(2_FIDELITY_LOGOS)FIDELITY
GOVERNMENT SECURITIES
FUND
SEMIANNUAL REPORT
MARCH 31, 1996
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,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although the markets were fairly positive during 1995, no one can predict
what lies ahead for investors. The previous year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
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, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Government Securities Fund 1.91% 9.87% 50.63% 117.05%
Salomon Brothers Treasury/Agency 2.29% 10.52% 50.06% 120.78%
Index
General U.S. Government 1.61% 9.28% 42.62% 101.65%
Bond Funds' Average
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 Salomon Brothers
Treasury/Agency Index, a market-capitalization weighted index comprised of
U.S. Treasury and government agency securities. Issues included in the
Index have fixed-rate coupons and weighted average lives greater than one
year. To measure how the fund's performance stacked up against its peers,
you can compare it to the general U.S. government bond funds' average,
which reflects the performance of 183 funds with similar objectives tracked
by Lipper Analytical Services over the past six months. Both benchmarks
include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Government Securities Fund 9.87% 8.54% 8.06%
Salomon Brothers Treasury/Agency Index 10.52% 8.46% 8.24%
General U.S. Government
Bond Funds' Average 9.28% 7.34% 7.25%
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
19860331 10000.00 10000.00
19860430 10057.19 10038.95
19860531 9861.89 9792.99
19860630 10125.83 10120.65
19860731 10214.49 10209.97
19860831 10500.74 10490.22
19860930 10330.20 10318.77
19861031 10483.55 10464.40
19861130 10633.25 10592.24
19861231 10660.55 10606.21
19870131 10760.83 10717.97
19870228 10797.10 10800.52
19870331 10744.69 10677.33
19870430 10458.95 10472.44
19870531 10407.25 10422.91
19870630 10547.44 10541.44
19870731 10559.93 10511.39
19870831 10498.45 10467.36
19870930 10326.93 10270.09
19871031 10608.78 10661.25
19871130 10679.25 10712.05
19871231 10773.85 10833.12
19880131 11071.54 11201.00
19880229 11208.82 11320.38
19880331 11131.60 11207.35
19880430 11099.42 11133.69
19880531 11033.50 11081.62
19880630 11199.73 11305.56
19880731 11178.73 11233.17
19880831 11191.10 11251.38
19880930 11380.62 11490.98
19881031 11545.23 11692.49
19881130 11440.65 11564.64
19881231 11459.24 11602.32
19890131 11600.37 11758.11
19890228 11537.84 11667.51
19890331 11593.94 11736.52
19890430 11815.80 11956.23
19890531 12028.99 12260.18
19890630 12368.58 12675.47
19890731 12592.78 12939.21
19890831 12418.64 12720.35
19890930 12467.48 12778.77
19891031 12723.13 13110.66
19891130 12839.49 13234.27
19891231 12905.20 13254.17
19900131 12738.22 13071.71
19900228 12787.70 13082.72
19900331 12803.28 13095.84
19900430 12758.17 12985.35
19900531 13022.62 13334.18
19900630 13203.61 13546.69
19900731 13372.26 13726.61
19900831 13302.68 13528.07
19900930 13402.22 13670.73
19901031 13602.29 13895.10
19901130 13903.29 14193.13
19901231 14135.49 14417.92
19910131 14237.96 14570.74
19910228 14350.06 14632.55
19910331 14410.11 14712.56
19910430 14543.73 14887.82
19910531 14617.93 14939.89
19910630 14583.81 14930.15
19910731 14764.39 15118.53
19910831 15143.87 15455.08
19910930 15489.83 15789.52
19911031 15622.68 15911.44
19911130 15768.16 16076.96
19911231 16391.61 16628.57
19920131 16111.06 16371.18
19920229 16143.70 16436.80
19920331 16038.08 16337.74
19920430 16137.85 16454.58
19920531 16469.84 16740.75
19920630 16750.98 16984.17
19920731 17266.12 17405.38
19920831 17414.94 17584.03
19920930 17645.65 17827.03
19921031 17359.00 17568.37
19921130 17371.30 17536.20
19921231 17698.16 17832.53
19930131 18117.47 18232.58
19930228 18561.57 18588.18
19930331 18660.08 18638.13
19930430 18844.49 18798.15
19930531 18769.35 18769.79
19930630 19231.53 19191.01
19930731 19354.53 19309.12
19930831 19893.63 19738.38
19930930 19972.09 19825.59
19931031 20075.76 19878.08
19931130 19790.96 19659.64
19931231 19878.85 19747.27
19940131 20198.92 20018.63
19940228 19599.59 19602.07
19940331 19077.36 19145.71
19940430 18895.62 18998.39
19940531 18879.46 18980.19
19940630 18779.49 18941.24
19940731 19198.76 19271.87
19940831 19187.33 19276.95
19940930 18811.58 19006.86
19941031 18738.40 18987.81
19941130 18721.80 18945.90
19941231 18844.04 19076.28
19950131 19197.82 19450.09
19950228 19645.68 19857.76
19950331 19754.75 19975.87
19950430 20001.21 20233.26
19950531 20798.87 21062.99
19950630 20944.55 21222.59
19950731 20862.87 21148.93
19950831 21103.07 21390.65
19950930 21297.49 21583.69
19951031 21627.24 21920.24
19951130 21956.45 22275.00
19951231 22248.71 22583.61
19960131 22367.79 22727.12
19960229 21888.78 22273.30
19960329 21705.29 22077.72
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Government Securities Fund on March 31, 1986. As the chart shows, by March
31, 1996, the value of your investment would have grown to $21,705 - a
117.05% 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
$22,078 - a 120.78% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX MONTHS YEARS ENDED SEPTEMBER 30,
ENDED
MARCH 31,
1996 1995 1994 1993 1992 1991
Dividend return 3.23% 6.98% 5.76% 7.06% 8.07% 9.37%
Capital appreciation -1.32% 6.23% -11.57% 6.12% 5.85% 6.21%
return
Total return 1.91% 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 MARCH 31, 1996 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.70(cents) 32.32(cents) 62.52(cents)
Annualized dividend rate 6.84% 6.43% 6.32%
30-day annualized yield 5.56% - -
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 $9.81 over
the past month, $10.02 over the past six months and $9.90 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
An interview with Robert Ives, Portfolio Manager of Fidelity Government
Securities Fund
Q. HOW DID THE FUND PERFORM, BOB?
A. For the six-month period ended March 31, 1996, the fund had a total
return of 1.91%. That compares to the Lipper general U.S. government bond
funds' average of 1.61%. For the same period, the Salomon Brothers
Treasury/Agency Index had a return of 2.29%.
Q. AFTER SUCH A GREAT BOND MARKET IN 1995, WHAT'S CHANGED?
A. In the fourth quarter of 1995, there were clear signs of weakness in the
economy. This was beneficial to bonds because inflation - which erodes the
value of fixed-income investments - was not viewed as a threat. The
market's belief that the Federal Reserve Board was predisposed to lowering
short-term interest rates was confirmed when the Fed lowered its key
federal funds rate at the end of January 1996 for the third consecutive
time. Soon afterwards, signs of strength in the economy made investors
believe the Fed would assume a neutral bias toward interest rates. In
particular, the March release of the February employment report showed that
the economy was surprisingly strong. This report caused the 30-year
Treasury bond to rise 0.25% in yield, or decline about three points in
price (about $30 for each $1,000 bond).
Q. WHAT DO YOU MEAN WHEN YOU TALK ABOUT THE FED'S "NEUTRAL BIAS"?
A. The bond market constantly analyzes the Fed's bias - or what the market
perceives as the Fed's inclination toward changing the federal funds rate.
Therefore, as the market came to view the Fed as becoming neutral over the
past two months, it meant that it doesn't expect the Fed to take any action
on the Federal funds rate any time soon.
Q. TURNING TO THE FUND NOW, DID YOU MAKE ANY MAJOR CHANGES IN THE LAST SIX
MONTHS?
A. Yes. I significantly reduced the fund's U.S. government agency position
from almost 30% six months ago to about 17% at the end of the period. This
reduction was a result of my selling a large portion of the fund's callable
agency securities - or those that may be paid off prior to maturity. These
securities had performed well during the period and I thought there was
little upside potential remaining.
Q. COULD YOU SEE ADDING OTHER TYPES OF AGENCY BONDS TO REPLACE THE
SECURITIES YOU SOLD?
A. I'm trying to do so. However, this may take some time. The fund invests
so that the interest from its holdings is free from state and local taxes.
Therefore, in order to provide investors with tax-free income, there are a
limited number of agencies I can choose from - especially when compared to
the greater variety of agency securities in the Salomon Brothers
Treasury/Agency Index. The most significant agency holdings in the fund are
from the Federal Home Loan Bank and the Federal Farm Credit Bank.
Q. HOW ARE THE FUND'S U.S. TREASURY HOLDINGS DISTRIBUTED?
A. At the end of the period, holdings were evenly distributed along the
various maturities of the yield curve. That is, there was no one particular
maturity that I believed offered tremendous value. Additionally, the fund
did not hold any Treasury bonds beyond 28 years in maturity. In my opinion,
the longest end of the maturity spectrum was trading at somewhat expensive
levels compared to shorter-term bonds.
Q. WERE THERE ANY PARTICULAR TREASURY SECURITIES THAT YOU CONTINUED TO
AVOID?
A. I don't usually like to buy the most recently issued Treasury
securities. These bonds are generally priced somewhat higher and have lower
yields than older Treasury securities - which are known as "off-the-run"
Treasuries. Recently issued Treasury securities can have higher prices and
lower yields because they offer more liquidity or lower transaction costs.
The fund doesn't need this high level of liquidity. (Liquidity refers to
the ease with which one is able to buy and sell securities in the market.)
Q. WERE THERE ANY DISAPPOINTMENTS?
A. As I stated before, there is a very limited number of agency securities
the fund can own to meet its objective of investing so that interest from
its holdings is free from state and local taxes. Because agencies performed
well relative to Treasuries, a greater weighting in agency securities might
have given a boost to the fund's performance during the period.
Q. WHAT WILL IT TAKE FOR THE BOND MARKET TO TURN AROUND?
A. In order for the current negative climate in the bond market to change,
there needs to be evidence that the signs of strength we've seen in the
economy are temporary. The data for March was surprisingly strong. If this
trend continues, bond prices will not recover soon. However, as always,
investors should keep their long-term goals in mind and not be influenced
by short-term price movements.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: high current income
free from state and local
taxes
START DATE: April 4, 1979
SIZE: as of March 31, 1996,
more than $973 million
MANAGER: Robert Ives, since
February 1995; manager,
Fidelity Advisor Government
Investment and Fidelity
Advisor Annuity Government
Investment funds since
February 1995; manager,
Spartan Long Term
Government Bond Fund
since October 1995; manager,
Spartan Government Income
Fund since October 1993;
joined Fidelity in 1991
(checkmark)
BOB IVES ON MANAGING THE
FUND DURING PERIODS OF
VOLATILITY:
"Although few investors relish
the uncertainty a volatile bond
market creates, it really does
not make it more difficult to
manage the fund. As a fund
manager, my job is to look for
relative value in the bond
market - such as if one
sector appears inexpensive
relative to another, or if one
maturity range on the yield
curve seems attractively
priced compared to other
areas.
"Generally, volatility in the
market creates potential
opportunities. That's because
the historical relationships
between various securities
can temporarily become out
of line. When this occurs,
price anomalies can develop,
which can offer profit potential
for investors."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF MARCH 31, 1996
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Under 7% 5.5 21.6
7 - 7.99% 39.3 30.2
8 - 8.99% 29.2 23.2
9 - 9.99% 16.9 11.7
10 - 10.99% 0.0 1.1
11 - 11.99% 1.9 7.4
12% and over 7.1 4.7
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 MARCH 31, 1996
6 MONTHS AGO
Years 8.6 8.7
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, 1996
6 MONTHS AGO
Years 4.9 4.9
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, 1996 AS OF SEPTEMBER 30, 1995
Row: 1, Col: 1, Value: 3.0
Row: 1, Col: 2, Value: 17.3
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 29.7
U.S. Treasury
obligations 70.2%
U.S. government
agency
obligations 29.7%
Short-term
investments 0.1%
U.S. Treasury
obligations 81.7%
U.S. government
agency
obligations 17.3%
Short-term
investments 1.0%
Row: 1, Col: 1, Value: 2.1
Row: 1, Col: 2, Value: 29.7
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 29.2
INVESTMENTS MARCH 31, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 100%
PRINCIPAL VALUE
AMOUNT (NOTE1)
U.S. TREASURY OBLIGATIONS - 82.7%
8 1/2%, 5/15/97 $ 24,525,000 $ 25,287,482
7 3/8%, 11/15/97 100,150,000 102,606,680
9%, 5/15/98 47,000,000 49,929,980
9 1/4%, 8/15/98 52,610,000 56,473,678
8 7/8%, 11/15/98 85,100,000 91,136,994
7 3/4%, 12/31/99 104,440,000 110,347,126
7 7/8%, 8/15/01 46,990,000 50,631,725
11 1/4%, 8/15/03 20,000 25,547
11 7/8%, 11/15/03 13,385,000 17,799,908
11 5/8%, 11/15/04 200,000 268,500
12 3/4%, 11/15/10 20,970,000 30,183,589
13 7/8%, 5/15/11 820,000 1,259,594
9%, 11/15/18 45,560,000 56,651,126
8 7/8%, 2/15/19 127,960,000 157,191,182
12%, 8/15/23 25,860,000 37,331,237
U.S. Treasury Bills, yields at date of purchase
4.84% to 5.06%, 7/18/96 10,160,000 10,009,429
TOTAL U.S. TREASURY OBLIGATIONS 797,133,777
U.S. GOVERNMENT AGENCY OBLIGATIONS - 17.3%
Federal Farm Credit Bank:
8.65%, 10/01/99 3,580,000 3,850,183
6.09%, 4/03/00 2,040,000 2,030,616
8.35%, 12/13/00 1,250,000 1,349,238
6.56%, 8/05/02 1,790,000 1,795,728
6.32%, 9/09/02 1,560,000 1,548,734
6.20%, 9/23/02 2,420,000 2,382,006
6.40%, 10/03/02 760,000 755,668
6.45%, 3/20/03 7,700,000 7,651,875
6.45%, 3/27/03 1,650,000 1,641,255
Federal Home Loan Bank:
4 1/2%, 5/20/96 (callable) (a) 1,000,000 998,577
4.80%, 7/12/96 (callable) (a) 1,000,000 997,929
4 3/4%, 2/24/97 (callable) (a) 16,000,000 15,889,920
7.23%, 10/28/97 28,025,000 28,611,787
7.30%, 10/20/98 1,050,000 1,081,008
5.92%, 3/18/99 3,000,000 2,992,980
7.65%, 10/28/99 27,500,000 28,741,900
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Federal Home Loan Bank - continued
7.93%, 11/01/01 $ 1,900,000 $ 2,036,190
6.37%, 6/30/03 1,110,000 1,097,599
6.75%, 4/05/04 1,445,000 1,446,241
6.89%, 4/06/04 1,560,000 1,589,000
7.59%, 5/20/04 35,010,000 37,042,190
7.36%, 7/01/04 5,490,000 5,701,036
7.70%, 9/20/04 340,000 360,135
8.09%, 12/28/04 1,050,000 1,142,201
7.59%, 3/10/05 1,060,000 1,119,625
stripped principal 0%, 2/25/04 1,800,000 1,068,682
Student Loan Marketing Association:
7.93%, 10/15/01 600,000 631,804
8.14%, 10/15/03 330,000 354,610
8.14%, 5/17/04 1,500,000 1,617,363
Twelve Federal Land Banks:
7.95%, 10/21/96 2,520,000 2,552,684
7.35%, 1/20/97 7,035,000 7,130,606
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 167,209,370
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $957,815,061) $ 964,343,147
LEGEND
(a) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
INCOME TAX INFORMATION
At March 31, 1996, the aggregate cost of investment securities for income
tax purposes was $957,825,079. Net unrealized appreciation aggregated
$6,518,068, of which $18,326,192 related to appreciated investment
securities and $11,808,124 related to depreciated investment securities.
At September 30, 1995, the fund had a capital loss carryforward of
approximately $17,606,185 which will expire on September 30, 2003.
The fund intends to elect to defer to its fiscal year ending September 30,
1996 approximately $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>
MARCH 31, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $957,815,061) - $ 964,343,147
See accompanying schedule
Cash 67,870
Interest receivable 19,750,509
Other receivables 8,985
TOTAL ASSETS 984,170,511
LIABILITIES
Payable for investments purchased $ 7,956,243
Payable for fund shares redeemed 933,433
Distributions payable 787,799
Accrued management fee 363,824
Other payables and accrued expenses 279,675
TOTAL LIABILITIES 10,320,974
NET ASSETS $ 973,849,537
Net Assets consist of:
Paid in capital $ 986,616,717
Undistributed net investment income 817,459
Accumulated undistributed net realized gain (loss) (20,112,725)
on investments
Net unrealized appreciation (depreciation) on investments 6,528,086
NET ASSETS, for 99,822,552 shares outstanding $ 973,849,537
NET ASSET VALUE, offering price and redemption price per $9.76
share ($973,849,537 (divided by) 99,822,552 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 34,756,805
Interest
EXPENSES
Management fee $ 2,178,273
Transfer agent fees 1,084,033
Accounting fees and expenses 150,047
Non-interested trustees' compensation 1,872
Custodian fees and expenses 10,266
Registration fees 15,570
Audit 15,269
Legal 4,833
Miscellaneous 4,653
Total expenses before reductions 3,464,816
Expense reductions (57,689) 3,407,127
NET INVESTMENT INCOME 31,349,678
REALIZED AND UNREALIZED GAIN (LOSS) 8,881,583
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (23,898,168)
investment securities
NET GAIN (LOSS) (15,016,585)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 16,333,093
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1996 1995
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 31,349,678 $ 50,502,826
Net investment income
Net realized gain (loss) 8,881,583 (5,338,218)
Change in net unrealized appreciation (depreciation) (23,898,168) 61,371,907
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 16,333,093 106,536,515
FROM OPERATIONS
Distributions to shareholders (31,396,189) (50,883,059)
From net investment income
In excess of net realized gain - (1,037,275)
TOTAL DISTRIBUTIONS (31,396,189) (51,920,334)
Share transactions 274,538,519 564,857,682
Net proceeds from sales of shares
Reinvestment of distributions 26,244,865 41,085,061
Cost of shares redeemed (208,488,881) (377,565,960)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 92,294,503 228,376,783
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 77,231,407 282,992,964
NET ASSETS
Beginning of period 896,618,130 613,625,166
End of period (including undistributed net investment $ 973,849,537 $ 896,618,130
income of $817,459 and $863,970, respectively)
OTHER INFORMATION
Shares
Sold 27,364,428 60,339,165
Issued in reinvestment of distributions 2,622,489 4,293,957
Redeemed (20,802,663) (39,778,275)
Net increase (decrease) 9,184,254 24,854,847
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED SEPTEMBER 30, NINE MONTHS YEARS ENDED DECEMBER
ENDED ENDED 31,
MARCH 31, SEPTEMBER 30,
1996
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) 1995 1994 C 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.890 $ 9.330 $ 10.870 $ 10.500 $ 10.300 $ 9.640 $ 9.610
Income from Investment Operations .322 .625 .626 .672 .556 .801 .832
Net investment income
Net realized and unrealized gain (loss) (.129) .564 (1.225) .627 .198 .660 .030
Total from investment operations .193 1.189 (.599) 1.299 .754 1.461 .862
Less Distributions (.323) (.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 (.323) (.629) (.941) (.929) (.554) (.801) (.832)
Net asset value, end of period $ 9.760 $ 9.890 $ 9.330 $ 10.870 $ 10.500 $ 10.300 $ 9.640
TOTAL RETURN B 1.91% 13.21% (5.81)% 13.18% 7.65% 15.96% 9.53%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 973,850 $ 896,618 $ 613,625 $ 728,820 $ 581,584 $ 521,605 $ 468,683
Ratio of expenses to average net assets .71% A .71% .69% .69% .70% .70% .66%
A
Ratio of expenses to average net assets .70% A, .71% .69% .69% .70% .70% .66%
after expense reductions D A
Ratio of net investment income to average net 6.45% A 6.36% 6.26% 6.40% 7.31% 8.23% 8.84%
assets A
Portfolio turnover rate 132% A 391% 402% 323% 219% 257% 302%
A
</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.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 4 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1996 (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 financial
statements have been prepared in conformity with generally accepted
accounting principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. 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 which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $709,099,704 and $621,612,608, 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 .1100% 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 .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 $16,975 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.
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. For the
period, the transfer agent fees were equivalent to an annualized rate of
.22% of average net assets.
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.
4. EXPENSE REDUCTIONS.
The fund has entered into an arrangement with its custodian and transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $10,266 and $47,423,
respectively, under these arrangements.
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
950 Northgate Drive
San Rafael, 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
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 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
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
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
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
Fred L. Henning, Jr., 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
