(2_FIDELITY_LOGOS)FIDELITY
SHORT-INTERMEDIATE
GOVERNMENT
FUND
SEMIANNUAL REPORT
MARCH 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on bond market
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 last six
months.
INVESTMENTS 11 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:
The past few months have been an unsettling time for bond investors. The
bond market declined after the Federal Reserve Board raised short-term
interest rates in February and March. These rate hikes caused bond yields
to rise and bond prices to fall. While nobody knows whether rates will
continue to go up, this may be a good time to review the effect rising
rates have on your bond fund investment, and consider how well your current
bond fund holdings match your original investment goals.
Most investors choose bond funds to generate income and to help diversify
their investment portfolios. Despite the recent market downturn, bond
mutual funds still satisfy these needs. Where investors have felt the
negative effect of rising rates is in the market value of their investment,
which has eroded as bond prices have fallen. It's important to remember,
however, that this loss in principal is only "on paper" until you choose to
sell your shares. That's why your investing time horizon is key.
If your time horizon is short - one year or less - you may want to consider
shifting all or part of your bond fund investment into a money market fund.
If you can't keep your investment in the bond fund until yields start
falling again and bond prices rise, you increase your risk of not recouping
the full value of the shares. A money market fund provides a stable $1
share price and a yield that becomes more attractive as rates go up.
If you don't need your money within the next year, staying in your bond
fund may be the appropriate strategy for you. The longer your investing
time frame, the better your chances of retaining your principal investment
through periods of rising AND falling rates. For example, if you plan to
use your money in one to two years, a short-term bond fund may be the right
choice. If your time frame is two to four years, a fund with an
intermediate length average maturity may be best. If you have a longer-term
goal - say a child's college education that's ten years away - you may be
willing to ride out the bond market's peaks and valleys in exchange for the
higher potential returns of a longer-term fund.
If you have questions, please call us at 1-800-544-8888. We would be happy
to send you a Fidelity FundMatch kit, which can help you determine the mix
of investments that is right for you. You might also find it convenient to
set up a regular investment plan using the Fidelity Automatic Account
Builder.
We look forward to hearing from you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MARCH 31, 1994 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Short-Intermediate Government -1.44% 0.70% 12.61%
Lehman Brothers 1-3 Year Government
Bond Index 0.14% 2.65% n/a
Average Short U.S. Government -0.90% 1.90% n/a
Fund
Consumer Price Index 1.45% 2.51% 7.76%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, or since the fund
started on September 13, 1991. 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.
You can compare these figures to the Lehman Brothers 1-3 Year Government
Bond Index - a broad measure of the performance of short-term government
bonds. To measure how the fund stacked up against its peers, you can also
look at the average short U.S. government fund, which reflects the
performance of 107 funds tracked by Lipper Analytical Services. These
benchmarks include reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index helps show how
your fund did compared to inflation. (The periods covered by the CPI
numbers are the closest available match to those covered by the fund).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 1994 PAST 1 LIFE OF
YEAR FUND
Short-Intermediate Government 0.70% 4.77%
Lehman Brothers 1-3 Year Government
Bond Index 2.65% n/a
Average Short U.S. Government Fund 1.90% n/a
Consumer Price Index 2.51% 2.93%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
09/30/91 10000.00 10000.00
10/31/91 10124.47 10108.00
11/30/91 10206.40 10212.11
12/31/91 10363.11 10367.34
01/31/92 10270.74 10353.86
02/29/92 10301.42 10384.92
03/31/92 10286.47 10381.81
04/30/92 10374.48 10476.28
05/31/92 10511.20 10573.71
06/30/92 10602.20 10680.50
07/31/92 10620.67 10803.33
08/31/92 10766.62 10890.84
09/30/92 10813.26 10993.21
10/31/92 10714.26 10930.55
11/30/92 10721.94 10914.15
12/31/92 10851.34 11015.65
01/31/93 11000.35 11131.32
02/28/93 11099.60 11220.37
03/31/93 11141.24 11255.15
04/30/93 11190.06 11323.81
05/31/93 11193.01 11296.63
06/30/93 11276.44 11381.36
07/31/93 11314.33 11406.40
08/31/93 11364.69 11501.07
09/30/93 11382.59 11537.87
10/31/93 11391.71 11563.26
11/30/93 11374.06 11565.57
12/31/93 11424.52 11611.83
01/31/94 11516.84 11683.82
02/28/94 11419.43 11612.55
03/31/94 11230.72 11553.33
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Short-Intermediate Government Fund on September 30, 1991, shortly after the
fund started. As the chart shows, by March 31, 1994, the value of your
investment, with dividends reinvested would have grown to $11,219 - a
12.19% increase on your initial investment. For comparison, look at how the
Lehman Brothers 1-3 Year Government Bond Index did over the same period.
With dividends reinvested, the same $10,000 investment would have grown to
$11,553 - a 15.53% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, 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)
INCOME
SIX MONTHS
ENDED
MARCH 31, YEARS ENDED SEPTEMBER
30,
1994 1993 1992
Income return 2.68% 6.34% 6.73%
Capital gain return 0.00% 0.70% 0.10%
Change in share price -4.12% -1.78% 1.30%
Total return -1.44% 5.26% 8.13%
INCOME returns, capital gain returns, and changes in share price are all
part of a bond fund's total return. An income return reflects the dividends
paid by the fund. A capital gain return reflects the amount paid by the
fund to shareholders based on the profits it has from selling bonds that
have grown in value. Both returns assume the dividends or gains are
reinvested. Changes in the fund's share price include changes in the prices
of the bonds owned by the fund.
DIVIDENDS AND YIELD
PERIODS ENDED MARCH 31, 1994 PAST 30 PAST 6 PAST 1
DAYS MONTHS YEAR
Dividends per share n/a 27.08(cents) 55.55(cents)
Annualized dividend rate n/a 5.52% 5.60%
Annualized yield 4.58% n/a n/a
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 $9.84 over
the past six months and $9.92 over the past year, you can compare the
fund's income over these two periods. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Curt Hollingsworth, Portfolio Manager of Short-
Intermediate Government Fund
Q. CURT, HOW DID THE FUND PERFORM?
A. Not as well as I would have liked. The best way to measure the fund's
performance is by its total return. This reflects interest payments, plus
capital gains - which occur when the fund profits from selling bonds that
have grown in value - and changes in share price. For the six months and
year ended March 31, 1994, the fund had total returns of -1.44% and 0.70%.
According to Lipper Analytical Services, the average short-term government
bond fund had returns of -0.90% and 1.90% respectively.
Q. IT SOUNDS LIKE THE BOND MARKET HAD AN ESPECIALLY WEAK SIX MONTHS FOR THE
PERIOD ENDED MARCH 31. WHAT HAPPENED?
A. Bond prices fell during this time for several reasons. First, the
economy started growing more quickly and commodity prices began rising.
This situation was bad news for bond investors because the improving
economy increased concerns about inflation - which eats away at a bond's
fixed interest payment. Another reason bond prices dropped was that the
Federal Reserve Board raised short-term interest rates in February and
March of 1994. In response, yields on intermediate and long-term Treasuries
also rose. During the past six months of the period, the yield on the
five-year Treasury note increased from 4.8% to 6.2%. Keep in mind that bond
yields and prices move in opposite directions. So the rise in yields meant
the prices of bonds would fall.
Q. WHY DID THE DOWNTURN HURT THE FUND MORE THAN SOME OF ITS COMPETITORS?
A. The fund's share price fell more than that of similar funds during the
year because it had a longer duration than most of those funds. Duration is
a way to measure how sensitive a bond is to changes in interest rates. It
looks at a bond's maturity, or how much time remains until the issuer is
scheduled to pay off the principal, as well as the frequency and amount of
interest payments. The longer the average duration of the fund, the more
its share price will move up as rates fall, or down as rates rise. For
example, if the fund had a duration of 2.5 years and interest rates rose
1%, its share price would fall roughly 2.5%. Conversely, if interest rates
fell 1%, its share price would rise about 2.5%. While having a longer
duration than similar funds over the past six months resulted in lower
performance, I believe that keeping the fund's duration fairly long will
pay off if interest rates turn around and the market improves.
Q. AS YOU JUST NOTED, THE FED HAS HIKED INTEREST RATES OVER THE LAST FEW
MONTHS. HAS THIS AFFECTED PREPAYMENT RISK?
A. Yes. As of the end of the period, there was less prepayment risk - the
risk that homeowners will refinance their existing mortgages at lower
interest rates. The general rule is that as interest rates go up,
prepayment risk goes down. That's because higher inflation rates make
refinancing a house less attractive. In the past, I invested in older
mortgages or brand new mortgages - what I called my barbell strategy -
because people who held new or old mortgages were less likely to refinance
their homes. Now because there's less prepayment risk, the fund is invested
in mortgages of all maturities.
Q. DID YOU CHANGE THE FUND'S STRATEGY IN LIGHT OF WHAT WAS HAPPENING IN THE
BOND MARKET?
A. No, the fund's overall strategy remains the same. The fund is still
using duration averaging - a disciplined approach to managing the fund's
duration. Using this strategy, I lengthen the average maturity and duration
of the fund after interest rates rise, causing the fund to become more
aggressively positioned after bond prices fall. Conversely, I invest in
bonds with shorter maturities after interest rates fall, causing the fund
to become more defensively positioned after bond prices rise. This
strategy, which is contrary to that of many other bond funds, hopefully
will help the fund outperform most of its competitors over the long haul.
That said, I have made some changes to the way the fund uses duration
averaging.
Q. HOW DID YOU CHANGE DURATION AVERAGING?
A. I'm now using a more disciplined approach to forecast the average yield
of the 30-year Treasury bond. Essentially, I compare bond yields available
today with average bond yields over the past 40 years. This new approach
looks at both nominal yields and real yields. Nominal yields are the yields
to maturity you see quoted in the newspaper. Real yields are simply these
yields minus the inflation rate. For example, at the end of the period on
March 31, 1994, five-year Treasury notes yielded 6.2%, and consumer prices
rose 2.5% over the previous 12 months. This gave us a real yield of 3.7%.
How do these yields compare with yields over the past 40 years? The average
nominal yield was 6.20%, and 53% of the time it was lower than today's
yield of 6.2%. The average real yield was 2.4%, and 71% of the time real
yields were lower than today's real yield of 3.7%. So, when compared to
historical averages, today's nominal yields are modestly attractive, and
today's real yields are very attractive. As a result, the fund's duration
is now 2.7 years, longer than its neutral duration of 2.5 years, but
shorter than its target maximum duration of three years.
Q. THINKING BACK OVER THE PAST SIX MONTHS, WOULD YOU CHANGE SOME OF YOUR
INVESTMENT DECISIONS?
A. Yes. I would have made the average duration of the fund shorter when
interest rates reached their low point of the year on October 15, 1993.
That way the fund would have been able to respond better to the rise in
interest rates after that date.
Q. HOW DOES THE FUND LOOK GOING FORWARD?
A. Forecasting interest rates is extraordinarily difficult. However, I'm
feeling fairly optimistic because I think that inflation will remain under
control. Over the long haul, inflation is the single most important
variable affecting bond market performance.
FUND FACTS
GOAL: high current income
with preservation of capital
START DATE: September 13,
1991
SIZE: as of March 31, 1994,
about $142 million
MANAGER: Curt
Hollingsworth, since
September 1991; also
manages Fidelity Advisor
Government Investment,
Fidelity Government
Securities, Spartan Limited
Maturity Government,
Spartan Long-Term
Government Bond, and
Spartan Short-Intermediate
Government Funds
(checkmark)
CURT HOLLINGSWORTH ON THE
CURRENT BOND MARKET:
"Bond prices fell considerably
over the six months ended
March 31, 1994. Because
yields had risen and prices
had fallen, the end of the
period was an ideal time to
buy bonds, not to sell them.
Shareholders also should
remember that most of the
average total return for bonds
over the long term comes
from income - which is
higher when yields are higher
- - - not from capital gains. As a
general rule, this fund invests
for the long term and is not
dramatically affected by the
ups and downs of the bond
market."
(bullet) As of March 31, 1994, the
fund held 47.1% of its assets
in Ginnie Maes. The rest was
invested in U.S. Treasuries.
(bullet) The fund's share price
fluctuated between $9.55 and
$9.96 from September 30,
1993, to March 31, 1994.
(bullet) At the end of the period,
the fund's duration was 2.7
years. That means that if
interest rates fell 1
percentage point, the fund's
share price - $9.55 on March
31 - would rise roughly 2.7%
to about $9.81. If rates rose 1
percentage point, however,
the fund's share price would
fall about 2.7% to about
$9.29.
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF MARCH 31, 1994
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
6 - 6.99% 0.3 -
7 - 7.99% 14.1 10.6
8 - 8.99% 10.4 48.5
9 - 9.99% 57.4 24.8
10 - 10.99% 4.8 11.3
11% and over 5.0 4.8
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF MARCH 31, 1994
6 MONTHS AGO
Years 3.5 4.3
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF MARCH 31, 1994
6 MONTHS AGO
Years 2.7 2.0
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL
LOSE ABOUT 5% OF ITS VALUE.
ASSET ALLOCATION
AS OF MARCH 31, 1994 AS OF SEPTEMBER 30, 1993
Row: 1, Col: 1, Value: 8.0
Row: 1, Col: 2, Value: 47.1
Row: 1, Col: 3, Value: 44.9
U.S. Treasury
obligations 59.4%
Government
National Mortgage
Association
(GNMA)
securities 40.6%
Short-term
investments -
U.S. Treasury
obligations 44.9%
Government
National Mortgage
Association
(GNMA)
securities 47.1%
Short-term
investments 8.0%
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 40.6
Row: 1, Col: 3, Value: 59.4
INVESTMENTS MARCH 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
U.S. TREASURY OBLIGATIONS - 44.9%
PRINCIPAL VALUE (NOTE 1)
AMOUNT
9 1/4%, 1/15/96 $37,500,000 $ 23,371,615 912827XB
9 1/4%, 8/15/98 20,920,000 40,095,750 912827XB
TOTAL U.S. TREASURY OBLIGATIONS (Cost $66,028,244) 63,467,365
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 47.1%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
6 1/2%, 12/15/23 503,567 463,121 36223VC6
7%, 9/15/22 to 10/15/23 12,430,697 11,838,120 36223VVC
7 1/2%, 3/15/22 to 10/15/23 8,189,071 8,048,308 36223WCH
8%, 5/15/16 to 2/15/23 9,210,366 9,314,511 36223WPD
8 1/2%, 1/15/17 to 2/15/23 5,293,704 5,472,306 36223WZC
9%, 11/15/21 to 9/15/22 10,141,425 10,632,597 36223WZN
9 1/2%, 8/15/21 to 5/15/22 6,554,188 6,959,697 36223XCX
10%, 11/15/09 to 7/15/21 5,225,988 5,688,241 36223XND
10 1/2%, 2/15/16 to 12/15/20 1,018,180 1,140,363 36223XRL
11%, 12/15/09 to 1/15/16 354,490 404,004 36223XXM
12 1/2%, 4/15/10 to 10/15/15 5,416,058 6,332,776 36223X3Y
13%, 9/15/14 225,056 265,701 36224ACP
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE-
BACKED SECURITIES (Cost $68,913,896) 66,559,745
REPURCHASE AGREEMENTS - 8.0%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 3.58% dated
3/31/94 due 4/4/94 $ 11,243,471 11,239,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $146,181,140) $ 141,266,110
INCOME TAX INFORMATION
At March 31, 1994, the aggregate cost of investment securities for income
tax purposes was $146,181,142. Net unrealized depreciation aggregated
$4,915,032, of which $76,260 related to appreciated investment securities
and $4,991,292 related to depreciated investment securities.
At September 30, 1993, the fund had a capital loss carryforward of
approximately $303,000 which will expire on September 30, 2001.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 141,266,110
agreements of $11,239,000) (cost $146,181,140)
(Notes 1 and 2) - See accompanying schedule
Cash 677
Receivable for fund shares sold 167,319
Interest receivable 1,406,851
TOTAL ASSETS 142,840,957
LIABILITIES
Payable for investments purchased $ 30,407
Dividends payable 108,364
Accrued management fee 57,084
Other payables and accrued expenses 75,785
TOTAL LIABILITIES 271,640
NET ASSETS $ 142,569,317
Net Assets consist of (Note 1):
Paid in capital $ 151,431,955
Undistributed net investment income 688,959
Accumulated undistributed net realized gain (loss) on (4,636,567)
investments
Net unrealized appreciation (depreciation) on investment (4,915,030)
securities
NET ASSETS, for 14,929,327 shares outstanding $ 142,569,317
NET ASSET VALUE, offering price and redemption price per $9.55
share ($142,569,317 (divided by) 14,929,327 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MARCH 31, 1994 (UNAUDITED)
INVESTMENT INCOME $ 6,105,032
Interest
EXPENSES
Management fee (Note 4) $ 360,550
Transfer agent fees (Note 4) 231,927
Accounting fees and expenses (Note 4) 36,637
Non-interested trustees' compensation 498
Custodian fees and expenses 35,736
Registration fees 33,292
Audit 17,239
Legal 1,137
Interest (Note 5) 3,313
Miscellaneous 1,842
TOTAL EXPENSES 722,171
NET INVESTMENT INCOME 5,382,861
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (2,873,375)
(NOTES 1 AND 3)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (4,595,000)
investment securities
NET GAIN (LOSS) (7,468,375)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ (2,085,514)
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
1994 1993
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 5,382,861 $ 12,052,081
Net investment income
Net realized gain (loss) on investments (2,873,375) (3,529,055)
Change in net unrealized appreciation (depreciation) (4,595,000) (80,251)
on
investments
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (2,085,514) 8,442,775
FROM OPERATIONS
Distributions to shareholders (4,296,755) (10,384,430)
From net investment income
From net realized gain - (1,041,753)
TOTAL DISTRIBUTIONS (4,296,755) (11,426,183)
Share transactions 59,470,714 163,545,822
Net proceeds from sales of shares
Reinvestment of distributions from: 3,658,678 8,988,221
Net investment income
Net realized gain - 956,564
Cost of shares redeemed (82,469,751) (175,078,369)
Net increase (decrease) in net assets resulting from (19,340,359) (1,587,762)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (25,722,628) (4,571,170)
NET ASSETS
Beginning of period 168,291,945 172,863,115
End of period (including undistributed net investment $ 142,569,317 $ 168,291,945
income of $688,959 and $2,415,218,
respectively)
OTHER INFORMATION
Shares
Sold 6,061,104 16,349,116
Issued in reinvestment of distributions from: 372,977 899,578
Net investment income
Net realized gain - 96,720
Redeemed (8,405,844) (17,496,431)
Net increase (decrease) (1,971,763) (151,017)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED SEPTEMBER SEPTEMBER 13,
ENDED 30, 1991
MARCH 31, 1994 (COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30,
(UNAUDITED) 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.960 $ 10.140 $ 10.010 $ 10.000
period
Income from Investment .340 .722 .694 .027
Operations
Net investment income
Net realized and unrealized (.479) (.209) .096 .010
gain (loss) on
investments
Total from investment (.139) .513 .790 .037
operations
Less Distributions (.271) (.623) (.650) (.027)
From net investment
income
From net realized gain on - (.070) (.010) -
investments
Total distributions (.271) (.693) (.660) (.027)
Net asset value, end of $ 9.550 $ 9.960 $ 10.140 $ 10.010
period
TOTAL RETURN(dagger) (double dagger) (1.44)% 5.26% 8.13% .37%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 142,569 $ 168,292 $ 172,863 $ 1,339
(000 omitted)
Ratio of expenses to average .93% .61% .28% .65%*
net assets *
Ratio of expenses to average .93% .90% 1.29% 2.50%*
net assets before expense *
reductions
Ratio of net investment 6.91% 7.19% 7.91% 5.67%*
income to average net *
assets
Portfolio turnover rate 226% 348% 419% -
*
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
(double dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended March 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Short-Intermediate Government Fund (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. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities for which market quotations are not readily available are valued
at their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes 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 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. 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 are primarily due to differing treatments for
paydown gains/losses on certain securities 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 may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining to be distributed at fiscal year end is paid 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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 fund 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 of $820, a decrease in undistributed
net investment income of $2,812,365 and a decrease in accumulated net
realized loss on investments of $2,811,545.
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 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. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $171,604,190 and $202,373,916, respectively.
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
.14% 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 .30%.
For the period, the management fee was equivalent to an annualized rate of
.46% of average net assets.
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 rate schedule as it
results in the same or a lower management fee.
4. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, FMR or
the fund's distributor, Fidelity Distributors Corporation (FDC), an
affiliate of FMR, may use their resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $19,696 for the
period.
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.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $2,554,000 and $2,067,875,
respectively. The weighted average interest rate was 3.6%.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(Registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. 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
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Curtis Hollingsworth, 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
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income Fund
Ginnie Mae Portfolio
Global Bond Fund
Government Securities Fund
Intermediate Bond Fund
Investment Grade Bond Fund
Mortgage Securities Portfolio
New Markets Income Fund
Short-Intermediate Government Fund
Short-Term Bond Portfolio
Short-Term World Income Fund
Spartan Ginnie Mae Portfolio
Spartan Government Income Fund
Spartan High Income Fund
Spartan Investment Grade Bond Fund
Spartan Limited Maturity Government
Fund
Spartan Long-Term Government
Bond Fund
Spartan Short-Intermediate Government Fund
Spartan Short-Term Bond 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)
