FIDELITY
(registered trademark)
U.S. GOVERNMENT RESERVES
SEMIANNUAL REPORT
MARCH 31, 1994
CONTENTS
CHECK PAGE NUMBERS !!!
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 8 A summary of major shifts in the
fund's investments over the last six
months
and one year.
INVESTMENTS 9 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 12 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 16 Footnotes to the financial
statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
No one wants to pay more taxes than they have to. But a recent survey of
500 U.S. households, conducted by Fidelity and Yankelovich Partners, showed
that few people took steps to reduce their taxes under the new tax laws
that went into effect last year. In fact, many people were not completely
aware of the changes until they filed their 1993 tax returns.
Whether or not you're someone whose tax bill increased as a result of these
changes, it may make sense to consider ways to keep more of what you earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider tax-free investments like municipal bonds and municipal
bond funds. Often these can provide higher after-tax yields than comparable
taxable investments. For example, if you're in the new 36% federal income
tax bracket and invest $10,000 in a taxable investment yielding 7%, you'll
pay $252 in federal taxes and receive $448 in income. That same $10,000
invested in a tax-free bond fund yielding 5.5% would allow you to keep $550
in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center. We look forward to
talking with you.
Best regards,
Edward C. Johnson 3d, Chairman
PERFORMANCE: THE BOTTOM LINE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change in a fund's share
price over a given period, and reinvestment of its dividends (or income).
Yield measures the income paid by a fund. Since a money market fund tries
to maintain a $1 share price, yield is an important measure of performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1994 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity U.S. Government Reserves 1.43% 2.72% 29.50% 84.83%
Consumer Price Index 1.45% 2.51% 20.36% 43.47%
Average Government
Money Market Fund 1.30% 2.59% 28.91% 82.13%
CUMULATIVE TOTAL RETURNS reflect actual performance over a set period - in
this case, six months, one year, five years, or ten years. For example, if
you invested $1,000 in a fund that had a 5% return over the past year, you
would end up with $1,050. Comparing the fund's performance to the consumer
price index (CPI) helps show how your investment did compared to inflation.
To measure how the fund stacked up against its peers, you can compare its
return to the average government money market fund's total returns. This
average currently reflects the performance of 199 government money market
funds tracked by IBC/Donoghue. (The periods covered by the IBC/Donoghue
numbers are the closest available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity U.S. Government Reserves 2.72% 5.31% 6.34%
Consumer Price Index 2.51% 3.78% 3.68%
Average Government
Money Market Fund 2.59% 5.21% 6.18%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
3/31/93 6/30/93 9/30/93 12/31/93 3/31/94
Fidelity U.S. Government 2.49% 2.46% 2.89% 2.95% 3.00%
Reserves
Average Government 2.56% 2.53% 2.54% 2.57% 2.79%
Money Market Fund
2.58% 2.47% 2.38% 2.34% 2.29%
MMDA
</TABLE>
Row: 1, Col: 1, Value: 2.49
Row: 1, Col: 2, Value: 2.56
Row: 1, Col: 3, Value: 2.58
Row: 2, Col: 1, Value: 2.46
Row: 2, Col: 2, Value: 2.53
Row: 2, Col: 3, Value: 2.47
Row: 3, Col: 1, Value: 2.89
Row: 3, Col: 2, Value: 2.54
Row: 3, Col: 3, Value: 2.38
Row: 4, Col: 1, Value: 2.95
Row: 4, Col: 2, Value: 2.57
Row: 4, Col: 3, Value: 2.34
Row: 5, Col: 1, Value: 3.0
Row: 5, Col: 2, Value: 2.79
Row: 5, Col: 3, Value: 2.29
4% -
3% -
2% -
1% -
0%
Fidelity
U.S. Government
Reserves
Average
Government
Money Market Fun
d
MMDA
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods, expressed as annual
percentage rates. A yield that assumes income earned is reinvested or
compounded is called an effective yield. The chart above shows the fund's
current seven-day yield at quarterly intervals over the past year. You can
compare these yields to the average U.S. Treasury money market fund and the
average bank money market deposit account (MMDA). The MMDA average is
supplied by BANK RATE MONITOR(double dagger) at month end.
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS REFLECT PAST RESULTS RATHER
THAN PREDICT FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
There are some important
differences between a bank
money market deposit account
(MMDA) and a money market
fund. First, the U.S.
government neither insures nor
guarantees a money market
fund. In fact, there is no
assurance that a money
market fund will maintain a $1
share price. Second, a money
market fund returns to its
shareholders income earned
by the fund's investments after
expenses. This is in contrast to
banks, which set their MMDA
rates periodically based on
current interest rates,
competitors' rates, and internal
criteria.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Leland Barron, Portfolio Manager of Fidelity U.S.
Government Reserves
Q. LELAND, BRING US UP TO SPEED ON THE MOVEMENTS IN SHORT-TERM INTEREST
RATES OVER THE PAST SIX MONTHS.
A. Through October and into November, short-term interest rates remained
pretty stable. Mild inflation fears nudged rates slightly higher by
mid-November, and rates moved within a narrow range through the end of
January 1994. During this period, the Federal Reserve Board appeared
content to keep the federal funds rate - the rate banks charge each other
for overnight loans - at 3.00%, where it had been since September 1992. But
on February 4, the Fed raised the fed funds rate to 3.25%, its first rate
hike in five years. And just over a month later, the Fed inched the fed
funds rate up another quarter of a percentage point. Both moves had the
effect of raising most short-term interest rates.
Q. GIVEN THOSE CHANGES, WHAT WAS YOUR STRATEGY?
A. I kept the fund's average maturity in a fairly aggressive range - 65 to
75 days - through October and November. During that time I locked in some
higher yields that were available while rates were stable or rising.
However, by the end of December, I felt that inflation worries triggered by
the improving economy might lead the Fed to move up short-term rates. To
give the fund more flexibility, I reduced its average maturity to 61 days
by the end of December.
Q. HOW WAS THE FUND POSITIONED WHEN THE FED RAISED RATES?
A. The fund's average maturity was 63 days at the end of January. In
hindsight, I wish it had been a bit shorter. By mid-January, I felt the Fed
might wait to see if the nation's strong fourth quarter economic growth was
sustainable through the first quarter of '94 before it raised rates. So
when the Fed made its so-called preemptive strike against inflation at the
beginning of February, it came as somewhat of a surprise. However,
immediately after the Fed's move, I began preparing the fund for even
higher rates. I reduced its average maturity to 42 days by the end of
February. By March 31, the average maturity had crept up slightly - to 47
days - because I had purchased some higher-yielding instruments that became
available after the rise in interest rates.
Q. SO HOW DID THE FUND PERFORM?
A. The fund's seven-day yield was 3.00% at the end of March, up from 2.89%
on September 30. In part, that reflected the two Fed rate hikes. For the
six months ended March 31, 1994, the fund had a total return of 1.43%. That
beat the 1.30% total return of the average government money market fund
tracked by IBC/Donoghue.
Q. WHAT'S YOUR THINKING ON THE MARKET FOR THE COMING MONTHS?
A. Because the Fed appears intent on keeping inflation in check, I think
short-term interest rates are likely to rise over the next several months.
But the Fed lowered rates gradually, and I expect it to take the same
approach toward raising rates. That's why I plan to keep the fund's average
maturity in the 45- to 55-day range for a while. That should give the fund
a defensive posture while still allowing me to go after higher-yielding
issues when they become available. In addition, I'll look for opportunities
to purchase more variable and floating rate instruments, which made up 6.1%
of the fund's investments on March 31. What makes them attractive is a
feature that resets their coupons (stated interest rates) at fixed
intervals. So when rates are rising, the fund can obtain a higher coupon on
these issues at their reset intervals.
FUND FACTS
GOAL: to provide current
income with share price
stability by investing in high
quality, short-term securities
START DATE: November 3, 1981
SIZE: as of March 31, 1994,
over $1.1 billion
MANAGER: Leland Barron,
since July 1991; manager,
Spartan U.S. Government
Money Market Fund, since
July 1991; Spartan U.S.
Treasury Money Market Fund,
since January 1991
(checkmark)
WORDS TO KNOW
AGENCY ISSUE: Debt security
issued by a government
agency, such as the Federal
National Mortgage Association
(Fannie Mae). Although their
credit ratings are high, most
agency issues are not backed
by the full faith and credit of the
U.S. government.
AVERAGE MATURITY: The average
maturity of debt securities in a
fund, weighted by dollar
amount. When the average
maturity is short, the fund
manager believes interest
rates will rise. When the
average maturity is long, the
fund manager is expecting
rates to fall.
DISCOUNT RATE: The interest
rate the Federal Reserve
charges member banks for
loans.
FEDERAL FUNDS RATE: The interest
rate banks charge each other
for overnight loans.
MATURITY: The amount of time
remaining before a debt
security is scheduled to be
redeemed.
REPURCHASE AGREEMENT:
Agreement between a seller
and a buyer in which the seller
promises to repurchase a
block of securities at a set
price and time. Also known
as a "repo."
TREASURY OBLIGATION: Debt
security issued directly by the
U.S. government. Payment of
principal and interest are
guaranteed.
INVESTMENT CHANGES
MATURITY DIVERSIFICATION
DAYS % OF FUND ASSETS % OF FUND ASSETS % OF FUND ASSETS
3/31/94 9/30/93 3/31/93
0 - 30 67.5 60.0 59.6
31 - 90 12.3 7.6 14.0
91 - 180 10.8 16.6 25.5
181 - 397 9.4 15.8 0.9
WEIGHTED AVERAGE MATURITY
3/31/94 9/30/93 3/31/93
Fidelity U.S. Government
Reserves 47 days 64 days 46 days
Average Government
Money Market Fund* 45 days 59 days 56 days
ASSET ALLOCATION
AS OF 3/31/94 AS OF 9/30/93
Row: 1, Col: 1, Value: 40.3
Row: 1, Col: 2, Value: 6.7
Row: 1, Col: 3, Value: 53.0
Row: 1, Col: 1, Value: 30.9
Row: 1, Col: 2, Value: 17.5
Row: 1, Col: 3, Value: 51.6
Federal agency
issues 40.3%
U.S. Treasury
obligations 6.7%
Repurchase
agreements 53.0%
Federal agency
issues 30.9%
U.S. Treasury
obligations 17.5%
Repurchase
agreements 51.6%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(Registered trademark)
INVESTMENTS MARCH 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investments
FEDERAL AGENCIES - 40.3%
DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1)
DATE TIME OF PURCHASE (000S) (000S)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 2.2%
10/3/94 3.36% $ 13,000 $ 13,001 313993JQ
10/3/94 3.38 12,000 12,000 313993JR
25,001
FEDERAL FARM CREDIT BANK - DISCOUNT NOTES - 0.9%
9/6/94 3.98 10,000 9,829 313993NR
FEDERAL HOME LOAN BANK - AGENCY COUPONS - 2.7%
4/25/94 3.23 15,000 15,038 567995BM
4/25/94 3.33 15,000 15,059 567995AS
30,097
FEDERAL HOME LOAN BANK - DISCOUNT NOTES - 1.9%
4/22/94 3.28 11,000 10,980 3133899B
6/16/94 3.37 10,000 9,998 567995GP
20,978
FEDERAL HOME LOAN MORTGAGE CORP. - DISCOUNT NOTES - 1.4%
11/28/94 4.18 16,000 15,566 355993RM
FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS - 4.5%
4/4/94 3.60 40,000 40,000 9931287F
6/30/94 3.40 10,000 10,001 9931162G
50,001
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 13.9%
6/27/94 3.34 30,000 29,762 993128RW
8/1/94 3.20 15,000 14,840 9931287G
9/6/94 3.29 20,000 19,716 9931287C
9/19/94 4.03 8,000 7,850 9931304S
9/22/94 3.33 35,000 34,449 9931286H
9/29/94 4.04 6,000 5,881 9931304U
10/19/94 4.05 20,000 19,559 993130VX
10/25/94 3.40 24,000 23,543 9931286J
155,600
STUDENT LOAN MARKETING ASSOCIATION - AGENCY COUPONS - 6.1% (A)
4/5/94 3.90 30,000 30,000 863990PS
4/5/94 4.18 15,000 15,063 82399CAU
7/1/94 3.74 23,600 23,600 863990PT
68,663
STUDENT LOAN MARKETING ASSOCIATION - DISCOUNT NOTES - 6.7%
4/4/94 3.49 75,000 74,978 863990PX
TOTAL FEDERAL AGENCIES 450,713
U.S. TREASURY OBLIGATIONS - 6.7%
DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1)
DATE TIME OF PURCHASE (000S) (000S)
U.S. TREASURY BILLS - 6.7%
4/7/94 3.35% $ 12,000 $ 11,994 99399HLF
5/5/94 3.35 28,000 27,914 99399HPL
6/2/94 3.36 10,000 9,942 99399H5R
6/2/94 3.47 10,000 9,943 99399HRU
10/20/94 3.36 15,000 14,724 993134GV
TOTAL U.S. TREASURY OBLIGATIONS 74,517
REPURCHASE AGREEMENTS - 53.0%
MATURITY AMOUNT
(000S)
With Bear Stearns & Co., Inc.:
At 3.58%, dated 3/31/94 due 4/4/94:
U.S. Treasury Obligations
(principal amount $53,600)
3.875% to 10.375%, 9/30/95 to 5/15/16 $ 61,089 61,06 0739995P5
With First Boston Corporation:
At 3.65%, dated 3/25/94 due 4/4/94:
U.S. Government Obligations
(principal amount $45,000)
0% to 9.50%, 12/1/2 to 10/1/7 45,046 45,000
With Goldman Sachs & Co., Inc.
At 3.72%, dated 3/31/94 due 4/4/94:
U.S. Treasury Obligations
(principal amount $52,266)
4% to 4.25%, 1/31/95 to 1/31/96 51,021 51,000
With Kidder Peabody & Co., Inc.
At 3.72%, dated 3/28/94 due 4/4/94:
U.S. Government Obligations
(principal amount $47,848)
5.61%, 11/01/30 45,033 45,000
With Merrill Lynch Government Securities, Inc.:
At 3.625%, dated 3/28/94 due 4/4/94:
U.S. Government Obligations
(principal amount $22,369)
5.625%, 12/1/30 22,016 22,000
With Paine Webber, Inc.:
At 3.75%, dated 3/31/94 due 4/4/94:
U.S. Government Obligations
(principal amount $22,711)
3.499%, 11/1/23 22,009 22,000
At 3.85%, dated 3/31/94 due 4/4/94:
U.S. Government Obligations
(principal amount $50,757)
4.137% to 8.956%, 10/1/23 to 1/1/20 50,021 50,000
REPURCHASE AGREEMENTS - CONTINUED
MATURITY AMOUNT VALUE (NOTE 1)
(000S) (000S)
In a joint trading account
(U.S. Treasury Obligations)
dated 3/31/94, due 4/4/94 (Note 2)
At 3.70% $ 85,938 $ 85,903
At 3.74% 210,087 210,000
TOTAL REPURCHASE AGREEMENTS 591,968
TOTAL INVESTMENTS - 100% $ 1,117,198
Total Cost for Income Tax Purposes $ 1,117,198
LEGEND
(a) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At September 30, 1993 the fund had a capital loss carryforward of
approximately $436,000
of which $7,000 and $429,000 will expire on September 30, 1995 and 1996
respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) MARCH 31, 1994 (UNAUDITED)
1.ASSETS 2. 3.
4.Investment in securities, at value (including 5. $ 1,117,198
repurchase agreements of $591,968) (Notes 1 and 2)
- - - See accompanying schedule
6.Cash 7. 24,896
8.Interest receivable 9. 2,782
10. 11.TOTAL ASSETS 12. 1,144,876
13.LIABILITIES 14. 15.
16.Dividends payable $ 155 17.
18.Accrued management fee 169 19.
20.Other payables and accrued expenses 388 21.
22. 23.TOTAL LIABILITIES 24. 712
25.26.NET ASSETS 27. $ 1,144,164
28.Net Assets consist of (Note 1): 29. 30.
31.Paid in capital 32. $ 1,144,628
33.Accumulated net realized gain (loss) on investments 34. (464)
35.36.NET ASSETS, for 1,144,568 shares outstanding 37. $ 1,144,164
38.39.NET ASSET VALUE, offering price and redemption 40. $1.00
price per share ($1,144,164 (divided by) 1,144,568 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MARCH 31, 1994 (UNAUDITED)
41.42.INTEREST INCOME 43. $ 17,356
44.EXPENSES 45. 46.
47.Management fee (Note 4) $ 1,004 48.
49.Transfer agent fees (Note 4) 1,394 50.
51.Accounting fees and expenses (Note 4) 56 52.
53.Non-interested trustees' compensation 3 54.
55.Custodian fees and expenses 18 56.
57.Registration fees 99 58.
59.Audit 22
60.Miscellaneous 1 61.
62. 63.TOTAL EXPENSES 64. 2,597
65.66.NET INTEREST INCOME 67. 14,759
68.69.NET REALIZED GAIN (LOSS) ON INVESTMENTS 70. (28)
(NOTE 1)
71.72.NET INCREASE IN NET ASSETS RESULTING FROM 73. $ 14,731
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 1994 SEPTEMBER 30,
(UNAUDITED) 1993
74.INCREASE (DECREASE) IN NET ASSETS
75.Operations $ 14,759 $ 29,285
Net interest income
76. Net realized gain (loss) on investments (28) 20
77. 78.NET INCREASE (DECREASE) IN NET ASSETS 14,731 29,305
RESULTING
FROM OPERATIONS
79.Dividends to shareholders from net interest income (14,759) (29,285)
80.Share transactions at net asset value of $1.00 per 898,919 1,179,994
share
Proceeds from sales of shares
81. Reinvestment of dividends from net interest income 14,330 27,738
82. Cost of shares redeemed (812,447) (1,456,797)
83. Net increase (decrease) in net assets and shares 100,802 (249,065)
resulting from share transactions
84. 85.TOTAL INCREASE (DECREASE) IN NET ASSETS 100,774 (249,045)
86.NET ASSETS 87. 88.
89. Beginning of period 1,043,390 1,292,435
90. End of period $ 1,144,164 $ 1,043,390
</TABLE>
FINANCIAL HIGHLIGHTS
91. SIX MONTHS YEARS ENDED SEPTEMBER 30,
ENDED
MARCH 31,
1994
92. (UNAUDITED) 1993 1992 1991 1990 1989
93.SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
94.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of
period
95.Income from .014 .025 .039 .061 .076 .083
Investment
Operations
Net interest
income
96.Less Distributions (.014) (.025) (.039) (.061) (.076) (.083)
From net interest
income
97.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
98.TOTAL RETURN (dagger) 1.43% 2.57 3.95 6.29 7.86 8.66
% % % % %
99.RATIOS AND SUPPLEMENTAL DATA
100.Net assets, $ 1,144 $ 1,043 $ 1,292 $ 1,436 $ 1,581 $ 1,545
end of period
(in millions)
101.Ratio of .50%* .73 .73 .72 .74 .80
expenses to % % % % %
average net
assets
102.Ratio of net 2.82%* 2.57 3.88 6.13 7.66 8.29
interest income to % % % % %
average net assets
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity U.S. Government Reserves (the fund) is a fund of Fidelity Charles
Street Trust (the trust) and is authorized to issue an unlimited number of
shares. The trust 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. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October
1, 1993 the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the funds changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of September 30, 1993 have been reclassified to
reflect an increase in paid in capital and an increase in accumulated net
realized loss of $60,000.
2. OPERATING POLICIES.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund,
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
along with other registered investment companies having management
contracts with FMR, may transfer uninvested cash balances into a joint
trading account.
These balances are invested in one or more repurchase agreements that are
collateralized by U.S. Treasury or Federal Agency obligations.
3. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total investments
in repurchase agreements through a joint trading account. These repurchase
agreements were with entities whose creditworthiness has been reviewed and
found satisfactory by FMR. The repurchase agreements were dated 3/31/94 and
due 4/04/94. The maturity values of the joint trading account investments
were $750,000,000 at 3.70% and $1,100,000,000 at 3.74%. The investments in
repurchase agreements through the joint trading account are summarized as
follows:
SUMMARY OF JOINT TRADING ACCOUNT
AT 3.70% AT 3.74%
Number of Dealers or Banks 2 2
Maximum Amount With One Dealer or Bank $ 400,000,000 $ 600,000,000
Aggregate Principal Amount of Agreements 750,000,000 1,100,000,000
Aggregate Maturity Amount of Agreements 750,308,000 1,100,457,000
Aggregate Market Value of Collateral 770,916,000 1,126,818,000
Coupon Rates of Collateral 3.187-7% 3.175-10.5%
Maturity Dates of Collateral 4/1/08-5/1/25 1/1/01-9/1/23
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's
investment adviser, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates ranging from .15% to .37% and is based on the
monthly average net assets of all the mutual funds advised by FMR. The
annual individual fund fee rate is .28%.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .1325% to .3700%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee schedule as it results
in the same or a lower management fee.
Effective September 1, 1993, FMR has also agreed to voluntarily adopt a
revised management fee structure for the fund. The revised structure
provides for a lower individual fund fee rate of .03% and the addition of
an income component (6% of gross income in excess of a 5% yield, up to a
maximum of .24% of average net assets). These changes will provide for
lower management fees, and will be presented to shareholders for approval
at the next shareholder meeting.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
MANAGEMENT FEE - CONTINUED
For the period, the management
fee was equivalent to an annualized rate of .19% of average net assets.
SUB-ADVISER FEE. As the fund's investment sub-adviser, FMR Texas Inc., a
wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the
management fee payable to FMR. The fee is paid prior to any voluntary
expense reimbursements which may be in effect, and after reducing the fee
for any payments by FMR pursuant to the fund's Distribution and Service
Plan.
TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the
fund's transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEE. FSC maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
TO WRITE FIDELITY
Please locate the address that is closest to you. We'll give your
correspondence immediate attention and send you written confirmation upon
completion of your request. Please send ALL correspondence about retirement
accounts to Dallas.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 2269
Boston, MA 02107-2269
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30280
Salt Lake City, UT 84130-0280
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
Additional Payments
P.O. Box 2656
Boston, MA 02293-0656
Fidelity Investments
Additional Payments
P.O. Box 620024
Dallas, TX 75262-0024
Fidelity Investments
Additional Payments
P.O. Box 31455
Salt Lake City, UT 84131-0455
OVERNIGHT EXPRESS
Fidelity Investments
Additional Payments
World Trade Center
164 Northern Avenue
Boston, MA 02210
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02103-0878
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02101-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 620024
Dallas, TX 75262-0024
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
SUB-ADVISER
FMR Texas Inc.
Irving, TX
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Leland Barron, Vice President
Thomas D. Maher, Assistant
Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Morgan Guaranty Trust Co. of New York
New York, NY
FIDELITY'S TAXABLE
MONEY MARKET FUNDS
Fidelity Cash Reserves
Fidelity Daily Income Trust
Fidelity U.S. Government Reserves
Spartan(registered trademark) Money Market Fund
Spartan U.S. Government
Money Market Fund
Spartan U.S. Treasury
Money Market Fund
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
