FIDELITY
(Registered trademark)
U.S. GOVERNMENT RESERVES
ANNUAL REPORT
SEPTEMBER 30, 1993
CONTENTS
PERFORMANCE 3 How the fund has done over time.
FUND TALK 5 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 7 A summary of major shifts in the
fund's investments over the last six
months and one year.
INVESTMENTS 8 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 11 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 15 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 18 The auditor's opinion.
ACCOUNTANTS
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.
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
YEARS ENDED SEPTEMBER 30, 1993 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity U.S. Government Reserves 2.57% 32.83% 90.41%
Consumer Price Index 2.69% 21.12% 44.09%
Average Government Money Market Fund 2.62% 32.34% 87.53%
CUMULATIVE TOTAL RETURNS reflect actual performance over a specific period.
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 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 over 190
government money market funds tracked by IBC/Donoghue's MONEY FUND
REPORT.(Registered trademark) (The periods covered by the IBC/Donoghue
numbers are the closest available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED SEPTEMBER 30, 1993 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity U.S. Government Reserves 2.57% 5.84% 6.65%
Consumer Price Index 2.69% 3.91% 3.72%
Average Government Money Market Fund 2.62% 5.77% 6.49%
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
9/30/92 12/31/92 3/31/93 6/30/93 9/30/93
Fidelity U.S. Government Reserves 2.87% 2.69% 2.49% 2.46% 2.89%
Average Government
Money Market Fund 2.85% 2.68% 2.56% 2.53% 2.54%
MMDA 2.83% 2.72% 2.58% 2.47% 2.38%
Row: 1, Col: 1, Value: 2.87
Row: 1, Col: 2, Value: 2.85
Row: 1, Col: 3, Value: 2.83
Row: 2, Col: 1, Value: 2.69
Row: 2, Col: 2, Value: 2.68
Row: 2, Col: 3, Value: 2.72
Row: 3, Col: 1, Value: 2.49
Row: 3, Col: 2, Value: 2.56
Row: 3, Col: 3, Value: 2.58
Row: 4, Col: 1, Value: 2.46
Row: 4, Col: 2, Value: 2.53
Row: 4, Col: 3, Value: 2.47
Row: 5, Col: 1, Value: 2.89
Row: 5, Col: 2, Value: 2.54
Row: 5, Col: 3, Value: 2.38
3% -
2% -
1% -
0%
Fidelity
U.S. Government
Reserves
Average Governmen
t
Money Market
Fund
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 charts above show the fund's
current seven-day yield at quarterly intervals over the past year. This is
compared to similar yields for the average government money market fund and
the average bank money market deposit account (MMDA). Figures for the
average government money market fund are from the IBC/Donoghue's MONEY FUND
REPORT.(Registered trademark) The MMDA average is supplied by BANK RATE
MONITOR.(double dagger) (Both figures are those available closest to month
end.)
A MONEY MARKET FUND'S TOTAL RETURNS AND YIELDS REFLECT PAST RESULTS RATHER
THAN PREDICTING FUTURE PERFORMANCE.
COMPARING
PERFORMANCE
(checkmark)
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 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.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Leland Barron,
Portfolio Manager of Fidelity U.S. Government Reserves
Q. LOOKING BACK TO SEPTEMBER
1992, WHAT HAS BEEN THE TREND IN
INTEREST RATES?
A. We saw slight moves both up and down. A year ago, interest rates hit a
20-year low after falling six percentage points during the preceding three
years. Between October and December 1992 short-term interest rates climbed
3/4 of 1%. That was in part because many economic indicators pointed to a
stronger-than-expected recovery, and investors feared a rise in inflation.
In early 1993 the market accepted that the economic recovery was sluggish
and that President Clinton was serious about reducing the budget deficit.
Rates started to fall again, and remained steady during most of the spring.
Between May and June short-term rates rose about 1/3 of 1% based on the
market's renewed inflation fears. This inflation scare subsided a bit in
July, when gold, commodity and consumer prices moderated somewhat. In
response, short-term rates dropped about 1/4 of 1%. Recently the Fed
indicated that they have adopted a neutral approach regarding monetary
policy, which means they don't have a bias towards either raising or
lowering interest rates at the present time.
Q. HOW DID YOU ALTER YOUR STRATEGY TO KEEP UP WITH THESE RAPID MOVES?
A. Last September, I began lengthening the fund's average maturity to as
far out as 85 days, a move that was fairly aggressive. Interest rates were
falling,
and I wanted to lock in attractive rates for as long as possible. After
October, I began shortening the fund's maturity again as interest rates
rose slightly. By year-end, the maturity had dropped to 46 days and
remained in that general area during the first quarter of 1993. Through the
second quarter I extended the maturity to between 60 to 70 days.
I didn't expect the Fed to raise rates
immediately, and I wanted to take advantage of the rise in interest rates
in May and June. As rates declined during the last several months I've kept
the maturity at about 64 days.
Q. WHAT WERE THE RESULTS?
A. The fund's seven-day yield as of September 30, 1993 was 2.89%, compared
to 2.49% at the end of March and 2.87% at the end of September 1992. The
fund's total return for the year ended September 30, 1993 was 2.57%. During
the same period, the average government money market fund had a total
return of 2.62%, according to IBC/Donoghue. I wasn't as aggressive with the
fund's maturity as I could have been because I believed the economy would
improve faster than it did, and so, rates would rise more than they did. In
hindsight, I missed an opportunity to extend the fund's maturity sooner.
Q. WHAT'S YOUR OUTLOOK?
A. I'm interpreting what Fed officials are currently saying as a sign that
they don't see any real economic benefit from lowering short-term rates. On
the other hand, there seems to be no real reason to raise rates either.
Inflationary pressures -- increases in consumer prices, producer prices and
wages -- are mild right now and the economy has been growing at only 2 to 2
1/2 percent annually. I see the Fed holding short-term rates steady over
the next six months. So, I'll probably keep a neutral to aggressive
strategy, with the average maturity of the fund somewhere in the 65-80 day
range. Unless conditions drastically change, I probably won't go lower than
the 50s.
FUND FACTS
GOAL: income and stability
by investing in high quality,
short-term investments
START DATE: November 3,
1981
SIZE: as of September 30,
1993, over $1 billion
MANAGER: Leland Barron,
since July 1991; manager,
Spartan U.S. Government
Money Market Fund, since
July 1991, and 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
9/30/93 3/31/93 9/30/92
0 - 30 60.0 59.6 36.6
31 - 90 7.6 14.0 15.6
91 - 180 16.6 25.5 40.3
181 - 397 15.8 0.9 7.5
WEIGHTED AVERAGE MATURITY
9/30/93 3/31/93 9/30/92
Fidelity U.S. Government
Reserves 64 days 46 days 85 days
Average Government Money
Market Fund* 59 days 56 days 60 days
ASSET ALLOCATION
AS OF 9/30/93 AS OF 3/31/93
Row: 1, Col: 1, Value: 30.9
Row: 1, Col: 2, Value: 17.5
Row: 1, Col: 3, Value: 51.6
Row: 1, Col: 4, Value: nil
Row: 1, Col: 1, Value: 28.4
Row: 1, Col: 2, Value: 26.8
Row: 1, Col: 3, Value: 44.8
Row: 1, Col: 4, Value: nil
Federal agency
issues 30.9%
U.S. Treasury
obligations 17.5%
Repurchase
agreements 51.6%
Federal agency
issues 28.4%
U.S. Treasury
obligations 26.8%
Repurchase
agreements 44.8%
* SOURCE: IBC/DONOGHUE'S MONEY FUND REPORT(registered trademark)/GOVERNMENT
INVESTMENTS SEPTEMBER 30, 1993
Showing Percentage of Total Value of Investments
FEDERAL AGENCIES - 30.9%
DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1)
DATE TIME OF PURCHASE (000S) (000S)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 4.1%
10/1/93 3.21% $ 18,500 $ 18,500 313993HX
10/3/94 3.43 25,000 25,003 313993JR
43,503
FEDERAL HOME LOAN BANK - AGENCY COUPONS - 2.9%
4/25/94 3.23 15,000 15,326 567995BM
4/25/94 3.33 15,000 15,505 567995AS
30,831
FEDERAL HOME LOAN BANK - DISCOUNT NOTES - 2.4%
1/19/94 3.19 15,000 14,856 567995BH
4/22/94 3.28 11,000 10,803 3133899B
25,659
FEDERAL HOME LOAN MORTGAGE CORP. - DISCOUNT NOTES - 1.6%
1/19/94 3.19 1,000 990 355993CG
1/20/94 3.15 16,000 15,846 355993FG
16,836
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 13.5%
11/23/93 3.20 22,000 21,898 31364T9B
11/24/93 3.20 20,000 19,906 31364T9F
12/6/93 3.24 13,000 12,924 31365B9Q
12/31/93 3.29 15,000 14,877 31365D9M
2/28/94 3.22 75,000 74,009 31365R9S
143,614
STUDENT LOAN MARKETING ASSOCIATION - AGENCY COUPONS - 6.4% (A)
10/5/93 3.28 30,000 30,000 863990PS
10/5/93 3.56 15,000 15,091 82399CAU
7/1/94 3.74 23,600 23,600 82399CAU
68,691
TOTAL FEDERAL AGENCIES 329,134
U.S. TREASURY OBLIGATIONS - 17.5%
DUE ANNUALIZED YIELD AT PRINCIPAL AMOUNT VALUE (NOTE 1)
DATE TIME OF PURCHASE (000S) (000S)
U.S. TREASURY BILLS
10/21/93 3.27% $ 10,000 $ 9,982 9949989A
11/18/93 3.16 25,000 24,896 99399HPP
1/20/94 3.25 25,000 24,753 99399HVB
2/3/94 3.30 28,000 27,684 99399HWL
4/7/94 3.35 12,000 11,797 99399HLF
5/5/94 3.30 12,000 11,770 99399HPC
5/5/94 3.35 28,000 27,456 99399HPL
6/2/94 3.47 10,000 9,773 99399HRU
6/30/94 3.30 39,000 38,057 99399HTS
TOTAL U.S. TREASURY OBLIGATIONS 186,168
REPURCHASE AGREEMENTS - 51.6%
MATURITY AMOUNT
(000S)
With Credit Lyonnais:
At 3.5%, dated 9/30/93 due 10/1/93:
U.S. Treasury Obligations
(principal amount $145,720,000)
4.25% to 9.5%, 5/15/94 to 5/31/98 $ 150,014 150,000
227993LQWith First Boston Corporation:
At 3.15%, dated 9/08/93 due 10/8/93:
U.S. Government Obligations
(principal amount $72,716,873)
3.65% to 9.5%, 7/01/98 to 7/01/23 51,635 51,500
310992BDIn a joint trading account
(U.S. Treasury Obligations)
dated 9/30/93, due 10/1/93
(Note 2)
At 3.40% 1,255 1,255
99799L7EAt 3.53% 347,109 347,075 99799L7C
TOTAL REPURCHASE AGREEMENTS 549,830
TOTAL INVESTMENTS - 100% $ 1,065,132
Total Cost for Income Tax Purposes $ 1,065,132
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) SEPTEMBER 30, 1993
1.ASSETS 2. 3.
4.Investment in securities, at value (including repurchas 5. $ 1,065,132
e
agreements of $549,830) (Notes 1 and 2) -
See accompanying schedule
6.Cash 7. 2,186
8.Interest receivable 9. 1,814
10. TOTAL ASSETS 11. 1,069,132
12.LIABILITIES 13. 14.
15.Payable for investments purchased $ 25,003 16.
17.Dividends payable 139 18.
19.Accrued management fee 166 20.
21.Other payables and accrued expenses 434 22.
23. TOTAL LIABILITIES 24. 25,742
25.26.NET ASSETS 27. $ 1,043,390
28.Net Assets consist of: 29. 30.
31.Paid in capital 32. $ 1,043,766
33.Accumulated net realized gain (loss) on investments 34. (376)
35.36.NET ASSETS, for 1,043,766 shares outstanding 37. $ 1,043,390
38.39.NET ASSET VALUE, offering price and redemption p 40. $1.00
rice per
share ($1,043,390 (divided by) 1,043,766 shares)
</TABLE>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED SEPTEMBER 30, 1993
41.INTEREST INCOME 42. $ 37,573
43.EXPENSES 44. 45.
46.Management fee (Note 4) $ 4,887 47.
48.Transfer agent fees (Note 4) 2,955 49.
50.Accounting fees and expenses (Note 4) 136 51.
52.Non-interested trustees' compensation 7 53.
54.Custodian fees and expenses 65 55.
56.Registration fees 94 57.
58.Audit 30 59.
60.Legal 27 61.
62.Miscellaneous 87 63.
64. TOTAL EXPENSES 65. 8,288
66.NET INTEREST INCOME 67. 29,285
68.NET REALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 1) 69. 20
70.NET INCREASE IN NET ASSETS RESULTING FROM OPERATIO 71. $ 29,305
NS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEARS ENDED SEPTEMBER 30,
72.INCREASE (DECREASE) IN NET ASSETS 1993 1992
73.Operations $ 29,285 $ 51,665
Net interest income
74. Net realized gain (loss) on investments 20 23
75. NET INCREASE (DECREASE) IN NET ASSETS RESULTING 29,305 51,688
FROM OPERATIONS
76.Dividends to shareholders from net interest income (29,285) (51,665)
77.Share transactions at net asset value of $1.00 per share 1,179,994 1,539,954
Proceeds from sales of shares
78. Reinvestment of dividends from net interest income 27,738 49,475
79. Cost of shares redeemed (1,456,797) (1,732,610)
80. Net increase (decrease) in net assets resulting from (249,065) (143,181)
share transactions
81. TOTAL INCREASE (DECREASE) IN NET ASSETS (249,045) (143,158)
82.NET ASSETS 83. 84.
85. Beginning of period 1,292,435 1,435,593
86. End of period $ 1,043,390 $ 1,292,435
</TABLE>
FINANCIAL HIGHLIGHTS
87. YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
88. 1993 1992 1991 1990 1989
89.SELECTED PER-SHARE DATA
90.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
beginning of period
91.Income from Investme .025 .039 .061 .076 .083
nt
Operations
Net interest income
92. Dividends from net (.025) (.039) (.061) (.076) (.083)
interest income
93.Net asset value, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
end of period
94.TOTAL RETURN 2.57% 3.95% 6.29% 7.86% 8.66%
95.RATIOS AND SUPPLEMENTAL DATA
96.Net assets, end of $ 1,043 $ 1,292 $ 1,436 $ 1,581 $ 1,545
period (in millions)
97.Ratio of expenses to .73% .73% .72% .74% .80%
average net assets
98.Ratio of net interest 2.57% 3.88% 6.13% 7.66% 8.29%
income to average
net assets
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended September 30, 1993
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 THE COST OF INVESTMENTS. Effective October 1,
1992, the fund changed its method of accounting for the cost of investments
from the average cost method to the specific identification method. The new
method of accounting for the cost of investments was adopted because it
better matches specific costs with proceeds from sales of securities and
more closely conforms realized gains with related distributions. The change
in accounting had no effect on the fund's net assets, net asset value per
share, its net increase (decrease) in net assets resulting from operations
or its distributions. The change in accounting also had no effect on net
accumulated realized gain on investments and net unrealized depreciation in
value of investment securities previously reported through September 30,
1992.
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, along with other registered
investment
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 9/30/93 and
due 10/01/93. The maturity values of the joint trading account investments
were $1,255,000 at 3.40% and $347,109,000 at 3.53%. The investments in
repurchase agreements through the joint trading account
are summarized as follows:
SUMMARY OF JOINT TRADING ACCOUNT
AT 3.40% AT 3.53%
Number of Dealers or Banks 20 4
Maximum Amount With One Dealer or Bank $ 1,844,889,000 $ 2,750,000,000
Aggregate Principal Amount of Agreements 10,083,337,000 4,450,000,000
Aggregate Maturity Amount of Agreements 10,084,291,000 4,450,436,000
Aggregate Market Value of Collateral 10,297,360,000 4,585,007,000
Coupon Rates of Collateral 3.326%-14.25% 3.236%-11.5%
Maturity Dates of Collateral 11/4/93-11/15/22 1/15/98-11/1/27
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%. For the period, the management
fee was equivalent to an annualized rate of .43% of average net assets.
On December 12, 1991, the Board of
Trustees approved a new group fee rate schedule with rates ranging from
.14% to .37%; effective January 1, 1992, FMR has voluntarily agreed to
implement this new group fee rate schedule. Effective September 1, 1993,
FMR has 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
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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
Fidelity U.S. Government Reserves:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity U.S. Government Reserves at September 30, 1993, and the results of
its operations for the year then ended, the changes in its net assets for
each of the two years then ended, and its financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities owned at September 30, 1993 by
correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE
Dallas, Texas
October 22, 1993
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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. FOR MORE
INFORMATION ON ANY
FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888
FOR A FREE
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
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 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 1-800-544-0111
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
** AUTOMATED LINES FOR QUICKEST SERVICE
