(2_FIDELITY_LOGOS)FIDELITY
GOVERNMENT SECURITIES
FUND
ANNUAL REPORT
SEPTEMBER 30, 1997
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 14 STATEMENTS OF ASSETS AND LIABILITIES,
OPERATIONS, AND CHANGES IN NET ASSETS,
AS WELL AS FINANCIAL HIGHLIGHTS.
NOTES 18 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 20 THE AUDITORS' OPINION.
ACCOUNTANTS
DISTRIBUTIONS 21
PROXY VOTING RESULTS 22
To reduce expenses and demonstrate respect for our environment, we
have initiated a project through which we will begin eliminating
duplicate copies of most financial reports and prospectuses to most
households, even if they have more than one account in the fund. If
additional copies of financial reports, prospectuses or historical
account information are needed, please call 1-800-544-6666.
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
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
The stock and bond markets have performed well through the end of
September 1997, despite experiencing some short-term volatility in the
spring and again in August. The Standard & Poor's 500 Index was up
roughly 30% year-to-date through September, almost three times its
historical annual average. The bond markets - primarily influenced by
positive news on the inflation front - have posted moderate returns
through the first nine months of the year.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while 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. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you 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. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). You can also look at the fund's income, as
reflected in the fund's yield, to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY GOVERNMENT SECURITIES FUND 8.61% 36.10% 132.55%
SALOMON BROTHERS TREASURY/AGENCY INDEX 9.20% 38.11% 139.74%
GENERAL U.S. GOVERNMENT FUNDS AVERAGE 8.71% 32.18% 118.88%
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 had invested $1,000 in a fund that had a 5% return
over the past year, the value of your investment would be $1,050. You
can compare the fund's returns to the performance of the Salomon
Brothers Treasury/Agency Index - a market-capitalization weighted
index comprised of U.S. Treasury and U.S. government agency securities
with fixed-rate coupons and weighted average lives of at least one
year. To measure how the fund's performance stacked up against its
peers, you can compare it to the general U.S. government funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past one
year average represents a peer group of 180 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY GOVERNMENT SECURITIES FUND 8.61% 6.36% 8.81%
SALOMON BROTHERS TREASURY/AGENCY INDEX 9.20% 6.67% 9.14%
GENERAL U.S. GOVERNMENT FUNDS AVERAGE 8.71% 5.71% 8.11%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19970930 19971008 144426 S00000000000001
Government Securities SB Treasury/Agency
00054 SB022
1987/09/30 10000.00 10000.00
1987/10/31 10272.93 10380.87
1987/11/30 10341.17 10430.34
1987/12/31 10432.77 10548.23
1988/01/31 10721.04 10906.43
1988/02/29 10853.97 11022.67
1988/03/31 10779.20 10912.61
1988/04/30 10748.04 10840.89
1988/05/31 10684.20 10790.19
1988/06/30 10845.17 11008.24
1988/07/31 10824.84 10937.76
1988/08/31 10836.81 10955.48
1988/09/30 11020.34 11188.79
1988/10/31 11179.73 11385.00
1988/11/30 11078.46 11260.51
1988/12/31 11096.46 11297.20
1989/01/31 11233.13 11448.89
1989/02/28 11172.57 11360.68
1989/03/31 11226.90 11427.86
1989/04/30 11441.73 11641.80
1989/05/31 11648.18 11937.76
1989/06/30 11977.02 12342.13
1989/07/31 12194.12 12598.93
1989/08/31 12025.49 12385.82
1989/09/30 12072.79 12442.70
1989/10/31 12320.35 12765.87
1989/11/30 12433.02 12886.23
1989/12/31 12496.65 12905.61
1990/01/31 12334.96 12727.95
1990/02/28 12382.87 12738.66
1990/03/31 12397.96 12751.44
1990/04/30 12354.28 12643.86
1990/05/31 12610.35 12983.51
1990/06/30 12785.61 13190.44
1990/07/31 12948.92 13365.62
1990/08/31 12881.55 13172.30
1990/09/30 12977.93 13311.21
1990/10/31 13171.67 13529.68
1990/11/30 13463.14 13819.87
1990/12/31 13687.99 14038.75
1991/01/31 13787.22 14187.55
1991/02/28 13895.77 14247.73
1991/03/31 13953.92 14325.64
1991/04/30 14083.31 14496.29
1991/05/31 14155.16 14546.99
1991/06/30 14122.12 14537.51
1991/07/31 14296.98 14720.94
1991/08/31 14664.45 15048.64
1991/09/30 14999.46 15374.28
1991/10/31 15128.10 15492.99
1991/11/30 15268.97 15654.16
1991/12/31 15872.69 16191.26
1992/01/31 15601.02 15940.64
1992/02/29 15632.63 16004.53
1992/03/31 15530.35 15908.08
1992/04/30 15626.96 16021.85
1992/05/31 15948.44 16300.49
1992/06/30 16220.68 16537.51
1992/07/31 16719.51 16947.65
1992/08/31 16863.62 17121.60
1992/09/30 17087.03 17358.20
1992/10/31 16809.45 17106.35
1992/11/30 16821.36 17075.02
1992/12/31 17137.87 17363.56
1993/01/31 17543.91 17753.09
1993/02/28 17973.95 18099.34
1993/03/31 18069.34 18147.98
1993/04/30 18247.92 18303.79
1993/05/31 18175.15 18276.17
1993/06/30 18622.70 18686.31
1993/07/31 18741.80 18801.32
1993/08/31 19263.84 19219.29
1993/09/30 19339.82 19304.20
1993/10/31 19440.21 19355.32
1993/11/30 19164.42 19142.62
1993/12/31 19249.53 19227.95
1994/01/31 19559.47 19492.17
1994/02/28 18979.11 19086.56
1994/03/31 18473.41 18642.21
1994/04/30 18297.42 18498.76
1994/05/31 18281.77 18481.04
1994/06/30 18184.97 18443.12
1994/07/31 18590.97 18765.05
1994/08/31 18579.90 18769.99
1994/09/30 18216.05 18507.01
1994/10/31 18145.19 18488.46
1994/11/30 18129.11 18447.65
1994/12/31 18247.48 18574.61
1995/01/31 18590.05 18938.58
1995/02/28 19023.74 19335.53
1995/03/31 19129.36 19450.54
1995/04/30 19368.01 19701.15
1995/05/31 20140.42 20509.07
1995/06/30 20281.49 20664.47
1995/07/31 20202.39 20592.75
1995/08/31 20434.99 20828.11
1995/09/30 20623.26 21016.08
1995/10/31 20942.57 21343.78
1995/11/30 21261.36 21689.20
1995/12/31 21544.37 21989.69
1996/01/31 21659.67 22129.02
1996/02/29 21195.83 21687.55
1996/03/31 21018.14 21496.70
1996/04/30 20853.70 21328.11
1996/05/31 20819.55 21323.17
1996/06/30 21064.28 21591.92
1996/07/31 21118.91 21640.15
1996/08/31 21056.74 21595.22
1996/09/30 21411.87 21954.25
1996/10/31 21862.43 22452.18
1996/11/30 22220.16 22826.46
1996/12/31 21993.57 22596.04
1997/01/31 22017.37 22633.55
1997/02/28 22032.14 22647.16
1997/03/31 21794.16 22426.63
1997/04/30 22100.49 22736.60
1997/05/31 22273.33 22935.28
1997/06/30 22510.99 23192.91
1997/07/31 23150.94 23855.32
1997/08/31 22898.55 23613.77
1997/09/30 23255.29 23974.03
IMATRL PRASUN SHR__CHT 19970930 19971008 144428 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Government Securities Fund on September 30, 1987.
As the chart shows, by September 30, 1997, the value of the investment
would have grown to $23,255 - a 132.55% increase on the initial
investment. For comparison, look at how the Salomon Brothers
Treasury/Agency Index did over the same period. With dividends and
capital gains, if any, reinvested, the same $10,000 investment would
have grown to $23,974 - a 139.74% 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
YEARS ENDED SEPTEMBER 30,
1997 1996 1995 1994 1993
DIVIDEND RETURN 7.15% 6.55% 6.98% 5.76% 7.06%
CAPITAL APPRECIATION RETURN 1.46% -2.73% 6.23% -11.57 6.12%
%
TOTAL RETURN 8.61% 3.82% 13.21% -5.81% 13.18%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the fund. A capital appreciation return reflects both the
amount paid by the fund to shareholders as capital gain distributions
and changes in the fund's share price. Both returns assume the
dividends or capital gains paid by the fund are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED SEPTEMBER 30, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.05(CENTS) 31.56(CENTS) 66.03(CENTS)
ANNUALIZED DIVIDEND RATE 6.32% 6.54% 6.84%
30-DAY ANNUALIZED YIELD 5.52% - -
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 $9.72
over the past one month, $9.62 over the past six months and $9.66 over
the past one year, you can compare the fund's income over these three
periods. The 30-day annualized YIELD is a standard formula for all
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
The bond market's chief
antagonist - rising inflation -
remained in check throughout
most of the 12 months that ended
September 30, 1997, translating
into a generally favorable investing
climate. The Lehman Brothers
Aggregate Bond Index - a broad
measure of the U.S. taxable bond
market - returned 9.71% over the
period. Through the first half of the
period, bonds suffered from the
perception of an overheating
economy and, in turn, that inflation
would rear its ugly head. In
February, Federal Reserve Board
Chairman Alan Greenspan hinted
that the Fed was inclined to raise
the rate banks charge each other
for overnight loans - known as the
fed funds target rate - to curb any
potential inflation upticks. The Fed
acted in March, raising the fed
funds rate by 0.25% to 5.50% in a
move largely anticipated by
investors. From April through July,
weakening economic and inflation
indicators - coupled with the Fed's
shift to a more beneficial stance
signaling no intention to raise
short-term rates further - helped
spark an across-the-board rally.
While some of these gains were
lost in August - as inflation fears
cropped up again due to
stronger-than-expected economic
data - much of the decline was
offset by a strong September.
Relative interest-rate stability
provided a positive backdrop for
mortgage-backed securities, as the
Salomon Brothers Mortgage Index
returned 9.85% over the 12-month
period. Sustained economic growth
and demand for higher yields aided
corporate bonds, as the Lehman
Brothers Corporate Bond Index
returned 10.83% over the same
period.
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity
Government Securities Fund
Q. HOW DID THE FUND PERFORM, CURT?
A. For the 12-month period that ended September 30, 1997, the fund
provided a total return of 8.61%. The fund's performance was in line
with the 8.71% return produced during the same period by the general
U.S. government funds average, as tracked by Lipper Analytical
Services. The Salomon Brothers Treasury/Agency Index had a 12-month
return of 9.20%.
Q. LOOKING BACK, THE BOND MARKET WAS SOMEWHAT SKITTISH DURING THE
FIRST HALF OF THE PAST YEAR, BUT TURNED MORE POSITIVE DURING THE PAST
SIX MONTHS AS INTEREST RATES FELL. DID YOU MAKE ANY ADJUSTMENTS IN
RESPONSE?
A. The main thrust of my investment strategy remained the same
throughout the past six months: I managed the fund to have
approximately the same sensitivity to interest-rate movements as the
market for government securities, as represented by the Salomon
Brothers Treasury/Agency Index. It's my view that very few people can
pinpoint the direction and magnitude of interest-rate changes with any
accuracy and consistency. Given that, I believe that managing a fund
based on the future level of interest rates can backfire if you place
an incorrect bet. So I kept the fund "duration neutral," meaning that
it was essentially no more or no less sensitive to interest-rate
changes than the government securities market as a whole.
Q. YOU NEARLY DOUBLED THE FUND'S STAKE IN AGENCY SECURITIES BY THE END
OF THE PERIOD COMPARED TO SIX MONTHS EARLIER. WHAT PROMPTED THAT
INCREASE?
A. I chose to increase the fund's holdings in agency securities
because they became more attractive in light of their expanding yield
advantage over Treasuries. At the end of the period, the average
agency security offered roughly 15 to 25 basis points - or 0.15% or
0.25% - more in yield than Treasury securities. Six months ago,
agencies offered a smaller yield advantage of only about 10 to 15
basis points. Since a bond's - and ultimately the fund's - total
return is based on both its yield and its price appreciation (or
depreciation), having a fairly large stake in high-yielding agency
securities was a plus for the fund.
Q. WITHIN THE AGENCY SECTOR, WHICH SECURITIES DID YOU ADD?
A. Most of the new additions were securities issued by the Federal
Home Loan Bank, the Federal Farm Credit Bank and the Financing
Corporation. Additionally, I focused exclusively on agency securities
that are non-callable - those that can't be redeemed by their issuers
before maturity. Bonds typically are called when interest rates fall
so significantly that issuers
can save money by issuing new bonds at lower rates. A call is a
positive for issuers because it cuts their borrowing costs. But
holders of callable bonds are often at a disadvantage because they may
have to reinvest the proceeds from the called bonds in new,
lower-yielding bonds. I prefer non-callable securities because they
generally perform better than callable bonds when interest rates fall
and bond prices rally, and generally fare no worse than callable bonds
when interest rates rise and bond prices fall.
Q. WE UNDERSTAND THAT THE FUND'S SHAREHOLDERS RECENTLY APPROVED A
CHANGE IN ITS INVESTMENT POLICY RELATED TO INVESTING IN SECURITIES
WHOSE INTEREST IS EXEMPT FROM STATE AND LOCAL INCOME TAXES . . .
A. That's correct. As of November 28, 1997, the policy that limited
the fund's investments to U.S. government securities and agency
securities whose interest is exempt from state and local income taxes
was eliminated. This change allows the fund increased flexibility to
invest in a wider variety of U.S. agency securities, such as those
issued by the Government National Mortgage Association - Ginnie Maes -
and other mortgage securities. In connection with this change, the
fund has adopted a policy that limits investments in mortgage
securities to 40% of the fund's assets. Going forward, I will continue
to manage the fund as a broad government fund that invests in Treasury
and agency securities. I will also invest in mortgage securities.
Q. WHAT'S YOUR OUTLOOK FOR THE BOND MARKET AND THE FUND?
A. At present, bonds appear to be priced based on a fairly optimistic
view: Inflation will remain moderate and the Federal Reserve Board
won't hike interest rates. If inflation rises or the Fed raises rates,
the bond markets would be unpleasantly surprised and would likely
react negatively. As far as the fund goes, I'll most likely take
advantage of the recent investment policy change to add
mortgage-backed securities and more agency securities, as long as they
offer what I think is an appropriate amount of additional yield
relative to Treasury securities.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
CURT HOLLINGSWORTH ON SELECTING
INDIVIDUAL SECURITIES:
"The direction of interest rates is
the primary factor that determines
the performance of bonds. Many
investors try to pick securities that
will do well based on where they
feel interest rates are headed. In
contrast, I try to identify those
securities that I believe will offer
the best total-return potential in
any type of interest-rate
environment - rising, falling or
stable. Because I tend to have a
value orientation, I choose
securities that I find to be
cheap relative to other securities
because they are currently out of
the market's favor, with the idea
that they will appreciate when the
market starts to favor them."
(solid bullet) Within the Treasury sector,
the manager focused on securities
that were issued some time ago.
Newly issued Treasuries - known
as "off-the-run" securities -
typically are priced higher than
older Treasuries with similar
maturities. That's because
off-the-run securities command a
premium price for being more
easily traded, or liquid.
FUND FACTS
GOAL: high current income
with preservation of capital
FUND NUMBER: 054
TRADING SYMBOL: FGOVX
START DATE: April 4, 1979
SIZE: as of September 30,
1997, more than $1.0 billion
MANAGER: Curt Hollingsworth,
since February 1997;
manager, various Fidelity and
Spartan government and
mortgage funds; joined
Fidelity in 1983
(checkmark)
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF SEPTEMBER 30, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
ZERO 12.6 15.7
COUPON
BONDS
UNDER 6% 3.2 0.0
6 - 21.7 3.0
6.99%
7 - 8.9 29.8
7.99%
8 - 26.2 37.8
8.99%
9 - 7.5 6.1
9.99%
10 - 1.6 4.5
10.99%
11% AND 11.5 2.4
OVER
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING
SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF SEPTEMBER 30, 1997
6 MONTHS AGO
YEARS 8.0 7.9
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, 1997
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 (% OF FUND'S INVESTMENTS)
AS OF SEPTEMBER 30, 1997 AS OF MARCH 31, 1997
ROW: 1, COL: 1, VALUE: 6.8
ROW: 1, COL: 2, VALUE: 47.9
ROW: 1, COL: 3, VALUE: 45.3
U.S. TREASURY
OBLIGATIONS 75.2%
U.S. GOVERNMENT
AGENCY
OBLIGATIONS 24.1%
SHORT-TERM
INVESTMENTS 0.7%
U.S. TREASURY
OBLIGATIONS 45.3%
U.S. GOVERNMENT
AGENCY
OBLIGATIONS 47.9%
SHORT-TERM
INVESTMENTS 6.8%
ROW: 1, COL: 1, VALUE: 2.0
ROW: 1, COL: 2, VALUE: 24.0
ROW: 1, COL: 3, VALUE: 37.0
ROW: 1, COL: 4, VALUE: 37.0
INVESTMENTS SEPTEMBER 30, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 100%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
U.S. TREASURY OBLIGATIONS - 52.1%
8%, 8/15/99 $ 116,287 $ 120,720
7 3/4%, 12/31/99 49,000 50,928
8 1/2%, 2/15/00 18,400 19,458
11 3/4%, 2/15/10 (callable) 89,000 117,703
9%, 11/15/18 42,580 54,855
8 7/8%, 2/15/19 37,000 47,175
8 1/8%, 8/15/19 43,000 51,150
U.S. Treasury Bill yield at date of purchase
4.81%, 11/13/97 45,051 44,790
U.S. Treasury Bill yield at date of purchase
4.94%, 1/2/98 25,339 25,014
TOTAL U.S. TREASURY OBLIGATIONS 531,793
U.S. GOVERNMENT AGENCY OBLIGATIONS - 47.9%
Farm Credit Systems Financial Assistance Corp.
8.80%, 6/10/05 8,210 9,394
Federal Farm Credit Bank:
6.10%, 9/24/01 93,500 93,441
6.80%, 4/4/02 5,000 5,124
6.18%, 8/5/02 5,000 4,999
6.82%, 1/27/03 2,900 2,976
6.02%, 6/30/03 1,000 989
6.65%, 8/8/03 15,000 15,281
5.54%, 9/10/03 10,000 9,658
8.06%, 1/4/05 6,600 7,237
8.12%, 2/1/05 8,635 9,489
7.35%, 3/24/05 1,000 1,055
Federal Home Loan Bank:
5.345%, 2/16/01 13,820 13,503
5.74%, 3/13/01 8,550 8,448
6.495%, 8/9/01 5,000 5,059
7.44%, 8/10/01 24,300 25,359
7.39%, 8/22/01 2,000 2,087
7.26%, 9/6/01 1,160 1,205
8%, 9/11/01 1,400 1,491
6.225%, 9/19/01 45,000 44,972
6.135%, 9/23/02 7,750 7,745
6.145%, 9/30/02 19,700 19,666
6.37%, 6/30/03 1,110 1,116
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Federal Home Loan Bank: - continued
5.52%, 10/3/03 $ 1,000 $ 960
9 1/2%, 2/25/04 1,500 1,748
7.59%, 3/10/05 1,895 2,035
7.485%, 4/7/05 2,000 2,128
6.225%, 10/24/05 17,175 16,987
Stripped principal 0%, 2/25/04 1,800 1,211
Financing Corp.:
0%, 4/5/04 1,196 796
0%, 11/11/04 2,256 1,442
0%, 9/7/06 3,152 1,779
10.70%, 10/6/17 2,825 4,052
9.80%, 11/30/17 2,825 3,777
9.40%, 2/8/18 8,450 10,939
10.35%, 8/3/18 8,940 12,509
9.70%, 4/5/19 3,950 5,262
Stripped principal:
0%, 12/6/98 1,702 1,592
0%, 6/6/99 1,000 907
0%, 3/26/00 11,270 9,727
0%, 4/5/00 14,000 12,071
0%, 6/6/00 19,199 16,389
0%, 11/2/00 8,046 6,692
0%, 5/2/02 1,158 877
0%, 8/3/02 3,669 2,733
0%, 11/2/02 8,343 6,128
0%, 3/7/03 2,971 2,129
0%, 4/5/03 12,160 8,667
0%, 4/6/03 3,000 2,140
0%, 5/2/03 9,632 6,841
0%, 5/30/03 2,811 1,987
0%, 6/6/03 4,500 3,174
0%, 6/27/03 1,000 703
0%, 10/6/03 10,100 6,986
0%, 11/11/03 2,822 1,938
0%, 4/6/04 3,926 2,617
0%, 5/11/04 1,420 940
0%, 6/6/04 4,541 2,991
0%, 5/2/05 3,365 2,087
0%, 6/6/05 2,284 1,406
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Financing Corp.: - continued
Stripped principal: - continued
0%, 8/3/05 $ 1,082 $ 661
0%, 8/3/05 907 553
0%, 12/27/05 11,515 6,841
0%, 3/26/06 3,972 2,316
0%, 4/6/06 3,915 2,276
0%, 5/11/06 6,100 3,519
0%, 8/8/06 2,385 1,355
0%, 10/5/06 2,274 1,277
0%, 12/6/06 4,500 2,500
Student Loan Marketing Associates:
7.20%, 11/9/00 4,000 4,129
7.93%, 10/15/01 600 637
7.43%, 6/16/03 1,000 1,056
8.14%, 5/17/04 1,500 1,642
Tennessee Valley Authority 6 3/4%, 11/1/25 3,470 3,471
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 489,874
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,002,357) $ 1,021,667
INCOME TAX INFORMATION
At September 30, 1997, the aggregate cost of investment securities for
income tax purposes was $1,003,006,000. Net unrealized appreciation
aggregated $18,661,000, of which $19,414,000 related to appreciated
investment securities and $753,000 related to depreciated investment
securities.
At September 30, 1997, the fund had a capital loss carryforward of
approximately $30,325,000 of which $17,606,000, $8,245,000, and
$4,474,000 will expire on September 30, 2003, 2004, and 2005,
respectively.
The fund intends to elect to defer to its fiscal year ending September
30, 1998 approximately $1,729,000 of losses recognized during the
period November 1, 1996 to September 30, 1997.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) SEPTEMBER 30, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $1,002,357) - $ 1,021,667
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 3,001
INTEREST RECEIVABLE 9,176
TOTAL ASSETS 1,033,844
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 1
PAYABLE FOR INVESTMENTS PURCHASED 9,858
PAYABLE FOR FUND SHARES REDEEMED 91
DISTRIBUTIONS PAYABLE 559
ACCRUED MANAGEMENT FEE 370
OTHER PAYABLES AND ACCRUED EXPENSES 252
TOTAL LIABILITIES 11,131
NET ASSETS $ 1,022,713
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 1,035,510
UNDISTRIBUTED NET INVESTMENT INCOME 581
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (32,688)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 19,310
NET ASSETS, FOR 104,824 SHARES OUTSTANDING $ 1,022,713
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER $9.76
SHARE ($1,022,713 (DIVIDED BY) 104,824 SHARES)
</TABLE>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1997
INVESTMENT INCOME $ 70,414
INTEREST
EXPENSES
MANAGEMENT FEE $ 4,315
TRANSFER AGENT FEES 2,310
ACCOUNTING FEES AND EXPENSES 305
NON-INTERESTED TRUSTEES' COMPENSATION 6
CUSTODIAN FEES AND EXPENSES 24
REGISTRATION FEES 61
AUDIT 48
LEGAL 14
REPORTS TO SHAREHOLDERS 52
MISCELLANEOUS 5
TOTAL EXPENSES BEFORE REDUCTIONS 7,140
EXPENSE REDUCTIONS (117) 7,023
NET INVESTMENT INCOME 63,391
REALIZED AND UNREALIZED GAIN (LOSS) (622)
NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON 18,125
INVESTMENT SECURITIES
NET GAIN (LOSS) 17,503
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 80,894
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 63,391 $ 62,555
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) (622) 278
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 18,125 (29,241)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 80,894 33,592
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (66,908) (62,671)
SHARE TRANSACTIONS 378,207 453,471
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 57,722 52,723
COST OF SHARES REDEEMED (376,059) (424,876)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 59,870 81,318
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 73,856 52,239
NET ASSETS
BEGINNING OF PERIOD 948,857 896,618
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 1,022,713 $ 948,857
INCOME OF $581 AND $3,871, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 39,114 46,023
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 5,974 5,385
REDEEMED (38,946) (43,364)
NET INCREASE (DECREASE) 6,142 8,044
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED SEPTEMBER 30,
1997 1996 1995 1994 C 1993
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 9.620 $ 9.890 $ 9.330 $ 10.870 $ 10.500
BEGINNING OF PERIOD
INCOME FROM INVESTMENT .625 B .670 .625 .626 .672
OPERATIONS
NET INVESTMENT INCOME
NET REALIZED AND UNREALIZED .175 (.299) .564 (1.225) .627
GAIN (LOSS)
TOTAL FROM INVESTMENT OPERATIONS .800 .371 1.189 (.599) 1.299
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.660) (.641) (.609) (.631) (.679)
FROM NET REALIZED GAIN - - - (.310) (.250)
IN EXCESS OF NET REALIZED GAIN - - (.020) - -
TOTAL DISTRIBUTIONS (.660) (.641) (.629) (.941) (.929)
NET ASSET VALUE, END OF PERIOD $ 9.760 $ 9.620 $ 9.890 $ 9.330 $ 10.870
TOTAL RETURN A 8.61% 3.82% 13.21% (5.81)% 13.18%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 1,023 $ 949 $ 897 $ 614 $ 729
(IN MILLIONS)
RATIO OF EXPENSES TO AVERAGE .73% .72% .71% .69% .69%
NET ASSETS
RATIO OF EXPENSES TO AVERAGE NET .72% D .71% .71% .69% .69%
ASSETS AFTER EXPENSE REDUCTIONS D
RATIO OF NET INVESTMENT INCOME 6.48% 6.52% 6.36% 6.26% 6.40%
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 199% 124% 391% 402% 323%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 4 OF NOTES TO
FINANCIAL STATEMENTS).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
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 September 30, 1997
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.
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. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
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, capital loss carryforwards and losses
deferred due to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in
the following year.
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 $1,920,901,000 and $1,926,629,000 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. The annual individual
fund fee rate is .30%. 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. For the period, the management fee was equivalent to
an annual rate of .44% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (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 annual rate of .24% 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 arrangements with its custodian and transfer
agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of the fund's expenses. During the
period, the fund's custodian and transfer agent fees were reduced by
$24,000 and $93,000, respectively, under these arrangements.
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, 1997, and the related
statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Government Securities Fund as of
September 30, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 4, 1997
DISTRIBUTIONS
A total of 93.99% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 1998 of the applicable
percentage for use in preparing 1997 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on November 19,
1997. The results of votes taken among shareholders on proposals
before them are listed below.
PROPOSAL 1
To approve an amended management contract for the fund.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 48,795,914.793 88.848
AGAINST 2,883,825.948 5.250
ABSTAIN 3,241,181.566 5.902
TOTAL 54,920,922.307 100.000
PROPOSAL 2
To approve an Agreement and Plan providing for the reorganization of
the fund from a separate series of one Massachusetts business trust to
another.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 47,517,695.722 87.445
AGAINST 3,341,858.396 6.150
ABSTAIN 3,480,375.189 6.405
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 3
To eliminate the fund's fundamental investment policy which limits its
security investments to U.S. Government securities whose interest is
exempt from state and local income tax.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 43,653,157.958 80.333
AGAINST 7,829,564.040 14.409
ABSTAIN 2,857,207.309 5.258
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 4
To amend the fund's fundamental investment limitation concerning real
estate.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 43,538,901.055 80.123
AGAINST 7,652,857.829 14.084
ABSTAIN 3,148,170.423 5.793
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 5
To adopt a new fundamental investment policy for the fund permitting
the fund to invest all of its assets in another open-end investment
company with substantially the same investment objective and policies.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 43,793,612.477 80.592
AGAINST 7,249,829.833 13.342
ABSTAIN 3,296,486.997 6.066
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 6
To amend the fund's fundamental investment limitation concerning the
issuance of senior securities.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 44,280,194.440 81.487
AGAINST 6,217,061.821 11.441
ABSTAIN 3,842,673.046 7.072
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.00
PROPOSAL 7
To eliminate the fund's fundamental investment limitation concerning
short sales of securities.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 42,954,562.404 79.048
AGAINST 7,640,176.677 14.060
ABSTAIN 3,745,190.226 6.892
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 8
To eliminate the fund's fundamental investment limitation concerning
margin purchases.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 42,422,733.526 78.069
AGAINST 8,272,315.505 15.223
ABSTAIN 3,644,880.276 6.708
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 9
To amend the fund's fundamental investment limitation concerning
borrowing.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 43,534,075.971 80.114
AGAINST 7,150,425.949 13.159
ABSTAIN 3,655,427.387 6.727
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 10
To amend the fund's fundamental investment limitation concerning
underwriting.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 44,087,249.519 81.132
AGAINST 6,458,340.084 11.885
ABSTAIN 3,794,339.704 6.983
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 11
To amend the fund's fundamental investment limitation concerning the
concentration of its investments in a single industry.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 44,053,690.994 81.071
AGAINST 6,775,484.079 12.468
ABSTAIN 3,510,754.234 6.461
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 12
To eliminate the fund's fundamental investment limitation concerning
investments in other investment companies.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 43,612,257.823 80.258
AGAINST 7,161,856.646 13.180
ABSTAIN 3,565,814.838 6.562
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
PROPOSAL 13
To eliminate the fund's fundamental investment limitation concerning
investing in oil, gas, or other mineral exploration or development
programs.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 43,208,212.433 79.515
AGAINST 7,634,243.696 14.049
ABSTAIN 3,497,473.178 6.436
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,933.000
PROPOSAL 14
To eliminate the fund's fundamental investment limitation concerning
purchasing warrants.
# OF % OF
SHARES VOTED SHARES VOTED
OF THE FUND OF THE FUND
AFFIRMATIVE 42,976,193.894 79.088
AGAINST 7,407,344.645 13.631
ABSTAIN 3,956,390.768 7.281
TOTAL 54,339,929.307 100.000
Broker
Non-Votes 580,993.000
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate
the service, and on your first call, the system will help you create a
personal identification number (PIN) for security.
SM
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
To speak to a Fidelity representative.
0
*
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* 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
815 East Birch Street
Brea, CA
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Campbell, CA
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Glendale, CA
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Irvine, CA
10100 Santa Monica Blvd.
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
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, 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
1907 West State Road 434
Longwood, FL
4001 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
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
155 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
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 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
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
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, 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
1900 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
2300 Litton Lane - KH1A
Hebron, KY 41048
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 500
Merrimack, NH 03054-0500
(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 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Curtis Hollingsworth, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
New Markets Income
Short-Intermediate Government
Short-Term Bond
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity Government
Spartan Short-Intermediate Government
Spartan Short-Term Bond
Target Timeline(trademark) 1999, 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE
