bond or bond fund's sensitivity to
changes in interest rates. The shorter the duration, the less sensitive the
bond or fund generally is to upward or downward movements in interest
rates. Perhaps other fund managers were concerned that interest rates would
keep increasing and didn't expect the dramatic drop in rates we saw in
1995. While interest rates were rising, I maintained a duration that was in
line with the general government securities market. As a result, the fund
is better able to participate in the bond market rally we've seen since
November 1994, as interest rates have come down significantly.
Q. SO MUCH SO THAT THE FUND HAS ENJOYED A ONE-YEAR TOTAL RETURN THAT IS
WELL ABOVE ITS 10-YEAR AVERAGE ANNUAL RETURN . . .
A. Yes, it's been a great year for shareholders. The market has seen a
dramatic drop in interest rates, as sentiment turned from one of fear that
strong future growth would spark inflation to one where more data have
quelled those inflation fears. At the same time, the return produced by the
fund this past year is unlikely to be repeated in the near future. Let me
add that currently and going forward, I'll be measuring the fund's
performance against the market as measured by the Salomon Brothers
Treasury/Agency Index. My goal will be to generate returns that are better
than the treasury/agency market as a whole, while attempting to limit
volatility relative to the benchmark. As a result, I've tried to position
the fund so that its sensitivity to interest rates is in line with the
index.
Q. HOW IS THE FUND CURRENTLY POSITIONED IN TERMS OF SECTOR WEIGHTING?
A. The fund has reduced its investments in agency issues over the past six
months, increasing its focus on Treasury securities. I have been selling
agency securities after they significantly outperformed Treasuries. Earlier
in the period agency bonds were attractive buy candidates, because when
Orange County, California, was having its problems, there were a lot of
sellers in the marketplace, particularly those selling callable bonds. The
added supply pushed prices down. At that point in time, I increased agency
bond weighting. Since then, though, the callable agency issues have
performed well, so I've reduced the fund's investments there.
Q. WHAT ABOUT MATURITY STRUCTURE?
A. Earlier in the period, I had the fund in a barbell structure, focusing
the fund's investments on the two ends of the maturity spectrum and
investing less in between, relative to the market. I positioned the fund in
this way because longer-term maturity Treasury securities had higher yields
than is typical for the prevailing market conditions at the time. Now,
however, yields along the entire maturity structure of the market are more
in line, so I've neutrally weighted the fund's maturity structure, relative
to the market as measured by the Salomon Brothers Treasury/Agency Index.
The one area where I've particularly limited the fund's investments is in
five-year Treasury securities. This part of the market is trading higher in
price relative to its historical values. That's because supply of these
securities is limited, relative to current demand.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. If you're asking me where do we go from here, I'll tell you that if the
economy continues to slow - as it has during most of 1995 - the bond market
may continue to rally, because inflation will seem to pose little threat to
bonds' fixed payments. At the same time, it's possible the economy might
rebound. We're in a period where it's unclear which way the economy is
headed. We're seeing mixed signals. The structure of the fund and my
strategy will be a function of what opportunities arise during the next six
months.
FUND FACTS
GOAL: high current income
free from state and local
taxes
START DATE: April 4, 1979
SIZE: as of September 30,
1995, more than $896 million
MANAGER: Robert Ives, since
February 1995; manager,
Fidelity Advisor Government
Investment Fund and Fidelity
Advisor Annuity Government
Investment Fund, since
February 1995; Spartan
Long-Term Government
Fund, since October 1995;
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 THE EFFECT OF
FEDERAL BUDGET NEGOTIATIONS ON
INTEREST RATES AND THE BOND
MARKET:
"If the current battle over the
federal budget is resolved
with meaningful reductions in
the budget deficit there could
be a positive effect on the
bond market. Bond investors
likely would respond
positively to real budget cuts
or a balanced budget
amendment. That's because
this new fiscal restraint would
signal a reduction of
government spending, which
would be a reduction in the
economic stimulus. In
response, the Federal
Reserve Board probably
would ease interest rates to
prevent the reduction in
government spending from
sending the economy into
recession. Bond prices rise
when interest rates fall, so it's
not hard to see why this
scenario would please bond
investors.
"In the short term, most of the
boost to the bond market
would be psychological,
because the relative impact of
budget cuts probably wouldn't
be felt for a number of years.
Right now, the bond market is
assuming that the federal
debt is likely to grow. If the
bond market perceives the
federal debt will stop growing,
that would present a
positive, meaningful change,
even though it would take
time to work through."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF SEPTEMBER 30, 1995
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Under 7% 21.6 31.0
7 - 7.99% 30.2 25.8
8 - 8.99% 23.2 29.1
9 - 9.99% 11.7 6.3
10 - 10.99% 1.1 1.2
11 - 11.99% 7.4 3.3
12% and over 4.7 3.2
Zero coupon bonds 0.1 0.1
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS, IF ANY.
AVERAGE YEARS TO MATURITY AS OF SEPTEMBER 30, 1995
6 MONTHS AGO
Years 8.7 8.5
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 SEPTEMBER 30, 1995
6 MONTHS AGO
Years 4.9 4.7
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 SEPTEMBER 30, 1995 AS OF MARCH 31, 1995
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 29.7
Row: 1, Col: 3, Value: 30.0
Row: 1, Col: 4, Value: 38.3
U.S. Treasury
obligations 53.3%
U.S. government
agency
obligations 44.3%
Short-term
investments 2.4%
U.S. Treasury
obligations 70.2%
U.S. government
agency
obligations 29.7%
Short-term
investments 0.1%
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 44.3
Row: 1, Col: 3, Value: 20.0
Row: 1, Col: 4, Value: 29.3
INVESTMENTS SEPTEMBER 30, 1995
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 - 70.3%
8%, 10/15/96 $ 40,175,000 $ 41,047,601
4 3/8%, 11/15/96 37,545,000 36,970,186
7 1/4%, 11/15/96 12,525,000 12,716,758
8 1/2%, 5/15/97 20,180,000 21,002,940
5 1/4%, 7/31/98 44,220,000 43,459,858
9 1/4%, 8/15/98 41,410,000 44,994,450
7 1/8%, 9/30/99 21,072,000 21,901,605
7 3/4%, 12/31/99 62,820,000 66,834,826
7 7/8%, 8/15/01 5,000,000 5,435,950
6 1/4%, 2/15/03 24,925,000 25,065,079
11 1/4%, 8/15/03 20,000 26,047
11 7/8%, 11/15/03 29,310,000 39,760,774
12 3/8%, 5/15/04 7,330,000 10,294,032
11 3/4%, 2/15/10 (callable) 18,380,000 25,393,073
12 3/4%, 11/15/10 1,790,000 2,631,855
9%, 11/15/18 45,560,000 58,046,174
8 7/8%, 2/15/19 107,640,000 135,693,137
12%, 8/15/23 (callable) 19,420,000 28,574,782
U.S. Treasury Bills
yield at date of purchase 5.28%, 12/07/95 1,320,000 1,307,368
TOTAL U.S. TREASURY OBLIGATIONS 621,156,495
U.S. GOVERNMENT AGENCY OBLIGATIONS - 29.7%
Federal Farm Credit Bank:
8.65%, 10/1/99 3,580,000 3,885,983
8.35%, 12/13/00 1,250,000 1,360,575
6.56%, 8/05/02 1,790,000 1,805,931
6.32%, 9/09/02 1,560,000 1,557,215
6.20%, 9/23/02 2,420,000 2,393,622
6.40%, 10/03/02 760,000 759,772
Federal Home Loan Bank:
4 1/2%, 5/20/96 (a) 1,000,000 991,574
4.80%, 7/12/96 (a) 1,000,000 989,931
4 3/4%, 2/24/97 (callable) (a) 16,000,000 15,723,200
4.30%, 6/30/97 6,665,000 6,485,845
7.23%, 10/28/97 28,025,000 28,628,182
5.40%, 8/3/98 (callable) (a) 50,000,000 48,780,000
7.30%, 10/20/98 1,050,000 1,081,336
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Federal Home Loan Bank - continued
5.92%, 3/18/99 $ 3,000,000 $ 2,979,840
7.65%, 10/28/99 27,500,000 28,908,000
7.93%, 11/1/01 1,900,000 2,044,282
6.37%, 6/30/03 1,110,000 1,101,978
7.59%, 5/20/04 35,010,000 37,451,142
stripped principal 0%, 2/25/04 1,800,000 1,047,656
Student Loan Marketing Association:
10 1/2%, 11/1/95 10,000,000 10,035,400
7.56%, 12/9/96 50,720,000 51,587,503
7.93%, 10/15/01 600,000 642,773
8.14%, 10/15/03 330,000 361,337
8.14%, 5/17/04 1,500,000 1,650,000
Twelve Federal Land Banks:
7.95%, 10/21/96 2,520,000 2,570,400
7.35%, 1/20/97 7,035,000 7,154,806
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 261,978,283
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $852,708,524) $ 883,134,778
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At September 30, 1995, the aggregate cost of investment securities for
income tax purposes was $853,163,718. Net unrealized appreciation
aggregated $29,971,060, of which $32,570,061 related to appreciated
investment securities and $2,599,001 related to depreciated investment
securities.
At September 30,1995, the fund had a capital loss carryforward of
approximately $17,573,000 which will expire on September 30, 2003.
The fund has elected to defer to its fiscal year ending September 30, 1996
$10,976,000 of losses recognized during the period November 1, 1994 to
September 30, 1995.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, 1995
ASSETS
Investment in securities, at value (cost $852,708,524) - $ 883,134,778
See accompanying schedule
Receivable for fund shares sold 1,079
Interest receivable 17,085,911
TOTAL ASSETS 900,221,768
LIABILITIES
Payable to custodian bank $ 197,146
Payable for investments purchased 754,475
Payable for fund shares redeemed 1,305,798
Distributions payable 732,595
Accrued management fee 335,407
Other payables and accrued expenses 278,217
TOTAL LIABILITIES 3,603,638
NET ASSETS $ 896,618,130
Net Assets consist of:
Paid in capital $ 894,322,214
Undistributed net investment income 863,970
Accumulated undistributed net realized gain (loss) (28,994,308)
on investments
Net unrealized appreciation (depreciation) on 30,426,254
investments
NET ASSETS, for 90,638,298 shares outstanding $ 896,618,130
NET ASSET VALUE, offering price and redemption price per $9.89
share ($896,618,130 (divided by) 90,638,298 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED SEPTEMBER 30, 1995
INVESTMENT INCOME $ 56,138,822
Interest
EXPENSES
Management fee $ 3,601,721
Transfer agent fees 1,589,234
Accounting fees and expenses 261,630
Non-interested trustees' compensation 14,816
Custodian fees and expenses 13,499
Registration fees 106,396
Audit 32,856
Legal 6,242
Reports to shareholders 2,596
Miscellaneous 7,006
TOTAL EXPENSES 5,635,996
NET INVESTMENT INCOME 50,502,826
REALIZED AND UNREALIZED GAIN (LOSS) (5,338,218)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 61,371,907
investment securities
NET GAIN (LOSS) 56,033,689
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 106,536,515
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 50,502,826 $ 44,269,430
Net investment income
Net realized gain (loss) (5,338,218) (16,944,754)
Change in net unrealized appreciation (depreciation) 61,371,907 (71,976,670)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 106,536,515 (44,651,994)
FROM OPERATIONS
Distributions to shareholders (50,883,059) (44,654,001)
From net investment income
From net realized gain - (21,542,609)
In excess of net realized gain (1,037,275) -
TOTAL DISTRIBUTIONS (51,920,334) (66,196,610)
Share transactions 564,857,682 443,439,151
Net proceeds from sales of shares
Reinvestment of distributions 41,085,061 49,600,153
Cost of shares redeemed (377,565,960) (497,385,873)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 228,376,783 (4,346,569)
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 282,992,964 (115,195,173)
NET ASSETS
Beginning of period 613,625,166 728,820,339
End of period (including under (over) distributions of $ 896,618,130 $ 613,625,166
net investment income of $863,970 and $(454,567),
respectively)
OTHER INFORMATION
Shares
Sold 60,339,165 43,597,123
Issued in reinvestment of distributions 4,293,957 4,917,440
Redeemed (39,778,275) (49,752,437)
Net increase (decrease) 24,854,847 (1,237,874)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS YEARS ENDED SEPTEMBER 30, NINE MONTHS YEARS ENDED
ENDED DECEMBER 31,
SEPTEMBER 30,
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1995 1994C 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.330 $ 10.870 $ 10.500 $ 10.300 $ 9.640 $ 9.610
Income from Investment Operations .625 .626 .672 .556 .801 .832
Net investment income
Net realized and unrealized gain (loss) .564 (1.225) .627 .198 .660 .030
Total from investment operations 1.189 (.599) 1.299 .754 1.461 .862
Less Distributions (.609) (.631) (.679) (.554) (.801) (.832)
From net investment income
From net realized gain - (.310) (.250) - - -
In excess of net realized gain (.020) - - - - -
Total distributions (.629) (.941) (.929) (.554) (.801) (.832)
Net asset value, end of period $ 9.890 $ 9.330 $ 10.870 $ 10.500 $ 10.300 $ 9.640
TOTAL RETURN B 13.21% (5.81) 13.18% 7.65% 15.96% 9.53%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 897 $ 614 $ 729 $ 582 $ 522 $ 469
Ratio of expenses to average net assets .71% .69% .69% .70% A .70% .66%
Ratio of net investment income to average net assets 6.36% 6.26% 6.40% 7.31% A 8.23% 8.84%
Portfolio turnover rate 391% 402% 323% 219% A 257% 302%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Governent Securtities 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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income 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 and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences that will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $3,174,499,956 and $2,954,097,388, 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 annual rate of .45% 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 $82,279 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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and the Shareholders of Fidelity Government Securities
Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Government Securities Fund, including the schedule of portfolio
investments, as of September 30, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial
highlights for each of the three years in the period then ended, the nine
month period ended September 30, 1992 and each of the two years in the
period ended December 31, 1991. 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 September 30, 1995 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Government Securities Fund as of September 30, 1995, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the
financial highlights for each of the three years in the period then ended,
the nine month period ended September 30, 1992 and each of the two years in
the period ended December 31, 1991, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 1, 1995
DISTRIBUTIONS
A total of 100% of the income dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is generally
exempt from state income tax.
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
6300 Canoga Avenue
Woodland Hills, 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
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 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
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity 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
