FIDELITY
(registered trademark)
EQUITY-INCOME
FUND
SEMIANNUAL REPORT
JULY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 42 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 46 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The first half of 1994 was an unsettling time for many investors. After
three years of a nearly perfect environment for stock market investing,
stock prices generally fell from February through June. Investors disagree
about whether this decline represents only a short-term correction or
signals the beginning of a longer bear market. One can collect statistics
to support either opinion, but of course, nobody knows for sure what will
happen to stock prices in the months ahead.
We do know, however, that market declines are a normal part of stock market
investing. We have historically seen corrections of 10% or more every two
years. That's why I thought this might be a good time to review three basic
investment principles that have proven helpful to successful stock market
investors in every market cycle.
First, take a long-term approach when investing in stocks and stock funds.
If you can afford to leave your money invested through the market's
inevitable ups and downs, you will greatly reduce your vulnerability to any
single decline. Over time, stock prices have gone up - and have
significantly outperformed other types of investments and stayed ahead of
inflation. But in the short-term, because of their volatility, stocks have
greater risk.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
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.SM
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 of change in value, the average annual
percentage change, or the growth of a hypothetical $10,000 investment. Each
performance 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 stocks that have grown in value).
Equity-Income has a 2% sales charge, which has been waived through December
31, 1995.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1994 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Equity-Income -2.32% 8.37% 53.00% 285.46%
Equity-Income (incl. 2% sales -4.27% 6.20% 49.94% 277.75%
charge)
S&P 500 -3.50% 5.16% 54.91% 327.52%
Average Equity Income Fund -4.01% 3.78% 46.65% 240.50%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one, five, or 10 years. For
example, if you had invested $1,000 in a fund that had a 5% return over the
past year, you would have $1,050. You can compare these figures to the
performance of the Standard & Poor's 500 Composite Stock Price Index - a
common proxy for the U.S. stock market. You can also compare them to the
average equity income fund, which reflects the performance of 104 funds
tracked by Lipper Analytical Services. Both benchmarks include reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Equity-Income 8.37% 8.88% 14.45%
Equity-Income (incl. 2% sales charge) 6.20% 8.44% 14.21%
S&P 500 5.16% 9.15% 15.64%
Average Equity Income Fund 3.78% 7.85% 12.65%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
Equity Income Standard & Poor's 500 Stock Index
07/31/84 9800.00 10000.00
08/31/84 10587.78 11105.00
09/30/84 10854.34 11107.22
10/31/84 11055.44 11150.54
11/30/84 11172.35 11025.65
12/31/84 11477.80 11316.73
01/31/85 12340.43 12198.30
02/28/85 12350.01 12348.34
03/31/85 12308.24 12356.99
04/30/85 12303.28 12345.87
05/31/85 12958.13 13059.46
06/30/85 13137.88 13264.49
07/31/85 13203.24 13244.59
08/31/85 13218.32 13132.01
09/30/85 12892.40 12720.98
10/31/85 13315.35 13308.69
11/30/85 13880.99 14221.67
12/31/85 14354.06 14910.00
01/31/86 14667.12 14993.49
02/28/86 15601.10 16115.01
03/31/86 16470.98 17014.22
04/30/86 16392.38 16821.96
05/31/86 16442.91 17716.89
06/30/86 16667.01 18016.31
07/31/86 16064.65 17009.19
08/31/86 16973.87 18271.28
09/30/86 16176.97 16760.24
10/31/86 16872.82 17727.31
11/30/86 17045.34 18158.08
12/31/86 16804.50 17695.05
01/31/87 18430.15 20078.57
02/28/87 18972.03 20871.68
03/31/87 19305.64 21474.87
04/30/87 19061.01 21283.74
05/31/87 18948.62 21468.91
06/30/87 19477.18 22553.09
07/31/87 20058.68 23696.53
08/31/87 20626.82 24580.41
09/30/87 20168.39 24042.10
10/31/87 16627.94 18863.43
11/30/87 15891.48 17309.09
12/31/87 16529.37 18626.31
01/31/88 17633.85 19410.48
02/29/88 18458.43 20315.00
03/31/88 18235.77 19687.27
04/30/88 18488.51 19905.80
05/31/88 18702.96 20078.98
06/30/88 19762.91 21000.60
07/31/88 19724.16 20920.80
08/31/88 19328.90 20209.50
09/30/88 19898.30 21070.42
10/31/88 20251.25 21656.18
11/30/88 20055.16 21346.49
12/31/88 20247.04 21720.06
01/31/89 21540.60 23309.97
02/28/89 21347.77 22729.55
03/31/89 21761.97 23259.15
04/30/89 22573.49 24466.30
05/31/89 23111.74 25457.18
06/30/89 23182.74 25312.07
07/31/89 24689.20 27597.76
08/31/89 24990.49 28138.67
09/30/89 24686.56 28023.30
10/31/89 23376.14 27373.16
11/30/89 23688.95 27931.57
12/31/89 24027.27 28601.93
01/31/90 22553.48 26682.74
02/28/90 22589.21 27026.95
03/31/90 22604.64 27743.16
04/30/90 21755.04 27049.59
05/31/90 23155.97 29686.92
06/30/90 23062.20 29485.05
07/31/90 22733.00 29390.70
08/31/90 20968.13 26733.78
09/30/90 19450.95 25431.84
10/31/90 19061.75 25322.49
11/30/90 20257.16 26958.32
12/31/90 20658.53 27710.46
01/31/91 21665.32 28918.63
02/28/91 23185.18 30986.31
03/31/91 23522.57 31736.18
04/30/91 23640.18 31812.35
05/31/91 24875.12 33186.64
06/30/91 23787.27 31666.69
07/31/91 25056.99 33142.36
08/31/91 25622.40 33927.84
09/30/91 25497.13 33361.24
10/31/91 25888.62 33808.28
11/30/91 24864.72 32445.81
12/31/91 26732.83 36157.61
01/31/92 26997.01 35485.08
02/29/92 27820.02 35946.38
03/31/92 27445.01 35245.43
04/30/92 28369.77 36281.64
05/31/92 28647.20 36459.42
06/30/92 28317.14 35916.18
07/31/92 29022.48 37385.15
08/31/92 28441.61 36618.75
09/30/92 28670.69 37050.86
10/31/92 28963.89 37180.53
11/30/92 29916.79 38448.39
12/31/92 30656.03 38921.31
01/31/93 31564.82 39248.24
02/28/93 32325.68 39782.02
03/31/93 33388.88 40621.42
04/30/93 33324.94 39638.38
05/31/93 33921.74 40700.69
06/30/93 34331.65 40818.72
07/31/93 34858.17 40655.45
08/31/93 36029.43 42196.29
09/30/93 35977.73 41871.38
10/31/93 36595.04 42738.12
11/30/93 36010.22 42332.10
12/31/93 37188.64 42844.32
01/31/94 38672.23 44301.03
02/28/94 37617.23 43100.47
03/31/94 35981.47 41221.29
04/30/94 36769.64 41748.92
05/31/94 37237.97 42433.61
06/30/94 36741.14 41393.98
07/31/94 37775.45 42751.71
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Equity-Income Fund on July 31, 1984, and paid a 2% sales charge. As the
chart shows, by July 31, 1994, the value of your investment would have
grown to $37,775 - a 277.75% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$42,752 - a 327.52% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks 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)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Stephen Petersen, Portfolio Manager of Fidelity Equity
Income Fund
Q. STEVE, HOW DID THE FUND PERFORM?
A. The fund performed relatively well. Total returns were -2.32% for the
six months and 8.37% for the twelve months ended July 31, 1994. These
results beat the average equity income fund's -4.01% and 3.78% returns
during the same periods, according to Lipper Analytical Services.
Q. WHAT DID YOU DO TO ACHIEVE ABOVE-AVERAGE PERFORMANCE IN WHAT HAS BEEN A
PRETTY TOUGH MARKET ENVIRONMENT?
A. The key over the past six months has been stock selection - in both
buying and selling. The strong economic growth of late 1993 and early 1994
caused a dramatic strengthening in cyclical stocks - those of auto makers,
home appliance manufacturers and other industries with high sensitivity to
changes in the economy. These industries tend to perform best in the early
stages of an economic recovery, and I was able to lock in some profit. This
helped performance because, as we entered 1994's second quarter, rising
interest rates led many investors to unload a lot of their early cyclicals.
This selling activity depressed the prices of many of the stocks that we
had already sold. A second factor that helped the fund was the continued
good performance of our investments in banks and basic industries such as
chemicals and paper. The basic industries tend to accelerate in a
recovery's later stages. Finally, the fund had a lower-than-many average
stake in utility stocks, compared to other equity income funds. The rising
interest rate environment walloped electric utilities in particular. The
fund holds some electrics, but it holds about the same in telephone
companies, which weren't hurt as badly.
Q. ABOUT 20% OF THE PORTFOLIO WAS INVESTED OVERSEAS AT THE END OF JULY. HOW
DID THESE INVESTMENTS AFFECT THE FUND'S PERFORMANCE?
A. The overall impact was favorable, particularly from Japan, where I'm
anticipating an economic recovery. The dollar has been weak against the yen
- - which enhances the value of yen-denominated investments for U.S.
investors - and the Japanese market is up about 18% this year. This has
been doubly beneficial for the fund's 3% stake in that market. I
dramatically reduced the fund's investments in Hong Kong after that
market's huge run-up in 1993. The one overseas area that hurt performance
was the fund's 4% position in emerging market fixed-income securities. Bond
markets in Argentina, Brazil, Mexico and elsewhere were caught up in the
worldwide sell-off that occurred earlier this year.
Q. WERE THERE ANY OTHER DISAPPOINTMENTS?
A. Probably the most significant disappointment was GE, which was the
fund's largest holding at the end of the period. The stock's price was
knocked down slightly by disappointing earnings and negative publicity
related to a scandal at its wholly owned stock brokerage. GE's attempted
hostile takeover of Kemper Insurance was also viewed negatively. However,
GE is a premier company and its businesses overall continue to do well.
Consequently, I took this period of weakness as an opportunity to add to
the fund's investment in GE.
Q. FINANCE CONTINUES TO BE THE FUND'S LARGEST SECTOR WEIGHTING. HOW HAVE
RISING INTEREST RATES IMPACTED THESE STOCKS?
A. Rising interest rates are a byproduct of stronger economic growth.
Stronger growth is generally favorable for banks because loan demand tends
to increase. Rising rates also enable banks to improve their lending
spreads. That is, a bank will raise the rates it charges for loans more
quickly than the rates it pays depositors. NationsBank, one of the fund's
top 10 investments on July 31, benefited in both ways, as did many of the
midwestern banks in the fund.
Q. YOU'VE INCREASED THE FUND'S INVESTMENTS IN CONSUMER NONDURABLE STOCKS
AND PHILIP MORRIS IS NOW THE SECOND LARGEST HOLDING. WHAT'S YOUR THINKING
HERE?
A. Consumer nondurables - that is, the tobacco, beverage, food and
pharmaceuticals industries - are beginning to offer many attractive
opportunities. These were the growth stocks of the 1980's but
have been the weakest performing market sector over the past couple of
years. Consequently, many of these stocks now meet our buying criteria:
they're selling at value prices with above-average dividend yields and
generally attractive balance sheet and cash flow characteristics. Philip
Morris is a good example. I bought the stock at a price that was about 10
times per share earnings with a dividend yield well over 5%. I think it can
continue to grow its earnings at a 12% to 15% annual rate, due mainly to
its international operations. Excluding the United States and Western
Europe, cigarette consumption continues to grow worldwide.
Q. DERIVATIVES HAVE BEEN GETTING A LOT OF ATTENTION LATELY. DO YOU USE THEM
IN THE FUND?
A. I use forward currency contracts with the goal of protecting the fund's
non-dollar-denominated securities against unfavorable movements in currency
exchange rates. For example, if I buy a German stock I can hedge it by
selling a German mark forward contract. By doing this, I lock in the
dollar-mark exchange rate reflected in the contract. This protects the
fund's investment should the mark weaken in value against the dollar.
However, if the dollar weakens against the mark - which has generally been
the case this year -I miss out on the currency gains I could have made. The
fund's non-dollar exposure is currently not fully hedged, because I expect
the dollar to weaken further against certain currencies. This is the type
of derivative instrument the fund typically uses.
Q. WHAT IS YOUR OUTLOOK AND GAME PLAN FOR THE REST OF THE YEAR?
A. I think the biggest influence on the U.S. stock market over the next six
to nine months will be the direction of interest rates. If the economy
continues to grow, accompanied by signs of higher inflation, interest rates
could rise further. In that type of environment, the overall market is
unlikely to move up, despite good corporate profits. Consequently, my game
plan is to continue to try to isolate good stocks. Over the next six
months, I'll most likely continue to increase the fund's investments in
consumer nondurable companies. I plan to reduce some of the fund's cyclical
investments where I have doubts about whether the company's earnings growth
is sustainable. I also plan to reduce the fund's exposure to banks. The
industry has had a tremendous three and one-half years, but I don't think
it's going to be able to grow its earnings as rapidly going forward.
FUND FACTS
GOAL: to increase the value
of the fund's shares over the
long term by investing mainly
in
income-producing equities
START DATE: May 16, 1966
SIZE: as of July 31, 1994,
more than $7 billion
MANAGER: Stephen Petersen,
since August 1993; manager,
various institutional accounts,
since 1987; joined Fidelity in
1980
(checkmark)
STEPHEN PETERSEN ON THE
FUND'S OVERALL RISK LEVEL:
"The fund is conservatively
structured and income-oriented,
thus offering a lower risk profile.
I invest primarily in larger,
mature, financially stable
companies. The fund also buys
convertible securities issued by
larger companies. These have
tended to be less volatile, over
time, than common stocks.
About 4% of the fund is invested
in debt from emerging market
countries, which are at the
higher end of the risk spectrum.
These have had a negative
impact on year-to-date
performance. More recently,
however, these investments
have stabilized. In the U.S., I
think we're getting close to the
end of the current economic
recovery. Therefore, in selecting
investments for the fund, I'll
continue to emphasize quality
companies that appear to be on
sound financial footing.
(solid bullet) Currently, one of the fund's
main investment themes is the
improving global
competitiveness of low-cost
U.S. manufacturers. Another is
the maturing of the U.S.
economic recovery and thus
the rotation out of stocks that
performed well in the
recovery's earlier stages:
autos, appliances and building
materials, for example.
(solid bullet) The fund's stake in
convertible securities has been
fairly consistent at about 12%
to 13% over the six months
ended July 31. Convertible
securities are bonds or
preferred shares that are
exchangeable for a set number
of the issuing corporation's
common stock shares at a
pre-determined price.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 2.7 2.1
Philip Morris Companies, Inc. 1.8 0.7
American Express Co. 1.4 0.4
Citicorp 1.3 2.7
International Business Machines 1.1 0.9
Corp.
NationsBank Corp. 1.0 1.0
Ameritech Corp. 0.9 0.5
Grace (W.R.) & Co. 0.8 1.0
First Fidelity Bancorporation 0.8 0.9
Xerox Corp. 0.8 0.8
TOP FIVE INDUSTRIES AS OF JULY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO
Finance 20.4 21.3
Utilities 11.2 12.1
Basic Industries 10.4 8.8
Energy 9.0 8.7
Indusrial Machinery and Equipment 6.4 6.1
ASSET ALLOCATION
AS OF JULY 31, 1994* AS OF JANUARY 31, 1994**
Row: 1, Col: 1, Value: 4.2
Row: 1, Col: 2, Value: 12.9
Row: 1, Col: 3, Value: 6.2
Row: 1, Col: 4, Value: 76.7
Stocks 76.7%
Bonds 6.2%
Convertible
securities 12.9%
Other securities
and short-term
investments 4.2%
FOREIGN
INVESTMENTS 20.9%
Stocks 71.6%
Bonds 7.2%
Convertible
securities 15.1%
Other securities
and short-term
investments 6.1%
FOREIGN
INVESTMENTS 21.5%
Row: 1, Col: 1, Value: 6.1
Row: 1, Col: 2, Value: 15.1
Row: 1, Col: 3, Value: 7.2
Row: 1, Col: 4, Value: 71.59999999999999
**
**
**
INVESTMENTS JULY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investments
COMMON STOCKS - 75.6%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.4%
DEFENSE ELECTRONICS - 0.4%
Raytheon Co. 404,700 $ 26,558
BASIC INDUSTRIES - 8.2%
CHEMICALS & PLASTICS - 4.6%
Akzo NV:
Ord. 45,000 5,425
sponsored ADR 115,700 6,971
Betz Laboratories, Inc. 328,700 14,463
Bush Boake Allen, Inc. (a) 71,600 1,334
du Pont (E.I.) de Nemours & Co. 364,900 21,666
Eastman Chemical Co. 567,275 29,286
Goodrich (B.F.) Company 601,100 27,500
Grace (W.R.) & Co. 1,446,200 60,017
Hoechst AG Ord. 62,200 13,548
Imperial Chemical Industries:
Ord. 1,828,600 23,575
PLC ADR 223,600 11,460
Lubrizol Corp. 19,800 671
Lyondell Petrochemical Co. 545,200 13,562
Nalco Chemical Co. 286,900 9,360
Olin Corp. 158,600 8,763
PPG Industries, Inc. 201,400 7,880
Potash Corp. of Saskatchewan 559,100 17,796
Rohm & Haas Co. 57,900 3,749
Union Carbide Corp. 1,010,600 28,549
Witco Corp. 777,100 22,633
328,208
IRON & STEEL - 1.2%
Armco, Inc. (a) 480,000 2,820
British Steel PLC Ord. 1,031,500 2,493
Compania Siderurgica Nacional 228,000,000 6,646
Inland Steel Industries, Inc. (a) 154,900 5,886
LTV Corp. (warrants) (a) 365 2
Lukens, Inc. 440,100 14,908
Mannesmann AG Ord. 181,200 50,251
83,006
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 1.5%
Alumax, Inc. (a) 283,300 $ 8,711
Aluminum Co. of America 435,874 34,107
De Beers Consolidated Mines Ltd. ADR 350,600 8,327
Noranda, Inc. 420,000 7,385
Preussag AG 36,500 10,514
Reynolds Metals Co. 724,500 36,497
105,541
PAPER & FOREST PRODUCTS - 0.9%
International Paper Co. 273,100 19,902
Scott Paper Co. 76,500 4,418
Union Camp Corp. 71,000 3,355
Weyerhaeuser Co. 919,000 38,598
66,273
TOTAL BASIC INDUSTRIES 583,028
CONGLOMERATES - 3.5%
Alexander & Baldwin, Inc. 200,200 5,105
Allied-Signal, Inc. 1,107,400 42,358
Brascan Ltd. Class A 1,819,600 25,104
Crane Co. 39,600 1,015
Dial Corp. (The) 1,511,400 31,173
Hanson Trust PLC:
Ord. 2,443,600 9,744
sponsored ADR 583,600 11,598
ITT Corp. 484,100 41,511
Teledyne, Inc. 5,500 95
Textron, Inc. 652,400 34,740
United Technologies Corp. 736,000 44,344
TOTAL CONGLOMERATES 246,787
CONSTRUCTION & REAL ESTATE - 1.6%
BUILDING MATERIALS - 0.3%
Armstrong World Industries, Inc. 486,900 23,980
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - 1.3%
Carr Realty Corp. 97,800 $ 2,005
Crown American Realty Trust (SBI) 412,100 5,872
Equity Residential Property Trust (SBI) 616,400 20,187
Federal Realty Investment Trust (SBI) 530,800 13,204
Haagen Alexander Properties, Inc. 180,200 3,153
Macerich Company 150,800 2,978
Meditrust (SBI) 51,750 1,675
Merry Land & Investment Co., Inc. 256,860 5,298
Nationwide Health Properties, Inc. 481,800 17,465
Simon Properties Group, Inc. 286,300 7,623
Taubman Centers, Inc. 310,600 3,572
Vornado Realty Trust 114,000 4,190
Western Investment Real Estate Trust (SBI) 118,400 1,643
88,865
TOTAL CONSTRUCTION & REAL ESTATE 112,845
DURABLES - 4.5%
AUTOS, TIRES, & ACCESSORIES - 3.4%
Bridgestone Corp. 1,199,000 19,683
Dana Corp. 178,800 5,141
Echlin, Inc. 233,300 7,407
Fiat Spa 670,600 2,947
General Motors Corp. 562,200 28,883
Genuine Parts Company 411,800 14,568
Honda Motor Co. Ltd. 480,000 8,312
Johnson Controls, Inc. 302,900 15,864
Nissan Motor Co. Ltd. Ord. 1,175,000 9,057
Snap-on Tools Corp. 464,900 17,027
Suzuki Motor Corp. 648,000 8,497
TRW, Inc. 452,800 31,583
Toyota Motor Corp. 1,801,000 38,219
Volkswagen AG 98,600 31,268
238,456
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.6%
Matsushita Electric Industrial Co. Ltd. 1,228,000 $ 20,159
Sony Corp. 131,100 7,703
Whirlpool Corp. 359,600 18,295
46,157
TEXTILES & APPAREL - 0.5%
Liz Claiborne, Inc. 681,300 14,478
Oshkosh B'Gosh, Inc. Class A 171,600 2,445
Unifi, Inc. 655,700 16,311
VF Corp. 92,700 4,751
37,985
TOTAL DURABLES 322,598
ENERGY - 7.7%
COAL - 0.0%
Eastern Enterprises Co. 88,600 2,038
ENERGY SERVICES - 1.8%
Baker Hughes, Inc. 1,455,100 30,739
Halliburton Co. 1,118,600 38,032
McDermott International, Inc. 276,500 6,947
Schlumberger Ltd. 883,500 52,127
127,845
OIL & GAS - 5.9%
Amoco Corp. 679,200 40,667
British Petroleum PLC:
ADR 755,600 57,426
Ord. 6,308,500 40,228
Chevron Corp. 703,200 31,205
Exxon Corp. 413,100 24,579
Imperial Oil Ltd. 545,000 16,217
Kerr-McGee Corp. 525,600 26,411
Mobil Corp. 283,400 23,770
Murphy Oil Corp. 498,600 22,188
Phillips Petroleum Co. 714,600 23,403
Royal Dutch Petroleum Co. 275,400 31,120
Total Compagnie Francaise des Petroles Class B 457,850 26,400
Total SA sponsored ADR 557,400 16,025
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Unocal Corp. 961,800 $ 27,892
Woodside Petroleum Ltd. 3,085,800 11,000
418,531
TOTAL ENERGY 548,414
FINANCE - 16.0%
BANKS - 7.6%
Banc One Corp. 974,720 32,531
Banco Central SA (Reg.) 229,300 4,665
Bank of New York Co., Inc. 1,457,494 46,093
Bank of Nova Scotia, Halifax 267,200 4,795
BankAmerica Corp. 244,800 11,812
Boatmen's Bancshares, Inc. 697,600 23,893
Chemical Banking Corp. 1,215,000 46,626
Comerica, Inc. 597,426 17,773
Commerzbank AG 74,600 15,905
Crestar Financial Corp. 147 7
Deutsche Bank AG 55,700 25,739
Dresdner Bank AG Ord. 61,500 15,093
First Chicago Corp. 674,800 33,909
First Fidelity Bancorporation 1,265,149 59,146
First Union Corp. 354,782 16,054
Firstar Corp. 371,300 12,856
HSBC Holdings PLC 432,000 5,201
KeyCorp. 755,300 24,547
Mellon Bank Corp. 337,085 19,298
Mercantile Bancorporation, Inc. 420,550 15,350
Morgan (J.P.) & Co., Inc. 127,519 8,034
NationsBank Corp. 1,309,978 73,031
Royal Bank of Canada 1,046,000 21,127
Shawmut National Corp. (warrants) (a) 10,731 55
Signet Banking Corp. 147,119 5,940
539,480
CLOSED END INVESTMENT COMPANY - 0.1%
Latin American Investment Fund, Inc. 138,000 3,433
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 3.3%
American Express Co. 3,800,300 $ 100,708
Argentaria Corp. Bancaria de Esp 353,600 15,553
Beneficial Corp. 1,135,800 45,148
GFC Financial Corp. 751,950 28,480
Household International, Inc. 1,380,783 47,292
237,181
FEDERAL SPONSORED CREDIT - 0.4%
Federal National Mortgage Association 332,900 28,879
INSURANCE - 2.8%
ACE Ltd. 180,000 4,207
Aetna Life & Casualty Co. 124,900 6,432
Allstate Corp. 1,026,700 25,667
Amer Premier Underwriters, Inc. 1,027,300 25,169
American Bankers Insurance Group, Inc. 471,620 10,140
CIGNA Corp. 476,700 32,654
Continental Corp. 150,100 2,327
Fremont General Corp. 153,300 3,679
NWNL Companies, Inc. 345,800 11,325
SAFECO Corp. 523,700 29,000
St. Paul Companies, Inc. (The) 502,800 21,495
Travelers, Inc. (The) 642,400 21,280
USLIFE Corp. 213,000 7,854
201,229
SAVINGS & LOANS - 0.8%
Ahmanson (H.F.) & Co. 1,671,300 33,217
Washington Mutual Savings Bank 1,094,200 22,021
55,238
SECURITIES INDUSTRY - 1.0%
First Marathon Inc. Class A non-vtg 502,000 4,889
Lehman Brothers Holdings, Inc. 888,760 13,998
Nomura Securities Co. Ltd. 1,773,000 39,222
Paine Webber Group, Inc. 617,850 9,963
68,072
TOTAL FINANCE 1,133,512
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 4.2%
DRUGS & PHARMACEUTICALS - 2.2%
American Cyanamid Co. 506,400 $ 30,701
Lilly (Eli) & Co. 101,800 4,950
Pfizer, Inc. 744,500 46,159
Schering-Plough Corp. 421,700 27,042
SmithKline Beecham PLC ADR 309,700 8,749
Warner-Lambert Co. 664,900 43,218
160,819
MEDICAL EQUIPMENT & SUPPLIES - 2.0%
Baxter International, Inc. 1,123,900 29,643
Becton, Dickinson & Co. 832,300 35,061
Bergen Brunswig Corp. Class A 681,700 9,629
Johnson & Johnson 864,600 40,636
Mallinckrodt Group, Inc. 852,600 26,004
140,973
TOTAL HEALTH 301,792
HOLDING COMPANIES - 0.5%
Brierley Investments Ltd. 15,004,300 10,843
Jardine Matheson & Co. Ltd. Ord. 898,400 7,298
Jardine Strategic Holdings Ord. 4,340,000 16,181
34,322
INDUSTRIAL MACHINERY & EQUIPMENT - 5.9%
ELECTRICAL EQUIPMENT - 4.2%
General Electric Co. 3,833,200 193,098
General Signal Corp. 902,400 32,825
Hutchison Whampoa Ltd. Ord. 2,695,000 12,385
Philips Electronics 1,287,300 39,452
Siemens AG 47,600 20,447
298,207
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
Caterpillar, Inc. 334,200 36,219
Cooper Industries, Inc. 433,800 16,267
Keystone International, Inc. 850,700 16,057
Mitsubishi Heavy Industry 1,726,000 13,424
Tenneco, Inc. 406,000 19,488
101,455
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.3%
Attwoods PLC ADR 746,100 $ 6,808
Safety Kleen Corp. 713,600 12,488
19,296
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 418,958
MEDIA & LEISURE - 1.0%
BROADCASTING - 0.0%
New World Communications Group, Class B 192,611 2,480
ENTERTAINMENT - 0.1%
Cedar Fair LP (depositary units) 253,800 8,058
PUBLISHING - 0.9%
Gannett Co., Inc. 681,000 34,391
Houghton Mifflin Co. 170,800 6,341
Times Mirror Co. Series A 652,200 19,484
Torstar Corp. Class B 225,500 3,945
64,161
TOTAL MEDIA & LEISURE 74,699
NONDURABLES - 3.4%
BEVERAGES - 0.3%
Anheuser-Busch Companies, Inc. 332,800 17,389
Heileman G Class 1 Unit (c) 100 2,000
19,389
FOODS - 0.6%
CPC International, Inc. 176,800 8,928
Goodman Fielder Ltd. 8,288,100 8,765
Montedison SPA:
ADR 73,500 680
sponsored Ord. 4,824,400 4,569
Pokphand CP Co. (Hong Kong Reg.) Ord. 100,000 30
Ralston Purina Co. 434,700 16,084
39,056
HOUSEHOLD PRODUCTS - 0.2%
Avon Products, Inc. 300,752 17,030
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
TOBACCO - 2.3%
Philip Morris Companies, Inc. 2,372,100 $ 130,465
RJR Nabisco Holdings Corp. (a) 5,307,200 32,507
162,972
TOTAL NONDURABLES 238,447
RETAIL & WHOLESALE - 2.8%
APPAREL STORES - 0.9%
Charming Shoppes, Inc. 817,500 7,664
Edison Brothers Stores, Inc. 726,600 18,165
Limited, Inc. (The) 1,074,600 21,223
TJX Companies, Inc. 187,000 3,740
United States Shoe Corp. 752,700 14,490
65,282
GENERAL MERCHANDISE STORES - 1.1%
Dillard Department Stores, Inc. Class A 177,100 5,933
Federated Department Stores, Inc. (a) 98,394 2,005
Penney (J.C.) Co., Inc. 592,600 29,334
Sears, Roebuck & Co. 783,100 37,001
74,273
GROCERY STORES - 0.7%
Fleming Companies, Inc. 53,500 1,578
Grand Union Capital Corp. Class B (a) 6,979 1,745
Grand Union Co. (warrants) (a) 1,749 437
Great Atlantic & Pacific Tea Co., Inc. 764,500 15,386
Supervalue, Inc. 1,087,800 31,138
50,284
RETAIL & WHOLESALE, MISC - 0.1%
International Semi-Tech Microelectronics, Inc. 480,000 1,558
Toys "R" Us, Inc. (a) 224,000 7,700
9,258
TOTAL RETAIL & WHOLESALE 199,097
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 1.0%
ADVERTISING - 0.1%
Omnicom Group, Inc. 150,100 $ 7,636
LEASING & RENTAL - 0.3%
GATX Corp. 344,800 13,792
Ryder Systems, Inc. 328,500 8,582
22,374
PRINTING - 0.3%
Moore Corporation Ltd. 807,500 14,417
Standard Register Co. 206,200 4,253
18,670
SERVICES - 0.3%
Jostens, Inc. 557,600 9,061
Kelly Services, Inc. Class A 129,300 3,815
National Service Industries, Inc. 376,700 10,312
23,188
TOTAL SERVICES 71,868
TECHNOLOGY - 3.4%
COMPUTER SERVICES & SOFTWARE - 0.1%
Sterling Software, Inc. (a) 118,677 3,560
COMPUTERS & OFFICE EQUIPMENT - 2.1%
Casio Computer Co. Ltd. Ord. 774,000 9,452
International Business Machines Corp. 1,264,400 78,077
Semi-tech Microelectronics 3,120,700 5,818
Xerox Corp. 575,181 58,812
152,159
ELECTRONICS - 0.9%
AMP, Inc. 154,000 11,511
Astrex, Inc. (a) (i) 565,723 23
Hitachi Ltd. 699,000 6,752
Nitto Denko Corp. 345,000 5,491
TDK Corp. 108,000 4,627
Texas Instruments, Inc. 122,572 9,637
Thomas & Betts Corp. 256,800 15,986
Toshiba Corp. 1,546,000 11,344
65,371
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.3%
Eastman Kodak Co. 463,900 $ 22,441
TOTAL TECHNOLOGY 243,531
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.1%
Swire Pacific Class A 564,000 4,636
Technology Resources (MLAY) (a) 1,193,000 4,968
9,604
RAILROADS - 1.0%
CSX Corp. 680,300 52,808
Canadian Pacific Ltd. 1,223,900 17,989
70,797
SHIPPING - 0.1%
Shun Tak Holdings Ltd. 6,190,000 6,090
TOTAL TRANSPORTATION 86,491
UTILITIES - 10.3%
ELECTRIC UTILITY - 4.5%
Baltimore Gas & Electric Co. 277,200 6,341
Cincinnati Gas & Electric Co. 116,800 2,613
Commonwealth Edison Co. 683,300 16,228
Consolidated Electric Power Asia Ltd. (a) 1,976,873 3,621
DPL, Inc. 1,447,650 29,496
DQE, Inc. 162,000 4,880
EUA Power Corp. contingent int. ctf (a) 8,140 8
Entergy Corp. 1,984,400 50,602
Hong Kong Electric Holdings Ord. 2,662,000 8,064
Houston Industries, Inc. 551,800 19,382
Illinova Corp. 1,511,000 31,542
Korea Electric Power Corp. 915,000 30,435
Niagara Mohawk Power Corp. 516,400 8,521
PSI Resources, Inc. 234,700 5,193
Pacific Gas & Electric Co. 217,500 5,247
PacifiCorp. 663,300 11,774
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Peco Energy Co. 562,400 $ 14,693
Pinnacle West Capital Corp. 1,064,200 18,757
Portland General Corp. 308,900 5,483
Veba Vereinigte Elektrizetaets & Bergwerks AG Ord. 134,900 44,279
317,159
GAS - 1.6%
Consolidated Natural Gas Co. 362,700 14,055
Enron Corp. 784,100 25,385
MCN Corp. 80,000 3,190
Pacific Enterprises 1,021,800 20,947
Panhandle Eastern Corp. 1,346,600 27,605
TransCanada PipeLines Ltd. 525,800 6,495
Williams Companies, Inc. 453,200 14,786
112,463
TELEPHONE SERVICES - 4.2%
ALLTEL Corp. 639,600 17,269
Ameritech Corp. 1,502,100 61,586
Bell Atlantic Corp. 671,200 38,007
BellSouth Corp. 513,300 32,081
Comsat Corp. Series 1 142,300 3,718
GTE Corp. 712,400 22,619
Koninklijke PTT Nederland (b) 434,700 12,222
Rochester Telephone Corp. 534,200 12,888
Southwestern Bell Corp. 683,600 28,711
Sprint Corp. 860,300 31,508
Tele Denmark Class B AS ADR 41,300 1,074
U.S. West, Inc. 911,700 36,696
298,379
TOTAL UTILITIES 728,001
TOTAL COMMON STOCKS
(Cost $4,569,388) 5,370,948
PREFERRED STOCKS - 9.7%
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - 8.6%
BASIC INDUSTRIES - 1.2%
IRON & STEEL - 0.3%
Armco, Inc. Class A $3.625 181,900 $ 9,504
Bethlehem Steel Corp.:
$3.00 (a) (b) 123,700 7,298
$5.00 75,100 4,103
20,905
METALS & MINING - 0.9%
Alumax, Inc. Series A, $4.00 238,266 32,226
Cyprus Amax Minerals Co. Series A, $4.00 221,033 15,251
Kaiser Aluminum Corp. $0.96 267,200 2,939
Reynolds Metals Co. $3.31 236,300 12,169
62,585
PAPER & FOREST PRODUCTS - 0.0%
Bowater, Inc. depositary shares representing 1/4 shares
Series B 124,000 3,100
TOTAL BASIC INDUSTRIES 86,590
DURABLES - 1.0%
AUTOS, TIRES, & ACCESSORIES - 1.0%
Chrysler Corp. Series A, $4.625 (b) 267,400 35,965
Ford Motor Co. (Del.) Series A, $4.20 305,500 31,772
67,737
ENERGY - 1.1%
COAL - 0.1%
Pittston Co. $3.125 (b) 164,200 6,568
ENERGY SERVICES - 0.1%
Reading & Bates Corp. $1.625 246,300 6,034
OIL & GAS - 0.9%
Diamond Shamrock, Inc. $2.50 (b) 159,900 8,715
Maxus Energy Corp. $4.00 129,900 5,115
Occidental Petroleum Corp. $3.00 694,900 30,923
Unocal Corp. $3.50 (b) 373,900 20,658
65,411
TOTAL ENERGY 78,013
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - 2.4%
BANKS - 1.7%
Citicorp $5.375 (b) 794,100 $ 91,321
Norwest Corp. Series B, $3.50 420,300 30,682
122,003
INSURANCE - 0.7%
Alexander & Alexander Services, Inc. Class A $3.60(b) 144,600 5,965
Conseco, Inc. Series D, $3.25 318,400 15,402
Southwestern Life Corp. Series A (a) 23,400 363
Travelers, Inc. $2.75 221,800 12,088
USF&G Corp. Series C, $5.00 241,500 15,094
48,912
TOTAL FINANCE 170,915
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
U.S. Surgical Corp. $2.20 (b) 361,600 8,679
HOLDING COMPANIES - 0.1%
Jardine Strategic Holdings Ltd. 7 1/2% cumulative 36,200 4,543
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.3%
Westinghouse Electric Corp. $1.30 (b) 1,590,600 22,268
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.2%
Evergreen Media Corp. $3.00 exch. 341,500 14,941
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 956,400 6
TOTAL MEDIA & LEISURE 14,947
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
NONDURABLES - 0.7%
FOODS - 0.2%
Chiquita Brands International, Inc. $2.875 232,600 $ 9,362
TOBACCO - 0.5%
RJR Nabisco Holdings Corp. Series C, depositary shares
representing 1/10 share (a) 4,075,100 27,507
RJR Nabisco Holdings Corp., Series A, depositary shares
representing 1/4 share 1,407,600 8,798
36,305
TOTAL NONDURABLES 45,667
TECHNOLOGY - 0.2%
ELECTRONICS - 0.2%
National Semiconductor Corp. $3.25 210,200 13,978
TOTAL TECHNOLOGY 13,978
TRANSPORTATION - 1.1%
AIR TRANSPORTATION - 0.9%
AMR Corp. $3.00 (b) 920,000 39,330
UAL, Inc. 6 1/4% (a)(b) 307,500 27,252
66,582
RAILROADS - 0.2%
Burlington Northern Railroad Co. 6.20% 212,700 13,081
TOTAL TRANSPORTATION 79,663
UTILITIES - 0.2%
GAS - 0.2%
Enron Corp. Series J, $10.50 31,800 13,356
Tejas Gas Corp. Delaware $2.625 49,100 2,283
15,639
TOTAL CONVERTIBLE PREFERRED STOCKS 608,639
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - 1.1%
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc. pay-in-kind $14.25 207,025 $ 6,004
FINANCE - 0.8%
BANKS - 0.8%
Continental Bank Corp., Series 1 262,564 13,292
First Chicago Corp. adj. rate 166,630 8,352
First Fidelity Bancorporation Series D, adj. rate (a) 41,570 4,147
First Interstate Bancorp depositary shares representing 1/8 share:
Series F 449,200 11,960
Series G, 9% 178,200 4,678
First Nationwide 11 1/2% 18,500 1,864
First Union Corp. Series 1990, adj. rate (a) 19,500 1,031
Marine Midland Banks, Inc. Series A, adj. rate 171,000 7,823
Shawmut National Corp. 9.30% depositary shares
representing 1/10th share 194,350 5,102
58,249
SAVINGS & LOANS - 0.0%
Chevy Chase Savings Bank, Series A 20,000 560
TOTAL FINANCE 58,809
MEDIA & LEISURE - 0.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. Series B, pay-in-kind (a) 129,225 1,034
UTILITIES - 0.2%
ELECTRIC UTILITY - 0.1%
Gulf States Utilities Co. Series B, adj. rate 18,485 938
Louisiana Power & Light Co. 9.68% 50,300 1,308
Niagara Mohawk Power Corp. Series A, adj. rate 104,595 2,196
4,442
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
UTILITIES - CONTINUED
GAS - 0.1%
ENSERCH Corp. Series E, adj. rate 78,500 $ 7,575
TOTAL UTILITIES 12,017
TOTAL NONCONVERTIBLE PREFERRED STOCKS 77,864
TOTAL PREFERRED STOCKS
(Cost $602,960) 686,503
CORPORATE BONDS - 7.1%
MOODY'S RATINGS (G) PRINCIPAL
(UNAUDITED) AMOUNT (F) (000S)
CONVERTIBLE BONDS - 4.3%
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.2%
Hercules, Inc. 8%, 8/15/10 A3 $ 5,490 13,172
IRON & STEEL - 0.1%
Allegheny Ludlum Corp. 5 7/8%, 3/15/02 Baa2 3,620 3,982
Hoogovens 4 1/2%, 4/11/01 -- NLG 2,860 1,825
5,807
METALS & MINING - 0.0%
Walsin Lihwa Corp. 3 1/4%, 6/16/04 (b) -- 4,000 4,030
PACKAGING & CONTAINERS - 0.0%
International Container Term Services, Inc.
unsecured 6%, 2/19/10 (b) -- 2,100 2,730
PAPER & FOREST PRODUCTS - 0.3%
Stone Container Corp. 8 7/8%, 7/15/00 (b) B2 10,810 17,810
TOTAL BASIC INDUSTRIES 43,549
CONGLOMERATES - 0.2%
Hanson PLC euro 9 1/2%, 1/31/06 -- GBP 7,600 12,967
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - 0.1%
CONSTRUCTION - 0.0%
Continental Homes Holding Corp.
6 7/8%, 3/15/02 B3 $ 3,900 $ 3,295
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%, 1/15/04 -- 1,374 1,539
Liberty Property 8%, 7/1/1 -- 1,358 1,351
Meditrust 9%, 1/1/02 Ba2 3,250 3,868
6,758
TOTAL CONSTRUCTION & REAL ESTATE 10,053
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Bridgestone Conv. 3.70%, 12/31/98 -- JPY 724,000 9,675
ENERGY - 0.1%
ENERGY SERVICES - 0.0%
Lone Star Technologies, Inc. euro 8%, 8/27/02 -- 5,845 4,705
OIL & GAS - 0.1%
Cross Timbers Oil Co. 5 1/4%, 11/01/03 B2 3,310 2,814
Oryx Energy Co. 7 1/2%, 5/15/14 B1 2,915 2,412
USX-Marathon Group 7%, 6/15/17 BB- 221 197
5,423
TOTAL ENERGY 10,128
FINANCE - 0.7%
BANKS - 0.2%
Bank of Boston Corp. 7 3/4%, 6/15/11 Baa2 4,182 4,835
Bank of New York Co., Inc. 7 1/2%, 8/15/01 Baa1 6,370 10,288
15,123
INSURANCE - 0.5%
Chubb Corp. 6%, 5/15/98 Aa3 7,190 7,406
Fremont General Corp. 0%, 10/12/13 Ba2 42,650 14,288
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
INSURANCE - CONTINUED
NAC RE Corp. 5 1/4%, 12/15/02 Baa3 $ 4,020 $ 3,472
USF & G Corp. 0%, 3/3/09 Ba2 15,780 7,574
32,740
TOTAL FINANCE 47,863
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Matsushita Electric Works Co. Ltd.
2.70%, 5/31/02 -- JPY 761,000 9,103
MEDIA & LEISURE - 0.9%
BROADCASTING - 0.7%
Comcast Corp. 1 1/8%, 4/15/07 B1 33,870 14,310
Time Warner, Inc. 8 3/4%, 1/10/15 Ba3 33,997 34,039
48,349
LEISURE DURABLES & TOYS - 0.2%
Outboard Marine Corp. 7%, 8/1/02 B1 11,700 12,987
LODGING & GAMING - 0.0%
Shangri-La Asia Cap Ltd. euro
2 7/8%, 12/16/00 (b) -- 5,060 4,301
RESTAURANTS - 0.0%
Flagstar Corp. 10%, 11/1/14 Caa 690 610
TOTAL MEDIA & LEISURE 66,247
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.1%
Dylex Ltd. 9%, 8/15/00 -- CAD 30 16
Petrie Stores Corp. sinking fund 8%, 12/15/10 Ba2 7,940 8,853
8,869
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
GENERAL MERCHANDISE STORES - 0.2%
Federated Department Stores, Inc. 0%,
2/15/04 (d) Ba3 $ 11,790 $ 11,201
RETAIL & WHOLESALE, MISC - 0.1%
Price Co. 5.50% 2/28/12 Baa1 1,300 1,108
Tiffany & Company euro 6 3/8%, 3/15/01 Baa1 4,230 4,103
5,211
TOTAL RETAIL & WHOLESALE 25,281
SERVICES - 0.3%
ADVERTISING - 0.1%
Omnicom Group, Inc. 4 1/2%, 9/1/00 (b)(d) Baa3 4,910 5,119
SERVICES - 0.2%
ADT Ltd euro 6%, 10/3/02 -- 10,060 13,757
TOTAL SERVICES 18,876
TECHNOLOGY - 0.5%
COMPUTER SERVICES & SOFTWARE - 0.1%
Sterling Software, Inc. 5 3/4%, 2/01/03 B1 7,384 8,639
COMPUTERS & OFFICE EQUIPMENT - 0.4%
IBM France 5 3/4%, 1/1/98 (a) -- FRF 284,600 22,316
Quantum Corp. 6 3/8%, 4/1/02 B2 2,710 2,751
25,067
TOTAL TECHNOLOGY 33,706
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Delta Air Lines, Inc. 3.23%, 6/15/03 Ba3 7,110 5,066
TRUCKING & FREIGHT - 0.0%
Greyhound Lines, Inc. 8 1/2%, 3/31/07 B3 1,860 1,232
TOTAL TRANSPORTATION 6,298
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
UTILITIES - 0.2%
CELLULAR - 0.1%
Cellular Communications, Inc. 0%, 7/27/99 B1 $ 5,430 $ 4,344
Rogers Communications, Inc. liquid yield option
note 0%, 5/20/13 B2 10,730 3,702
8,046
TELEPHONE SERVICES - 0.1%
CAM-NET Communications Network
10%, 8/15/97 (b) -- 3,250 3,185
TOTAL UTILITIES 11,231
TOTAL CONVERTIBLE BONDS 304,977
NONCONVERTIBLE BONDS - 2.8%
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.1%
American Pacific Corp. 11%, 12/15/02 (b) -- 3,000 3,000
Arcadian Partners LP 10 3/4%, 5/01/05 B2 1,500 1,500
IMC Fertilizer Group, Inc. 10 3/4%, 6/15/03 B3 1,000 1,015
Rexene Corp. 9%, 11/15/99 -- 140 136
5,651
IRON & STEEL - 0.0%
AK Steel Corp. 10 3/4%, 4/1/04 B2 1,170 1,170
METALS & MINING - 0.1%
Kaiser Aluminum & Chemical Corp.
9 7/8%, 2/15/02 B1 4,000 3,690
PACKAGING & CONTAINERS - 0.1%
Owens Illinois, Inc. 10 1/4%, 4/1/99 B2 4,230 4,293
PAPER & FOREST PRODUCTS - 0.1%
Crown Packaging Holdings Ltd.
12 1/4%, 11/1/03 (d) Caa 940 456
Indorayon Yankee 9 1/8%, 10/15/00 BB 1,000 877
Repap Enterprises, Inc. 0%, 7/21/97 (FRN) (e) -- 1,355 999
Repap Wisconsin, Inc. 9.875%, 5/1/06 B3 520 452
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Stone Container Corp.:
10 3/4%, 6/15/97 B2 $ 1,150 $ 1,150
11 7/8%, 12/1/98 B1 3,670 3,744
9 7/8%, 2/1/01 B1 2,600 2,418
10,096
TOTAL BASIC INDUSTRIES 24,900
CONSTRUCTION & REAL ESTATE - 0.2%
BUILDING MATERIALS - 0.1%
PT Semen Cibinong 9%, 12/15/98 (b) -- 2,000 1,890
Tolmex SA de CV 8 3/8%, 11/1/03 Ba2 1,000 878
USG Corp.:
10 1/4%, 12/15/02 B1 2,403 2,415
Series B 10 1/4%, 12/15/02 B2 924 924
6,107
CONSTRUCTION - 0.0%
Hillsborough/Jim Walter Corp. 17%, 1/1/96 (h) Ca 640 563
Ryland Group, Inc. 9 5/8%, 6/1/04 Ba3 1,500 1,373
1,936
REAL ESTATE - 0.1%
Bardell Associates Notes Trust
12 1/2%, 11/1/08 (c) -- 2,980 3,028
TOTAL CONSTRUCTION & REAL ESTATE 11,071
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.2%
Aftermarket Technology Corp. 12%, 8/01/04 B3 1,510 1,533
Grupo Dina (Consorcio G)
10 1/2%, 11/18/97 (b) -- 5,000 4,925
Grupo Imsa SA de CV euro 8 3/4%, 7/7/98 (b) -- 2,000 1,930
Harvard Industries, Inc. 12%, 7/15/04 B2 5,000 5,000
13,388
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
TEXTILES & APPAREL - 0.1%
Dan River, Inc. 10 1/8%, 12/15/03 B3 $ 1,000 $ 850
Fieldcrest Cannon Inc. 11 1/4%, 6/15/04 B2 5,500 5,596
6,446
TOTAL DURABLES 19,834
ENERGY - 0.1%
ENERGY SERVICES - 0.0%
Falcon Drilling, Inc. 9 1/4%, 1/15/01 (b) B2 340 326
INDEPENDENT POWER - 0.1%
California Energy Corp. 10 1/4%, 1/15/04 (d) Ba3 8,000 5,660
OIL & GAS - 0.0%
Mesa Capital Corp. secured
12 3/4%, 6/30/98 (d) B3 1,710 1,552
YPF Sociedad Anonima SA 8%, 2/5/04 B1 1,670 1,411
2,963
TOTAL ENERGY 8,949
FINANCE - 0.5%
BANKS - 0.2%
Bancomer SA 9%, 6/1/00 (b) -- 11,250 10,940
Central Bank of Nigeria Promissory Note
5.092%, 1/5/10 -- 1,000 254
Nigeria Brady 5 1/2%, 11/15/20 (a)(d) -- 2,000 720
11,914
CREDIT & OTHER FINANCE - 0.3%
Chrysler Financial Corp. 9 1/2%, 12/15/99 A3 11,710 12,787
General Electric Capital Corp. peso linked
16.95%, 10/29/96 (e) Aaa 2,000 1,785
Indah Kiat International Finance. Co. BV gtd.
11 7/8%, 6/15/02 Ba3 930 930
Indah Kiat International Finance Co.
12 1/2%, 6/15/06 Ba3 1,010 1,010
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Third Mexican Acceptance Corp. coll.
notes gtd. by Grupo Sidek SA and Grupo
Situr SA 10 1/2%, 3/15/98 (b) -- $ 4,000 $ 3,905
Tiphook Finance Corp. 8%, 3/15/00 Caa 110 79
20,496
SAVINGS & LOANS - 0.0%
Anchor Bancorp, Inc. 8 7/8%, 7/9/03 Ba3 2,000 1,880
TOTAL FINANCE 34,290
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
Hallmark Healthcare Corp. 10 5/8%, 11/15/03 B3 1,860 1,872
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Exide Corp. 10 3/4%, 12/15/02 B1 2,250 2,340
Welbilt Corp. 12 1/4%, 11/1/99 Ba3 1,400 1,526
3,866
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.3%
Jones Intercable, Inc. 11 1/2%, 7/15/04 B1 2,000 2,100
New City 11 3/8%, 11/01/03 B3 3,250 3,315
Robin Media Group, Inc. 11 1/8%, 4/1/97 -- 1,520 1,440
SCI Television, Inc.:
secured 7 1/2%, 6/30/98 (e) -- 2,261 2,216
secured 11%, 6/30/05 B3 3,488 3,554
Turner Broadcasting System, Inc. 12%, 10/15/01 B1 3,120 3,291
Videotrn Yank 11 1/8%, 7/01/4 (d) B3 6,000 3,270
19,186
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. 10%, 9/1/98 -- 861 724
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.1%
Bally Gaming International, Inc. 10 3/8%,
7/15/98 -- $ 7,500 $ 7,050
Casino Magic Financial Corp. 11 1/2%,
10/15/01 B1 430 378
Treasure Bay Gaming and Resorts, Inc.
12 1/4%, 11/15/00 ($1,000 bonds
12 1/4%, 11/15/00 & 5 warrants) (b) -- 3,250 2,893
10,321
PUBLISHING - 0.1%
Enquirer/Star Group, Inc. Unit 0%, 5/15/97 Ba3 8,230 6,028
TOTAL MEDIA & LEISURE 36,259
NONDURABLES - 0.1%
BEVERAGES - 0.0%
Dr. Pepper/Seven-Up Companies, Inc.
11 1/2%, 11/1/02 (d) B3 3,000 2,340
HOUSEHOLD PRODUCTS - 0.1%
Revlon Consumer Products Corp.
9 3/8%, 4/1/01 B2 5,440 4,542
Revlon World Wide secured 0%, 3/15/98 B3 3,510 1,369
5,911
TOBACCO - 0.0%
RJR Nabisco, Inc. note 8 5/8%, 12/01/02 Baa3 2,000 1,838
TOTAL NONDURABLES 10,089
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Apparel Retailers, Inc. 12 3/4%, 8/15/05 (d) Caa 800 480
DRUG STORES - 0.0%
Thrifty Payless Holdings, Inc. 11 3/4%, 4/15/03 B2 2,000 2,035
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 0.1%
Macy (R.H.) & Co., Inc. sr. sub. deb.
14 1/2%, 10/15/1998 Ca $ 6,756 $ 4,459
Parisian, Inc. 9 7/8%, 7/15/03 B3 2,000 1,760
6,219
TOTAL RETAIL & WHOLESALE 8,734
SERVICES - 0.1%
SERVICES - 0.1%
ADT Operations, Inc. gtd. 9 1/4%, 8/1/03 B2 10,000 9,450
Neodata Services, Inc. 12%, 5/1/03 (d) B3 1,500 1,155
10,605
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.0%
Guiness Peat Aviation
5.84%, 6/30/96 -- 2,386 2,064
6.22%, 9/30/96 -- 191 161
6.4%, 11/19/98 -- 450 320
2,545
RAILROADS - 0.1%
Southern Pacific Rail Corp. 9 3/8%, 8/15/05 Ba3 4,000 3,905
SHIPPING - 0.0%
Eletson Holdings, Inc. 9 1/4%, 11/15/03 Ba2 400 373
TOTAL TRANSPORTATION 6,823
UTILITIES - 0.3%
CELLULAR - 0.0%
Cencall Communications Corp. 10 1/4%,
1/15/04 (d) Caa 1,550 880
Nextel Communications, Inc. 9.75%, 8/15/04 (d) B3 650 356
1,236
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - 0.1%
Calpine Corp. 9 1/4%, 2/01/04 B1 $ 6,000 $ 5,280
Del Norte Funding Corp. 9.05%, 1/2/93 (h) Ca 2,364 1,702
EUA Power Corp. secured, pay-in-kind:
Series B 17 1/2%, 5/15/93 (h) -- 7,390 591
Series C 17 1/2%, 11/15/92 (b)(h) -- 2,265 181
El Paso Funding Corp. lease oblig.
10 3/4%, 4/1/13 (h) Ca 1,000 730
8,484
GAS - 0.2%
Columbia Gas System, Inc.:
9%, 8/1/93 (h) Caa 1,000 1,200
9 1/2%, 10/10/19 (h) B1 1,500 1,740
10 1/4%, 8/1/11 (h) Caa 150 186
10.15%, 11/1/13 (h) Caa 500 610
9.91%, 5/28/20 (h) -- 1,590 1,940
Ferrellgas, Inc. 12%, 8/1/96 Ba3 2,350 2,549
SFP Pipeline Holdings, Inc. exch. 0%, 8/15/10 (e) Baa3 3,690 4,502
12,727
TOTAL UTILITIES 22,447
TOTAL NONCONVERTIBLE BONDS 199,739
TOTAL CORPORATE BONDS
(Cost $512,145) 504,716
FOREIGN GOVERNMENT OBLIGATIONS (K) - 3.4%
Argentina Republic:
5%, 3/31/05 (b)(e) -- 4,075 2,985
BOCON:
3 1/4%, 4/1/07 (e) -- ARP 36,375 14,867
3 1/4%, 9/1/02 (e) -- ARP 18,953 8,632
3 1/4%, 4/1/01 (e) -- ARP 16,434 8,870
4 1/2%, 4/1/01 (e) B1 16,483 11,755
4 1/2%, 9/1/02 (e) -- 1,063 667
FOREIGN GOVERNMENT OBLIGATIONS (K) - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
Argentina Republic: - continued
Brady:
euro:
4 1/4%, 3/31/23 (e) B1 $ 96,000 $ 49,200
4 1/4%, 3/31/23 (e) B1 10,500 7,363
4 1/4%, 3/31/23 (b)(e) -- 10,626 5,446
4 1/4%, 3/31/23 (b)(e) -- 41,250 21,141
BOTE:
2.3974%, 4/1/96 (e) -- 950 463
4.2853%, 4/3/00 (e) -- 8,534 6,623
euro 5%, 3/31/05 (e) BB- 29,750 21,792
Brazil Federative Republic:
IDU euro 6.0625%, 1/1/01 (e) B2 6,713 4,926
euro 5 1/4%, 4/15/12 -- 10,000 5,075
5.1875%, 4/15/06 -- 5,000 2,819
8%, 4/15/14 B2 12,000 5,325
Mexican Bondes:
18.24%, 9/22/94 (e) -- MXN 24,700 7,272
18.57%, 11/10/94 (e) AA- MXN 19,100 5,626
Mexican Government Brady:
5.8125%, 12/31/19 (e) Ba3 2,500 2,112
6 1/4%, 12/31/19 Ba3 12,000 7,905
6 1/4%, 12/31/19 Ba3 25,000 16,469
6.63%, 12/31/19 Ba2 FRF 15,000 1,692
Morocco Trust:
4 1/2%, 1/3/09 (b)(e) -- 31,750 22,503
8.5175%, 1/1/09 (e) -- JPY 384,301 2,726
Republic of Philippines 5 1/4%, 12/1/17 -- 3,000 1,954
Siderurgica Brasileiras inflation indexed
6%, 8/15/99 (m) -- BRR 15,062 1,800
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $275,787) 248,008
OTHER SECURITIES - 1.2%
INDEXED SECURITIES - 0.0%
Morgan Guaranty Trust Co. cert . of dep.
0%, 8/22/94 (indexed to $481 par of
Westport Investments Ltd. sr. notes, collateralized
by Mexican gov't. securities, per $100 par) 355 353
OTHER SECURITIES - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (F) (000S) (000S)
PURCHASED BANK DEBT - 1.2%
El Paso Electric Co.:
unsecured term loan:
0%, 1/3/95 $ 667 $ 474
0%, 4/1/95 147 104
unsecured 0%, 12/1/95 118 83
term loan:
7%, 10/26/95 2,571 2,571
0%, 1/4/95 508 508
Macy (R.H.) & Co., Inc. :
49 Store Loan 16,000 15,040
LBO Swap Claim 2,175 2,414
10 Store Loan 5,020 4,718
10 Store Swap Claim 1,713 1,611
Working Capital Loan 19,370 19,772
Empressa de Electricidad del Peru SA loan
participation (a)(j) 2,000 855
International Bank for Economic Cooperation
(Russia) loan participation (a) 9,250 2,498
Polish People's Republic:
loans under 1988 restructuring agreement (l) 13,000 4,940
loans under 1988 restructuring agreement (l) DEM 8,000 1,946
past due interest (l) 3,945 1,499
past due interest (l) DEM 3,220 783
Republic of Ecuador:
loan participation under 1985 multi-year
refinancing agreement (a) 11,500 6,282
loan participation (a)(j) 5,000 2,581
loan participation under 1983 and 1984
extension and refinancing agreements (a) 8,500 3,538
Republic of Panama:
loan participation under refinancing
agreement (a)(j) 3,000 1,455
loan participation (a)(j) 15,500 7,440
TOTAL OTHER SECURITIES
(Cost $70,935) 81,465
COMMERCIAL PAPER - 0.2%
FINANCE - 0.2%
BANKS - 0.2%
Banco Nacional De Mexico SA 0%, 12/8/94
(Cost $14,474) MXN 47,000 12,961
REPURCHASE AGREEMENTS - 2.8%
MATURITY VALUE (NOTE 1)
AMOUNT (000S)
(000S)
Investments in repurchase agreements,
(U.S. Treasury obligations), in a joint
trading account at 4.23% dated
7/29/94 due 8/1/94 $ 199,531 $ 199,461
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $6,245,150) $ 7,104,062
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO BUY
248,912 FRF 8/18/94 $ 46,005 $ 2,574
(Payable amount $43,431)
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES --0.6%
CONTRACTS TO SELL
151,402 DEM 10/28/94 $ 95,586 $ (278)
3,123,749 ESP 8/18/94 23,927 (1,542)
371,773 FRF 8/18/94 68,712 (4,062)
4,301,601 ITL 10/26/94 2,688 4
8,289,996 JPY 10/03/94 83,357 1,383
TOTAL CONTRACTS TO SELL
(Receivable amount $269,775) $ 274,270 $ (4,495)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.9%
$ (1,921)
CURRENCY ABBREVIATIONS
ARP - Argentinean peso
BRR - Brazilian Real
GBP - British pound
CAD - Canadian dollar
NLG - Dutch guilder
FRF - French franc
DEM - German Deutsche mark
ITL - Italian lira
JPY - Japanese yen
MXN - Mexican peso
ESP - Spanish peseta
LEGEND
(a) Non-income producing.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $405,000,000 or 5.7% of net
assets.
(c) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Bardell Associates
Notes Trust
12 1/2%, 11/1/08 4/19/94 $3,000,000
Heileman G
Class 1 Unit 1/21/94 $2,000,000
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Principal amount is stated in United States dollars unless otherwise
noted.
(g) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(h) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(i) Affiliated company (see Note 6 of Notes to Financial Statements).
(j) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
(k) Most foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment advisor, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(l) Partial interest payment received on the last interest payment date.
(m) Principal amount shown is original face amount and does not reflect the
inflation adjustments.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A .5% AAA, AA, A .6%
Baa .6% BBB .7%
Ba 2.0% BB 2.2%
B 3.4% B 1.9%
Caa 0.1% CCC 0.1%
Ca, C 0.1% CC, C 0.0%
D 0.1%
The percentage not rated by either S&P or Moody's amounted to 4.4%,
including long-term debt categorized as other securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 79.1%
Germany 3.2
Japan 3.1
United Kingdom 2.9
Argentina 2.3
Canada 2.1
Netherlands 1.4
Mexico 1.1
Others (individually less than 1%) 4.8
TOTAL 100.0%
INCOME TAX INFORMATION
At July 31, 1994, the aggregate cost of investment securities for income
tax purposes was $6,253,159,000. Net unrealized appreciation aggregated
$850,903,000, of which $1,082,954,000 related to appreciated investment
securities and $232,051,000 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JULY 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 7,104,062
agreements of $199,461) (cost $6,245,150) (Notes 1
and 2) - See accompanying schedule
Cash 83
Receivable for investments sold 59,870
Unrealized appreciation on foreign currency contracts 3,961
(Note 2)
Receivable for fund shares sold 18,796
Dividends receivable 16,563
Interest receivable 10,928
Other receivables 3,371
TOTAL ASSETS 7,217,634
LIABILITIES
Payable for investments purchased: $ 63,664
Regular delivery
Delayed delivery (Note 2) 13,720
Unrealized depreciation on foreign currency contracts 5,882
(Note 2)
Payable for fund shares redeemed 35,957
Accrued management fee 2,553
Other payables and accrued expenses 2,432
Collateral on securities loaned, at value (Note 2) 2,406
TOTAL LIABILITIES 126,614
NET ASSETS $ 7,091,020
Net Assets consist of (Note 1):
Paid in capital $ 5,979,890
Undistributed net investment income 32,876
Accumulated undistributed net realized gain (loss) on 221,320
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 856,934
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 215,756 shares outstanding $ 7,091,020
NET ASSET VALUE, offering price and redemption price per $32.87
share ($7,091,020 (divided by) 215,756 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1994 (UNAUDITED)
INVESTMENT INCOME $ 104,829
Dividends
Interest (including security lending fees of $73) (Note 5) 34,833
TOTAL INCOME 139,662
EXPENSES
Management fee (Note 4) $ 15,138
Transfer agent fees (Note 4) 7,606
Accounting and security lending fees (Note 4) 394
Non-interested trustees' compensation 20
Custodian fees and expenses 605
Registration fees 60
Audit 110
Legal 23
Interest (Note 7) 5
Reports to shareholders 100
Miscellaneous 23
Total expenses before reductions 24,084
Expense reductions (Note 8) (204) 23,880
NET INVESTMENT INCOME 115,782
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1 AND 3)
Net realized gain (loss) on:
Investment securities (including realized gain (loss) 245,122
of $116 on sales of investment in affiliated issuers)
Foreign currency transactions (14,044) 231,078
Change in net unrealized appreciation (depreciation) on:
Investment securities (501,154)
Assets and liabilities in foreign currencies (3,625) (504,779)
NET GAIN (LOSS) (273,701)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ (157,919)
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED JANUARY 31,
JULY 31, 1994 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 115,782 $ 214,173
Net investment income
Net realized gain (loss) 231,078 484,404
Change in net unrealized appreciation (depreciation) (504,779) 531,022
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (157,919) 1,229,599
FROM OPERATIONS
Distributions to shareholders: (94,594) (213,298)
From net investment income
From net realized gain (205,819) (23,174)
TOTAL DISTRIBUTIONS (300,413) (236,472)
Share transactions 1,453,822 1,968,083
Net proceeds from sales of shares
Reinvestment of distributions 289,541 224,887
Cost of shares redeemed (1,137,282) (1,365,987)
Net increase (decrease) in net assets resulting from 606,081 826,983
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 147,749 1,820,110
NET ASSETS
Beginning of period 6,943,271 5,123,161
End of period (including undistributed net investment $ 7,091,020 $ 6,943,271
income of $32,876 and $11,688, respectively)
OTHER INFORMATION
Shares
Sold 44,342 60,873
Issued in reinvestment of distributions 8,844 6,963
Redeemed (34,723) (42,075)
Net increase (decrease) 18,463 25,761
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED JANUARY 31,
ENDED
JULY 31,
1994
(UNAUDITED 1994 1993B 1992 1991 1990
)
SELECTED PER-SHARE DATA
Net asset value, $ 35.19 $ 29.87 $ 26.57 $ 22.38 $ 25.25 $ 26.81
beginning of period
Income from
Investment
Operations
Net investment .55 1.11 1.11C 1.18 1.46 1.71
income
Net realized and (1.38) 5.48 3.27 4.21 (2.48) (.36)
unrealized gain
(loss)
Total from (.83) 6.59 4.38 5.39 (1.02) 1.35
investment
operations
Less Distributions
From net investment (.46) (1.15) (1.08) (1.20) (1.55) (1.75)
income
From net realized (1.03) (.12) - - (.30) (1.16)
gain
Total distributions (1.49) (1.27) (1.08) (1.20) (1.85) (2.91)
Net asset value, end $ 32.87 $ 35.19 $ 29.87 $ 26.57 $ 22.38 $ 25.25
of period
TOTAL RETURN A (2.32) 22.52% 16.92% 24.61% (3.94) 4.70%
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 7,091 $ 6,943 $ 5,123 $ 4,421 $ 3,941 $ 4,752
period (in millions)
Ratio of expenses to .73% .66% .67% .68% .70% .71%
average net assets D
Ratio of net 3.52% 3.55% 4.02% 4.81% 6.18% 6.10%
investment income D
to average net
assets
Portfolio turnover rate 48% 70% 84% 111% 107% 92%
D
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
B AS OF FEBRUARY 1, 1993 THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D ANNUALIZED
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Equity Income Fund (the fund) is a fund of Fidelity Devonshire
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 for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
are valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Effective February 1, 1994, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment in securities.
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."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attri- buted are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions 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
futures and options transactions, foreign currency transactions, market
discount, partnerships, non-taxable dividends, and losses deferred due to
wash sales and futures and options. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part of
the dividends paid deduction for income tax purposes.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the fund's Statement of Assets and Liabilities. The
face or contract amount in U.S. dollars, as reflected in the schedule of
investments under the caption "Forward Foreign Currency Contracts,"
reflects the total exposure the fund has in that particular currency
contract. The U.S. dollar value of forward foreign currency contracts is
determined using forward currency exchange rates supplied by a quotation
service. Losses may arise due to changes in the value of the foreign
currency or if the counterparty does not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss)
is recognized on settlement date.
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
deter- mining that the value of these underlying securities remains at
least equal to the resale price.
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
DELAYED DELIVERY TRANSACTIONS.
The fund may purchase or sell securities on a when-issued or forward
commitment basis. Payment and delivery may take place a month or more after
the date of the transaction. The price of the underlying securities and the
date when the securities will be delivered and paid for are fixed at the
time the transaction is negotiated. The fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the purchase commitment.
FUTURES CONTRACTS AND OPTIONS.
The fund may invest in futures and options contracts and write options.
These investments involve, to varying degrees, elements of market risk and
risks in excess of the amount recognized in the Statement of Assets and
Liabilities. The face or contract amounts reflect the extent of the
involvement the fund has
in the particular classes of instruments. Risks may be caused by an
imperfect correlation between movements in the
price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary
market for the instruments, or due to the inability of counter- parties to
perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
INDEXED SECURITIES. The fund may invest in indexed securities whose value
is linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-
consuming negotiations and expense, and prompt sale at an acceptable price
may be difficult. At the end of the period, restricted securities
(excluding 144A issues) amounted to $5,028,000 or .07% of net assets.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,107,665,000 and $1,572,260,000,
respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .285% to .520% for the period from November 1, 1993 to
July 31, 1994. In the event that these rates were lower than the
contractual rates in effect during those periods, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. The annual individual fund fee rate is .12%. For the
period, the management fee was equivalent to an annualized rate of .46% of
average net assets.
The Board of Trustees has approved a new group fee rate schedule with rates
ranging from .27% to .52%. Effective August 1, 1994, FMR voluntarily
agreed to implement this new group fee rate schedule as it results in the
same or a lower management fee.
SALES LOAD. For the period December 1, 1993 through December 31, 1995,
Fidelity Distributors Corporation, an affiliate of FMR and the general
distributor of the fund, will voluntarily waive the sales charge (2% of the
offering price) on the sales of shares.
TRANSFER AGENT FEES. 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 AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee is based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the month
plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $1,049,000 for the period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as
5. SECURITY LENDING - CONTINUED
collateral against the loaned securities, in an amount at least equal to
102% of the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the
market value of the loaned securities during the period of the loan. At
period end, the value of the securities loaned and the value of collateral
amounted to $2,329,000 and $2,406,000, respectively.
6. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies which are or
were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Astrex Inc. (a) $ - $ 122,000 $ - $ 23,000
7. 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
$24,086,000 and $10,369,000, respectively. The weighted average interest
rate was 4.0%. Interest expense includes $5,000 paid under the bank
borrowing program.
8. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion
of the fund's expenses. For the period, the fund's expenses were reduced by
$204,000 under this arrangement.
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)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(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)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(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.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
2249 Galiano Street
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
175 East 400 South Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
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 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Stephen Petersen, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
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 Chase Manhattan Bank, N.A.
New York, NY
FIDELITY GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Fidelity Fifty
Growth Company Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Growth Fund
Stock Selector
Trend Fund
Value 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)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
MID-CAP STOCK
FUND
SEMIANNUAL REPORT
JULY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 5 The manager's review of fund
performance, strategy and outlook.
INVESTMENT SUMMARY 8 A summary of the fund's
investments.
INVESTMENTS 9 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 16 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 20 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The first half of 1994 was an unsettling time for many investors. After
three years of a nearly perfect environment for stock market investing,
stock prices generally fell from February through June. Investors disagree
about whether this decline represents only a short-term correction or
signals the beginning of a longer bear market. One can collect statistics
to support either opinion, but of course, nobody knows for sure what will
happen to stock prices in the months ahead.
We do know, however, that market declines are a normal part of stock market
investing. We have historically seen corrections of 10% or more every two
years. That's why I thought this might be a good time to review three basic
investment principles that have proven helpful to successful stock market
investors in every market cycle.
First, take a long-term approach when investing in stocks and stock funds.
If you can afford to leave your money invested through the market's
inevitable ups and downs, you will greatly reduce your vulnerability to any
single decline. Over time, stock prices have gone up - and have
significantly outperformed other types of investments and stayed ahead of
inflation. But in the short-term, because of their volatility, stocks have
greater risk.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
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.SM
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
performance 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 stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIOD ENDED JULY 31, 1994 LIFE OF
FUND
Mid-Cap Stock -0.70%
CUMULATIVE TOTAL RETURNS reflect the fund's actual performance over a set
period - in this case, since the fund began on March 29, 1994. 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. Once the fund has a longer record, you may
want to compare it to the Standard & Poor's MidCap 400 index - a broad
measure of the performance of 400 mid-cap stocks. You may also want to look
at the performance of the average mid-cap fund, as tracked by Lipper
Analytical Services. Both benchmarks include reinvested dividends and
capital gains, if any. They will appear in the fund's next report six
months from now.
AVERAGE ANNUAL RETURNS and the growth of a hypothetical $10,000
INVESTMENT in the fund will appear once the fund is a year old.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks 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)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Jennifer Uhrig, Portfolio Manager of Fidelity
Mid-Cap Stock Fund
Q. JENNIFER, HOW HAS THE FUND PERFORMED?
A. This is a new fund, introduced on March 29, 1994. Fidelity usually
compares fund performance over six- or 12-month periods, but in this first
report, we'll look at the performance of the fund since its inception. The
fund had a total return of -0.70% for the period March 29 to July 31. For
the best available comparison to its peers, we can look at the period from
March 31, 1994, through July 31. During that time, the fund returned 1.53%,
while the average mid-cap stock fund tracked by Lipper Analytical Services
returned -2.97% for the same period.
Q. GRANTED, THE PERIOD WE'RE DISCUSSING IS ONLY FOUR MONTHS, BUT WHAT
HELPED THE FUND DO BETTER THAN THE AVERAGE?
A. The fund was introduced at a difficult time for the stock market,
especially for small stocks. Given the volatile stock market environment, I
weighted the fund a little more toward value stocks than growth stocks.
Value stocks are those that are under-priced relative to their current
sales, earnings or cash flow. Growth stocks are companies with the
potential for rapid earnings growth in the future. In a tough market
environment, especially one where interest rates are rising, investors are
less willing to pay up front for future earnings. Value stocks have done
better as a group in the past several months, and I'm pleased I've managed
to essentially maintain the fund's value in a falling market environment.
Q. WHAT ARE SOME EXAMPLES OF VALUE STOCKS THAT PERFORMED WELL DURING THE
PERIOD?
A. One of the best performing stocks has been Cytec Industries, a spin-off
from American Cyanamid. Cytec is a chemical company that used to be part of
a pharmaceutical company. The stock was under-followed by Wall Street and
analysts seemed to be underestimating its ability to run more efficiently
as an independent company. As a result, the stock was very inexpensive
relative to its potential earnings projections. Iowa Beef Products (IBP)
has also looked good because an increased supply of cattle has allowed the
company's plants to work at higher capacity.
Q. FINANCE AND TECHNOLOGY HAVE BEEN AMONG THE FUND'S LARGEST INDUSTRY
GROUPS. WHAT MADE THESE SECTORS ATTRACTIVE?
A. On the finance side, I owned a lot of regional banks, such as First
Security and SunTrust. When I started the fund, it looked like these
smaller banks were very inexpensive relative to the rest of the market.
Loan growth has been better because of the stronger economy, and the move
in Congress toward lifting regulations on interstate banking has led to
takeover speculation, which tends to help stock prices. In the technology
sector, there are excellent growth opportunities, driven by the need for
businesses to improve productivity and by the proliferation of new computer
applications for consumers. However, this is a highly competitive industry,
so valuations - stock prices compared to other financial measures such as
earnings and dividends - can be low relative to growth rates. The idea is
to find companies that can win the competitive battle or maintain a lead
but still trade at attractive valuations.
Q. WHAT ARE SOME EXAMPLES?
A. Compaq is one. This company is now the number two player in the
personal computer industry behind IBM, having recently surpassed Apple in
sales. The stock performed well during the period, and I sold it recently
to take profits. However, Compaq is a stock I'll be watching closely moving
forward. Cabletron is another technology stock that the fund owns. This
company is a leader in computer networking. It sells equipment and software
that enable members of a work group to share information among their PCs.
Currently there is a need for this equipment because it helps companies use
information more efficiently, which in turn increases productivity.
Q. ANY DISAPPOINTMENTS SO FAR?
A. The biggest disappointments were in housing and construction-related
companies. These stocks were hit when the Federal Reserve Board raised
interest rates and investors started to anticipate a slowdown in
housing-related businesses. Leggatt and Platt - a company that makes
furniture - and Armstrong World - a floor and ceiling company - suffered in
anticipation of a slowdown in the housing cycle, and I've sold both
positions. Westpoint Stevens - a manufacturer of sheets and towels - was
another disappointment. The company was hurt because its materials costs
increased when cotton prices went up. I've held on to this stock because
the company may get price increases and cotton prices appear to be
stabilizing. Finally, there was RJR Nabisco. Fears that health care
legislation would lead to higher tobacco taxes hurt the stock. However, I'm
keeping my position because it appears that legislators will not institute
as high a tax as originally expected.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The economy has slowed since the end of 1993, so slower growth could
lead to a more benign interest rate environment and a better stock market.
A lot of strong growth companies have seen big corrections in their stock
prices and are now selling at more attractive prices. I expect to move the
fund more in the direction of growth stocks as the environment improves.
Having weathered the first few months, I'm hopeful the fund can stay
flexible and perform better going forward.
FUND FACTS
GOAL: to increase the value
of the fund's shares by
investing mainly in stocks of
companies with
medium-sized market
capitalizations
START DATE: March 29, 1994
SIZE: as of July 31, 1994,
more than $29 million
MANAGER: Jennifer Uhrig,
since March 1994; manager,
Fidelity Mid-Cap Stock Pilot
Fund, October 1993 - March
1994; Fidelity Select
Retailing Portfolio, April 1991
- - October 1993; Select
Developing Communications
Portfolio, June 1990 -
April 1991; Select
Telecommunications, 1987 -
1990; joined Fidelity in 1987
(checkmark)
JENNIFER UHRIG ON THE APPEAL OF
SMALLER CAP STOCKS:
"In the 1980s, the market was
driven by larger cap stocks.
Starting in 1990, smaller
stocks generally started to
perform better than the
market as a whole. The
average small cap cycle
lasts about six years, and if
this is a typical cycle, we
should have three more years
of positive performance from
smaller cap stocks. The
market saw a sizable
correction in small stock
prices during the first half of
1994, but I don't believe it
signaled the end of the cycle.
Going forward, I intend to
purchase attractive mid-cap
stocks that fall in the smaller
side of the category, and
make selected small cap
purchases."
(solid bullet) As of July 31, 1994, the
Standard and Poor's MidCap
400 Index encompassed
stocks whose market values
ranged from $100 million to
$8 billion. Mid-cap stocks can
be those of companies that
are established but not yet
leaders in their fields, or those
of bigger companies that still
look like they can grow
substantially.
(solid bullet) The fund is authorized to
use
derivative investments, and
used S&P MidCap 400
futures contracts during the
period to help the fund track
broad market moves. The
performance of these futures
moves in step with the index,
and their risk is equivalent to
that of the broad mid-cap
market.
INVESTMENT SUMMARY
TOP TEN STOCKS AS OF JULY 31, 1994
% OF FUND'S INVESTMENTS
IBP, Inc. 3.0
Cytec Industries, Inc. 2.9
Cherry Corp. 2.4
Westpoint Stevens, Inc. Class A 2.2
Carolina Freight Corp. 2.1
West Marine, Inc. 2.1
Gaylord Container Corp. Class A 2.0
GFC Financial Corp. 2.0
Outboard Marine Corp. 1.9
RJR Nabisco Holdings Corp. 1.9
TOP FIVE INDUSTRIES AS OF JULY 31, 1994
% OF FUND'S INVESTMENTS
Media & Leisure 11.1
Finance 10.9
Technology 10.7
Basic Industries 8.7
Industrial Machinery & Equipment 8.0
ASSET ALLOCATION AS OF JULY 31, 1994
Row: 1, Col: 1, Value: 13.8
Row: 1, Col: 2, Value: 40.0
Row: 1, Col: 3, Value: 46.2
Stocks 86.2%
Short-term
investments 13.8%
INVESTMENTS JULY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 86.2%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.5%
Flightsafety International, Inc. 4,000 $ 145,000
BASIC INDUSTRIES - 8.7%
CHEMICALS & PLASTICS - 4.8%
Airgas, Inc. (a) 4,700 128,075
Cytec Industries, Inc. (a) 34,600 873,650
Great Lakes Chemical Corp. 2,000 119,000
Hanna (M.A.) Co. 11,300 299,450
1,420,175
PACKAGING & CONTAINERS - 2.0%
Gaylord Container Corp. Class A (a) 105,100 604,325
PAPER & FOREST PRODUCTS - 1.9%
Bowater, Inc. 15,000 403,125
Scott Paper Co. 400 23,100
Temple-Inland, Inc. 3,000 153,375
579,600
TOTAL BASIC INDUSTRIES 2,604,100
DURABLES - 7.2%
AUTOS, TIRES, & ACCESSORIES - 0.6%
Bandag, Inc. 3,000 168,000
CONSUMER ELECTRONICS - 1.4%
Fedders Corp. (a) 37,200 288,300
Harman International Industries, Inc. 5,200 139,750
428,050
HOME FURNISHINGS - 0.7%
Ameriwood Industries International, Inc. 18,200 204,750
TEXTILES & APPAREL - 4.5%
Burlington Industries, Inc. (a) 10,200 151,725
Cygne Designs, Inc. (a) 7,000 157,500
Dominion Textile, Inc. (a) 2,400 12,119
Fieldcrest Cannon, Inc. (a) 8,900 226,950
Image Industries, Inc. (a) 15,000 144,375
Westpoint Stevens, Inc. Class A (a) 42,600 654,975
1,347,644
TOTAL DURABLES 2,148,444
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 2.3%
ENERGY SERVICES - 0.9%
Halliburton Co. 8,000 $ 272,000
OIL & GAS - 1.4%
Beau Canada Exploration (a) 89,700 150,120
Cabre Exploration Ltd. (a) 16,500 181,515
Murphy Oil Corp. 1,600 71,200
402,835
TOTAL ENERGY 674,835
FINANCE - 10.9%
BANKS - 5.9%
Bank of Boston Corp. 12,000 316,500
BanPonce Corp. 7,500 241,875
Boatmen's Bancshares, Inc. 4,600 157,550
Centura Banks, Inc. 4,000 89,000
First Security Corp. 8,700 267,525
Liberty Bancorporation, Inc. 4,300 136,525
Regions Financial Corp. 2,500 89,063
Shawmut National Corp. 10,350 219,938
SunTrust Banks, Inc. 5,000 243,125
1,761,101
CREDIT & OTHER FINANCE - 2.0%
GFC Financial Corp. 15,400 583,275
FEDERAL SPONSORED CREDIT - 1.5%
Federal National Mortgage Association 5,250 455,432
INSURANCE - 1.5%
Gryphon Holdings, Inc. (a) 10,600 147,075
Life RE Corp. 6,500 139,750
SAFECO Corp. 2,800 155,050
441,875
TOTAL FINANCE 3,241,683
HEALTH - 7.4%
DRUGS & PHARMACEUTICALS - 2.0%
American Cyanamid Co. 6,850 415,281
Noven Pharmaceuticals, Inc. (a) 15,500 178,250
593,531
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 1.5%
Acuson Corp. (a) 11,000 $ 136,125
Baxter International, Inc. 12,000 316,500
452,625
MEDICAL FACILITIES MANAGEMENT - 3.9%
Humana, Inc. (a) 16,500 309,375
Lincare Holdings, Inc. (a) 18,800 401,850
U.S. Healthcare, Inc. 12,000 454,500
1,165,725
TOTAL HEALTH 2,211,881
INDUSTRIAL MACHINERY & EQUIPMENT - 8.0%
ELECTRICAL EQUIPMENT - 4.8%
California Amplifier, Inc. (a) 50,000 206,250
Cherry Corp. (a) 59,600 730,100
Cherry Corp. Class A (a) 41,600 509,600
1,445,950
INDUSTRIAL MACHINERY & EQUIPMENT - 2.7%
Applied Power, Inc. Class A 19,300 410,125
Joy Technologies, Inc. Class A (a) 25,000 246,875
Welbilt Corp. (a) 6,500 152,750
809,750
POLLUTION CONTROL - 0.5%
Western Waste Industries, Inc. (a) 7,300 146,913
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,402,613
MEDIA & LEISURE - 11.1%
BROADCASTING - 2.5%
CAI Wireless Systems, Inc. (a) 14,000 140,000
Infinity Broadcasting Corp. (a) 13,400 386,925
New World Communications Group, Inc. Class A (a) 10,000 128,750
People's Choice TV Corp. (a) 4,600 98,325
754,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.9%
Royal Carribean Cruises Ltd. 9,200 $ 265,650
LEISURE DURABLES & TOYS - 4.9%
Brunswick Corp. 5,800 138,475
ERO, Inc. (a) 14,000 122,500
Outboard Marine Corp. 25,700 578,250
West Marine, Inc. (a) 31,000 627,750
1,466,975
LODGING & GAMING - 1.4%
Caesars World, Inc. (a) 7,700 306,075
Promus Companies, Inc. (a) 4,000 116,000
422,075
RESTAURANTS - 1.4%
Brinker International, Inc. (a) 12,200 272,975
Quality Dining, Inc. (a) 12,000 130,500
403,475
TOTAL MEDIA & LEISURE 3,312,175
NONDURABLES - 6.8%
FOODS - 4.1%
IBP, Inc. 30,750 895,594
Michael Foods, Inc. 25,400 327,025
1,222,619
TOBACCO - 2.7%
RJR Nabisco Holdings Corp. (a) 91,500 560,438
UST, Inc. (a) 9,000 259,875
820,313
TOTAL NONDURABLES 2,042,932
RETAIL & WHOLESALE - 6.8%
APPAREL STORES - 1.8%
AnnTaylor Stores Corp. (a) 4,100 168,613
Cato Corp. Class A 20,400 209,100
Talbots, Inc. 4,800 156,600
534,313
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 0.8%
Lechters, Inc. (a) 16,000 $ 224,000
GROCERY STORES - 0.6%
Safeway, Inc. (a) 7,800 193,050
RETAIL & WHOLESALE, MISCELLANEOUS - 3.6%
Brookstone, Inc. (a) 19,100 233,975
Circuit City Stores, Inc. 21,500 470,313
Finish Line, Inc. Class A (a) 25,500 223,125
Friedmans, Inc. Class A (a) 10,000 143,750
1,071,163
TOTAL RETAIL & WHOLESALE 2,022,526
SERVICES - 2.1%
ADVERTISING - 0.7%
ADVO-Systems, Inc. 12,000 201,000
PRINTING - 0.5%
Skybox International, Inc. (a) 12,000 139,500
SERVICES - 0.9%
Manpower, Inc. 11,900 285,600
TOTAL SERVICES 626,100
TECHNOLOGY - 10.7%
COMMUNICATIONS EQUIPMENT - 2.6%
Aspect Telecommunications Corp. (a) 6,900 205,275
Cabletron Systems, Inc. (a) 3,600 362,700
General Instrument Corp. (a) 3,300 200,063
768,038
COMPUTER SERVICES & SOFTWARE - 3.2%
Broderbund Software, Inc. (a) 6,000 291,000
Electronic Arts (a) 10,000 142,500
MicroAge, Inc. (a) 11,900 113,794
Parametric Technology Corp. (a) 6,700 165,825
Sybase, Inc. (a) 6,500 255,938
969,057
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 0.5%
EMC Corp. (a) 10,000 $ 148,750
ELECTRONIC INSTRUMENTS - 1.7%
Kulicke & Soffa Industries, Inc. (a) 30,300 374,963
Megatest Corp. (a) 7,500 124,688
499,651
ELECTRONICS - 2.7%
Advanced Micro Devices, Inc. (a) 4,400 118,800
Intel Corp. 5,200 308,100
Linear Technology Corp. 6,900 276,000
Maxim Integrated Products, Inc. (a) 2,400 115,800
Cascade Communications Corp. (a) 100 1,500
820,200
TOTAL TECHNOLOGY 3,205,696
TRANSPORTATION - 3.7%
RAILROADS - 0.5%
Wisconsin Central Transportation Corp. (a) 4,000 157,000
TRUCKING & FREIGHT - 3.2%
Carolina Freight Corp. 68,600 634,550
Landstar System, Inc. (a) 9,800 308,700
943,250
TOTAL TRANSPORTATION 1,100,250
TOTAL COMMON STOCKS
(Cost $25,207,841) 25,738,235
REPURCHASE AGREEMENTS - 13.8%
MATURITY
AMOUNT
Investments in repurchase agreements,
(U.S. Treasury obligations), in a joint
trading account at 4.23% dated
7/29/94 due 8/1/94 $ 4,112,449 4,111,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $29,318,841) $ 29,849,235
LEGEND
(n) Non-income producing
INCOME TAX INFORMATION
At July 31, 1994, the aggregate cost of investment securities for income
tax purposes was $29,318,841. Net unrealized appreciation aggregated
$530,394, of which $1,639,272 related to appreciated investment securities
and $1,108,878 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JULY 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 29,849,235
agreements of $4,111,000) (cost $29,318,841)
(Notes 1 and 2) - See accompanying schedule
Cash 73
Receivable for investments sold 1,195,709
Receivable for fund shares sold 403,572
Dividends receivable 5,037
TOTAL ASSETS 31,453,626
LIABILITIES
Payable for investments purchased $ 1,817,329
Payable for fund shares redeemed 100,336
Accrued management fee 14,894
Other payables and accrued expenses 50,441
TOTAL LIABILITIES 1,983,000
NET ASSETS $ 29,470,626
Net Assets consist of (Note 1):
Paid in capital $ 29,312,786
Accumulated net investment loss (50,944)
Accumulated undistributed net realized gain (loss) on (321,610)
investments
Net unrealized appreciation (depreciation) on 530,394
investments
NET ASSETS, for 2,967,682 shares outstanding $ 29,470,626
NET ASSET VALUE, offering price and redemption price per $9.93
share ($29,470,626 (divided by) 2,967,682 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS MARCH 29, 1994 (COMMENCEMENT OF OPERATIONS) TO JULY 31, 1994
(UNAUDITED)
INVESTMENT INCOME $ 38,940
Dividends
Interest 50,881
TOTAL INCOME 89,821
EXPENSES
Management fee (Note 4) $ 43,173
Transfer agent fees (Note 4) 55,638
Accounting fees and expenses (Note 4) 15,490
Non-interested trustees' compensation 28
Custodian fees and expenses 10,027
Registration fees 10,297
Audit 6,459
Legal 5
Miscellaneous 92
Total expenses before reductions 141,209
Expense reductions (Note 5) (444) 140,765
NET INVESTMENT INCOME (LOSS) (50,944)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1, 2 AND 3)
Net realized gain (loss) on:
Investment securities (290,725)
Futures contracts (30,885) (321,610)
Change in net unrealized appreciation (depreciation) on 530,394
investment securities
NET GAIN (LOSS) 208,784
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 157,840
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C>
MARCH 29, 1994
(COMMENCEMENT
OF OPERATIONS) TO
JULY 31, 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ (50,944)
Net investment income (loss)
Net realized gain (loss) (321,610)
Change in net unrealized appreciation (depreciation) 530,394
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 157,840
Share transactions 43,872,147
Net proceeds from sales of shares
Cost of shares redeemed (14,559,361)
Net increase (decrease) in net assets resulting from share transactions 29,312,786
TOTAL INCREASE (DECREASE) IN NET ASSETS 29,470,626
NET ASSETS
Beginning of period -
End of period (including accumulated net investment loss of $50,944) 29,470,626
OTHER INFORMATION
Shares
Sold 4,456,664
Redeemed (1,488,982)
Net increase (decrease) 2,967,682
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C>
MARCH 29, 1994
(COMMENCEMENT OF
OPERATIONS) TO
JULY 31, 1994
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.00
Income from Investment Operations
Net investment income (.02)
Net realized and unrealized gain (loss) (.05)C
Total from investment operations (.07)
Net asset value, end of period $ 9.93
TOTAL RETURN B (.70)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 29,471
Ratio of expenses to average net assets 2.06% A
Ratio of expenses to average net assets before expense reductions 2.07% A
Ratio of net investment income to average net assets (.75)% A
Portfolio turnover rate 170% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN AND FOR PERIODS OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED. (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS)
C THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF
SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET
VALUES OF THE INVESTMENTS OF THE FUND.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1994 (Unaudited)
9. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Mid-Cap Stock Fund (the fund) is a fund of Fidelity Devonshire
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 for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities maturing within sixty days are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and
losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. The effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. The fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. By so qualifying, the fund
will not be 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."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income is accrued as earned. Investment income
is recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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 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
futures transactions.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated net investment loss may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
10. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. The U.S. dollar value of forward foreign currency
contracts is determined using forward currency exchange rates supplied by a
quotation service. Losses may arise due to changes in the value of the
foreign currency or if the counterparty does not perform under the
contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
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
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED.
fund, along with other affiliated entities of FMR, may transfer uninvested
cash balances into one or more joint trading accounts. These balances are
invested in one or more repurchase agreements that mature in 60 days or
less from the date of purchase, and are collateralized by U.S. Treasury or
Federal Agency obligations.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures and options
contracts and write options. These investments involve, to varying degrees,
elements of market risk and risks in excess of the amount recognized in the
Statement of Assets and Liabilities. The face or contract amounts reflect
the extent of the involvement the fund has in the particular classes of
instruments. Risks may be caused by an imperfect correlation between
movements in the price of the instruments and the price of the underlying
securities and interest rates. Risks also may arise if there is an illiquid
secondary market for the instruments, or due to the inability of
counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
11. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $37,828,918 and $12,330,352, respectively.
The market value of futures contracts opened and closed amounted to
$3,928,705 and $3,897,820, respectively.
12. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic 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
.285% to .520% 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%.
The basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .20%) based on the fund's investment performance as compared
to the appropriate index over a specified period of time. The fund's
performance adjustment will not take effect until March, 1995. For the
period, the management fee was equivalent to an annualized rate of .63% of
average net assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .27% to .52%. Effective August 1, 1994, 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
TRANSFER AGENT FEES. 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 FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $18,393 for the period.
13. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$444 under this arrangement.
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. French, Treasurer
William J. Hayes, Vice President
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FIDELITY GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Fidelity Fifty
Growth Company Fund
Low-Priced Stock Fund
Magellan Fund
Mid-Cap Stock Fund
New Millennium Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Stock Fund
Stock Selector
Trend Fund
Value 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)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
REAL ESTATE INVESTMENT
PORTFOLIO
SEMIANNUAL REPORT
JULY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 15 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 19 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The first half of 1994 was an unsettling time for many investors. After
three years of a nearly perfect environment for stock market investing,
stock prices generally fell from February through June. Investors disagree
about whether this decline represents only a short-term correction or
signals the beginning of a longer bear market. One can collect statistics
to support either opinion, but of course, nobody knows for sure what will
happen to stock prices in the months ahead.
We do know, however, that market declines are a normal part of stock market
investing. We have historically seen corrections of 10% or more every two
years. That's why I thought this might be a good time to review three basic
investment principles that have proven helpful to successful stock market
investors in every market cycle.
First, take a long-term approach when investing in stocks and stock funds.
If you can afford to leave your money invested through the market's
inevitable ups and downs, you will greatly reduce your vulnerability to any
single decline. Over time, stock prices have gone up - and have
significantly outperformed other types of investments and stayed ahead of
inflation. But in the short-term, because of their volatility, stocks have
greater risk.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
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.SM
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
performance 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 stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1994 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Real Estate Investment 1.40% 2.51% 71.33% 101.29%
S&P 500(registered trademark) -3.50% 5.16% 54.91% 140.30%
Average Real Estate -2.44% 3.50% 37.04% 101.43%
Fund
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 17, 1986. For example, if you had
invested $1,000 in a fund that had a 5% return over the past year, you
would have $1,050. You can compare these figures to the performance of the
Standard & Poor's Composite Index of 500 Stocks - a common proxy for the
U.S. stock market. You can also compare them to the average real estate
fund, which reflects the performance of 13 real estate funds tracked by
Lipper Analytical Services. Both benchmarks include reinvested dividends
and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Real Estate Investment 2.51% 11.37% 9.50%
S&P 500(registered trademark) 5.16% 9.15% 12.04%
Average Real Estate Fund 3.50% 6.28% 9.53%
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
Real Estate Standard & Poor's 500 Stock Index
11/17/86 10000.00 10000.00
11/30/86 10040.00 10206.19
12/31/86 9940.00 9945.93
01/31/87 10380.00 11285.65
02/28/87 10550.00 11731.43
03/31/87 10750.17 12070.47
04/30/87 10398.20 11963.05
05/31/87 10207.13 12067.12
06/30/87 10549.93 12676.51
07/31/87 10509.12 13319.21
08/31/87 10305.06 13816.02
09/30/87 10057.55 13513.45
10/31/87 8700.66 10602.65
11/30/87 8938.89 9728.99
12/31/87 9176.83 10469.37
01/31/88 9773.01 10910.13
02/29/88 10092.39 11418.54
03/31/88 10005.85 11065.71
04/30/88 10016.67 11188.54
05/31/88 9778.69 11285.88
06/30/88 10105.18 11803.90
07/31/88 10149.16 11759.05
08/31/88 10050.20 11359.24
09/30/88 10204.87 11843.14
10/31/88 10115.45 12172.38
11/30/88 9970.14 11998.32
12/31/88 10127.87 12208.29
01/31/89 10230.05 13101.93
02/28/89 10264.12 12775.70
03/31/89 10343.06 13073.37
04/30/89 10619.80 13751.88
05/31/89 10815.82 14308.83
06/30/89 11186.69 14227.27
07/31/89 11748.37 15511.99
08/31/89 11912.19 15816.03
09/30/89 11771.61 15751.18
10/31/89 11332.55 15385.75
11/30/89 11474.94 15699.62
12/31/89 11522.85 16076.41
01/31/90 11270.53 14997.69
02/28/90 11198.44 15191.16
03/31/90 11258.52 15593.72
04/30/90 11112.46 15203.88
05/31/90 11063.78 16686.26
06/30/90 11234.66 16572.79
07/31/90 11308.65 16519.76
08/31/90 10507.06 15026.37
09/30/90 9982.05 14294.59
10/31/90 9694.34 14233.12
11/30/90 10307.28 15152.58
12/31/90 10520.84 15575.34
01/31/91 11501.59 16254.42
02/28/91 11858.23 17416.61
03/31/91 12642.55 17838.09
04/30/91 12990.86 17880.91
05/31/91 13300.48 18653.36
06/30/91 12872.44 17799.04
07/31/91 13146.60 18628.47
08/31/91 13211.87 19069.97
09/30/91 13595.18 18751.50
10/31/91 13370.57 19002.77
11/30/91 13238.45 18236.96
12/31/91 14643.76 20323.26
01/31/92 15527.20 19945.25
02/29/92 15192.57 20204.54
03/31/92 15099.45 19810.55
04/30/92 14882.97 20392.98
05/31/92 15329.46 20492.91
06/30/92 15153.08 20187.56
07/31/92 15820.80 21013.23
08/31/92 15861.68 20582.46
09/30/92 16299.69 20825.34
10/31/92 16478.06 20898.23
11/30/92 16779.90 21610.85
12/31/92 17500.63 21876.67
01/31/93 18361.77 22060.43
02/28/93 18806.23 22360.45
03/31/93 20160.60 22832.26
04/30/93 19251.20 22279.72
05/31/93 19013.36 22876.82
06/30/93 19508.30 22943.16
07/31/93 19635.34 22851.39
08/31/93 19945.89 23717.45
09/30/93 20866.97 23534.83
10/31/93 20525.36 24022.00
11/30/93 19329.70 23793.79
12/31/93 19690.25 24081.70
01/31/94 19849.86 24900.47
02/28/94 20822.04 24225.67
03/31/94 20077.33 23169.43
04/30/94 20355.37 23466.00
05/31/94 20794.37 23850.84
06/30/94 20173.05 23266.50
07/31/94 20128.74 24029.64
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Real
Estate Investment Portfolio on November 17, 1986, when the fund started. As
the chart shows, by July 31, 1994, the value of your investment would have
grown to $20,129 - a 101.29% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$24,030 - a 140.30% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks 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)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Barry Greenfield, Portfolio Manager of Fidelity Real
Estate Investment Portfolio
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. The fund returned 1.40% for the six months ended July 31, 1994, compared
to -2.44% for the average real estate fund tracked by Lipper Analytical
Services. The fund's total return for the year ended July 31, 1994, was
2.51%, compared to 3.50% for the Lipper average.
Q. WHAT HAS THE REAL ESTATE INVESTMENT ENVIRONMENT BEEN LIKE OVER THE PAST
SIX MONTHS?
A. The real estate industry has improved, with the apartment and hotel
sectors leading the way. At the same time, average prices for REITs, or
real estate investment trusts - which make up the bulk of the fund - have
been relatively flat since February. This is because there has been a tidal
wave of new issues and secondary offerings of existing REITs, which has
overwhelmed the purchasing power of buyers. To illustrate, from January 1
to July 31, 1994, there have been $7.6 billion of new REITs issued. This
has led to a postponement of six new issues, because private owners don't
want to sell when REIT values are too low. However, periods like this are
usually followed by a recovery. The stop/start performance of REITs is more
a function of investment banking market conditions than the underlying
fundamentals of the companies in the market.
Q. WHAT KIND OF APARTMENT INVESTMENTS IS THE FUND FOCUSED ON?
A. I now prefer apartment REITs that can and are developing properties.
Real estate companies can grow assets in two ways: they can buy an existing
property that will give a higher return than the cost of buying it -
called spread investing - or they can develop a new property. In growing
cities such as Atlanta, Orlando and Denver, selling prices have gone up, so
the opportunity to spread invest in these more attractive areas has
diminished.
Developers like Post Properties in Atlanta and Oasis Residential in Las
Vegas are the types that should do well going forward.
Q. WHAT ABOUT HOTELS?
A. There are currently only seven hotel REITs nationwide and I am invested
in all of them. Hotel revenues are up about 8%, with occupancy and room
rates on the rise. This is clearly one real estate area that is doing well
at this point in the economic recovery. The fund owns RFS Hotel Investors
and Equity Inns, companies that are borrowing money on Wall Street, then
buying hotels, which when fixed up and run right are yielding 11% to 12%.
Also, I have about a 1.4% stake in hotel stocks that aren't REITs because
there's not enough supply in that area. But as soon as there are more
REITs, I'll sell these hotel stocks and buy hotel REITs. Although they may
carry some additional risk, hotel REITs offer higher yields.
Q. ARE THERE OTHER AREAS THAT
INTEREST YOU?
A. Yes, two. The first is industrial developers who custom build, called
"build-to-suit." The fund owns CenterPoint Properties in Chicago and Duke
Realty Investors in Indiana. The heartland seems to be reviving, and, as
prices of raw materials are going up, companies are choosing to build
warehouses to store their increased inventories. Also, some companies like
Wal-Mart have developed regional distribution centers, again increasing the
demand for warehouse space. The second is an area new to the fund,
industrial storage companies such as Storage USA, Shurgard and Storage
Equities. These companies are buying out smaller operations and
consolidating nationally.
Q. WHAT ABOUT MALLS?
A. Malls are a unique animal. They have little, if any, growth, but they're
relatively inexpensive and pay good dividends. One of the newest members of
the fund's top 10 is a mall company, DeBartolo Realty. The name of the game
in malls is putting money into fixing up the smaller stores and attracting
better, nationally known tenants. For a while, DeBartolo didn't have the
money to improve its smaller stores, but its malls are in great locations
and are well built. Now that the company's gone public, it will be able to
renovate and bring in more quality national tenants.
Q. WHAT HAVE BEEN SOME OF THE DISAPPOINTMENTS?
A. G&L Realty Corp., a Beverly Hills medical office REIT, came public about
six months ago and its stock is down about 11% in value. The southern
California earthquake hit several of the company's buildings, forcing
management to spend time and money fixing existing properties instead of
acquiring new ones. Still, G&L is producing about a 10% yield, so I'm
determined to stick with the investment. It's also interesting to note that
two of the fund's top 10 investments are also disappointments, not because
they've lost a great deal, but because they've been somewhat stagnant. The
first, Developers Diversified Realty - a Wal-Mart and Kmart shopping center
developer, and the fund's second largest investment - is in very good
shape, but has come to the market twice for more money. However, the market
has not been enamored with shopping centers. The second, Oasis Residential
- - the apartment developer I've already mentioned - is raising capital to
grow, but there has been a lot of competition in the apartment REIT market,
so its price has not appreciated during the period. Nevertheless, I'll
stick with these two companies because I think their long-term prospects
are excellent.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I see an improving real estate economy with strengthening hotel
occupancy and revenues, rising apartment rents, stable shopping center
revenue, and an increase in the industrial "build-to-suit" area. I also see
the office industry struggling as older leases are rewritten for lower
rates. In general, I think the fund should benefit from the continued
growth of the economy and its effect on the sectors I've mentioned. In
addition, if interest rates go up, the fund may benefit because it owns
existing real estate. When interest rates rise, it becomes more difficult
to find capital to start new competing construction. As a result, existing
real estate prices usually increase when interest rates rise.
FUND FACTS
GOAL: to provide
above-average income and
increase the value of the
fund's shares by investing
primarily in the securities of
companies principally
engaged in the real estate
industry
START DATE: November 17, 1986
SIZE: as of July 31, 1994,
more than $533 million
MANAGER: Barry Greenfield,
since November 1986;
manager Fidelity Fund, 1982
- - 1993; joined Fidelity in
1968
(checkmark)
BARRY GREENFIELD ON THE
SECURITIZATION OF REAL ESTATE:
"In my view, within the next 20
years the REIT industry will
grow as large as $400 billion.
REITS should become a
major investment category.
Presently, with the REIT
industry at about $43 billion,
it's like we're only in the third
inning of a nine-inning game.
The investor has to realize
that the home team is not
ahead after every inning.
Influxes of new issues knock
REIT stocks down, and then
they go back up. That
fluctuation is part of the
securitization of real estate."
(solid bullet) The fund has the authority
to use derivatives, but had no
derivative investments as of
July 31, 1994.
(solid bullet) As the economy recovered,
the fund owned a higher
percentage of real estate
investments that benefited
from the recovery, including
apartments, which made up
27.0%, industrial buildings
10.4%, and hotels 3.2% of the
fund as of
July 31, 1994 .
(solid bullet) In January 1992, REITs
were roughly a $5 billion
industry. As of July 31, 1994,
the industry has grown to
about $43 billion.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Equity Residential Property Trust 6.2 5.1
(SBI)
Developers Diversified Realty 6.0 6.0
Corp.
Simon Properties Group, Inc. 4.8 4.3
Kimco Realty Corporation 4.5 4.4
Federal Realty Investment Trust 4.0 4.4
(SBI)
Oasis Residential, Inc. 2.6 1.8
DeBartolo Realty Corp. 2.6 -
Weingarten Realty Investors (SBI) 2.4 1.6
Duke Realty Investors, Inc. 2.2 1.1
Property Trust of America (SBI) 2.2 3.5
TOP FIVE REIT SECTORS AS OF JULY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Shopping Centers 27.3 26.8
Apartments 27.0 22.6
Malls 12.3 6.5
Industrial Buildings 10.4 0.6
Mobile Home Parks 4.5 7.0
ASSET ALLOCATION
AS OF JULY 31, 1994* AS OF JANUARY 31, 1994**
Row: 1, Col: 1, Value: 5.5
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 41.0
Row: 1, Col: 1, Value: 7.8
Row: 1, Col: 2, Value: 8.4
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 33.8
Stocks 91.0%
Convertibles 3.5%
Short-term
investments 5.5%
FOREIGN
INVESTMENTS 0.0%
Stocks 83.8%
Convertibles 8.4%
Short-term
investments 7.8%
FOREIGN
INVESTMENTS 1.0%
*
**
INVESTMENTS JULY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 91.0%
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 0.1%
CONSTRUCTION - 0.1%
Oriole Homes Corp. Class B 62,800 $ 455,300
REAL ESTATE INVESTMENT TRUSTS (REITS) - 89.5%
REITS - APARTMENTS - 26.3%
Amli Residential Properties Trust (SBI) 143,600 3,087,400
Associated Estates Realty Corp. 103,500 2,225,250
Avalon Properties, Inc. 478,200 10,101,975
Bay Apartment Community 310,200 6,359,100
Berkshire Realty, Inc. 468,200 4,682,000
Colonial Property Trust (SBI) 376,700 8,428,663
Columbus Realty Trust 175,000 3,368,750
Equity Residential Property Trust (SBI) 1,013,900 33,205,225
Gables Residential Trust 133,400 2,968,150
Home Properties of NY 150,000 2,868,750
Irvine Apartment Communities 155,000 3,100,000
Merry Land & Investment Co., Inc. 400,710 8,264,644
Oasis Residential, Inc. 566,500 13,879,250
Post Properties, Inc. 344,900 10,691,900
Property Trust of America:
(SBI) 640,984 11,617,835
(rights) (a) 640,984 10,019
Sizeler Property Investors, Inc. 111,100 1,444,300
Smith (Charles E.) Residential Realty, Inc. (a) 255,000 6,406,875
South West Property Trust, Inc. 166,300 1,974,813
Summit Property Trust 34,800 678,600
United Dominion Realty Trust, Inc. 258,100 3,581,138
Walden Residential Properties, Inc. 90,000 1,833,750
140,778,387
REITS - FACTORY OUTLETS - 4.2%
Chelsea GCA Realty, Inc. 327,000 9,156,000
Factory Stores America, Inc. 73,000 1,660,750
Horizon Outlet Centers, Inc. 310,800 7,498,050
McArthur/Glen Realty Corp. (a) 12,300 201,413
Tanger Factory Outlet Centers, Inc. 149,000 3,948,500
22,464,713
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - HEALTHCARE FACILITIES - 1.3%
LTC Properties, Inc. 208,100 $ 2,965,425
Meditrust (SBI) 26,500 857,938
Nationwide Health Properties, Inc. 85,300 3,092,125
6,915,488
REITS - HOTELS - 3.2%
Equity Inns, Inc. 240,000 2,970,000
Felcor Suite Hotels 158,100 3,557,250
Hotel Investors Trust units (1 SBI Hotel Investors Trust & 1
common Hotel Investors Corp.) (a) 104,400 313,200
Jameson Co. 48,000 426,000
RFS Hotel Investors, Inc. 448,100 7,729,725
Resort Income Investors, Inc. 117,400 1,262,050
Winston Hotels, Inc. 72,000 774,000
17,032,225
REITS - INDUSTRIAL BUILDINGS - 10.1%
Bedford Property Investors, Inc. (b) 411,000 2,825,625
CenterPoint Properties Corp. 119,500 2,464,688
Duke Realty Investors, Inc. 430,809 11,631,843
EastGroup Properties (SBI) 122,200 2,337,075
MGI Properties, Inc. 184,400 2,789,050
Security Capital Industrial Trust 197,983 3,464,703
Shurgard Storage Centers, Inc. 115,500 2,569,875
Speiker Properties, Inc. 360,000 7,650,000
Storage Equities, Inc. 168,000 2,541,000
Storage USA, Inc. 261,500 6,929,750
Trinet Corporate Realty Trust, Inc. 323,300 9,052,400
54,256,009
REITS - MALLS - 11.3%
CBL & Associates Properties 285,500 5,745,688
Crown American Realty Trust (SBI) 165,600 2,359,800
DeBartolo Realty Corp. 958,400 13,657,200
MSA Realty Corp. 103,400 736,725
Macerich Company 295,900 5,844,025
Simon Properties Group, Inc. 961,900 25,610,588
Urban Shopping Centers, Inc. 286,000 6,292,000
60,246,026
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - MOBILE HOME PARKS - 4.5%
Chateau Properties, Inc. 195,500 $ 4,374,313
Manufactured Home Community 552,200 11,320,100
ROC Communities, Inc. 223,600 4,472,000
Sun Communities 184,600 4,153,500
24,319,913
REITS - OFFICE BUILDINGS - 2.0%
Cousins Properties, Inc. 224,300 3,700,950
Crocker Realty Investors, Inc. (a)(b) 81,000 627,750
G&L Realty Corp. 185,300 2,895,313
Highwoods Properties, Inc. 5,300 107,988
JDN Realty Corp. 9,700 214,613
Koger Equity, Inc. (a) 52,500 518,438
Liberty Property Trust (SBI) 126,400 2,480,600
10,545,652
REITS - SHOPPING CENTERS - 26.6%
Bradley Real Estate Trust (SBI) (b) 1,241,900 10,556,150
Burnham Pacific Properties, Inc. 209,500 3,456,750
Developers Diversified Realty Corp. (b) 1,045,200 32,009,250
Excel Realty Trust, Inc. 141,400 2,810,325
Federal Realty Investment Trust (SBI) 852,700 21,210,913
Franchise Finance Corp. of America 251,000 5,020,000
Glimcher Realty Trust 255,900 5,341,913
Haagen Alexander Properties, Inc. 420,700 7,362,250
JP Realty, Inc. 145,000 2,881,875
Kimco Realty Corporation 654,000 24,198,000
Mid-America Realty Investments, Inc. 18,900 177,188
Property Capital Trust 17,500 102,813
Vornado Realty Trust 311,500 11,447,625
Weingarten Realty Investors (SBI) 347,200 13,020,000
Western Investment Real Estate Trust (SBI) 180,800 2,508,600
142,103,652
TOTAL REAL ESTATE INVESTMENT TRUSTS 478,662,065
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 1.4%
HOTELS - 1.4%
Prime Hospitality Corp. (a) 460,000 $ 3,565,000
Red Lion Inns LP 155,800 3,895,000
Resort Hotels PLC 200,000 125,051
7,585,051
TOTAL COMMON STOCKS
(Cost $465,064,406) 486,702,416
CONVERTIBLE PREFERRED STOCKS - 2.0%
REAL ESTATE INVESTMENT TRUSTS (REITS) - 2.0%
REITS - APARTMENTS - 0.7%
Merry Land & Investment, Inc. 130,000 3,591,250
REITS - INDUSTRIAL BUILDINGS - 0.3%
Storage Equities, Inc. $2.0625 60,000 1,657,500
REITS - MALLS - 1.0%
Rouse Co., Series A 102,200 5,314,400
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $10,186,091) 10,563,150
CONVERTIBLE BONDS - 1.5%
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - 1.5%
REITS - HEALTHCARE - 0.8%
LTC Properties, Inc. 9 3/4%, 7/1/94 $ 3,000,000 4,230,000
REITS - SHOPPING CENTERS - 0.7%
Malan Realty Investors 9 1/2%, 7/15/94 4,000,000 3,900,000
TOTAL CONVERTIBLE BONDS
(Cost $7,915,000) 8,130,000
REPURCHASE AGREEMENTS - 5.5%
MATURITY VALUE (NOTE 1)
AMOUNT
Investments in repurchase agreements,
(U.S. Treasury obligations), in a
joint trading account at 4.23%
dated 7/29/94 due 8/1/94 $ 29,415,370 $ 29,405,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $512,570,497) $ 534,800,566
LEGEND
(a) Non-income producing.
(b) Affiliated company (see Note 6 of Notes to Financial Statements).
INCOME TAX INFORMATION
At July 31, 1994, the aggregate cost of investment securities for income
tax purposes was $512,913,650. Net unrealized appreciation aggregated
$21,886,916, of which $34,571,062 related to appreciated investment
securities and $12,684,146 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JULY 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 534,800,566
agreements of $29,405,000) (cost $512,570,497) -
See accompanying schedule
Cash 966
Receivable for investments sold 7,861,777
Receivable for fund shares sold 2,039,777
Dividends receivable 1,539,434
Interest receivable 59,073
Other receivables 16,789
TOTAL ASSETS 546,318,382
LIABILITIES
Payable for investments purchased $ 10,330,811
Payable for fund shares redeemed 1,771,682
Accrued management fee 279,505
Other payables and accrued expenses 277,851
TOTAL LIABILITIES 12,659,849
NET ASSETS $ 533,658,533
Net Assets consist of (Note 1):
Paid in capital $ 513,988,231
Undistributed net investment income 3,824,311
Accumulated undistributed net realized gain (loss) on (6,384,078)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 22,230,069
investments
NET ASSETS, for 39,139,707 shares outstanding $ 533,658,533
NET ASSET VALUE, offering price and redemption price per $13.63
share ($533,658,533 (divided by) 39,139,707 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1994 (UNAUDITED)
INVESTMENT INCOME $ 14,216,898
Dividends (including $2,045,597 received from affiliated
issuers) (Note 6)
Interest 1,309,545
TOTAL INCOME 15,526,443
EXPENSES
Management fee $ 1,602,122
Transfer agent fees 1,166,608
Accounting fees and expenses 151,653
Non-interested trustees' compensation 1,468
Custodian fees and expenses 28,851
Registration fees 78,241
Audit 21,596
Legal 1,527
Miscellaneous 16,208
Total expenses before reductions 3,068,274
Expense reductions (67,953) 3,000,321
NET INVESTMENT INCOME 12,526,122
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment securities (including realized loss of (6,130,960)
$610,830
on sales of investments in affiliated issuers)
Foreign currency transactions 518 (6,130,442)
Change in net unrealized appreciation (depreciation) on (4,338,926)
investment securities
NET GAIN (LOSS) (10,469,368)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 2,056,754
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JULY 31, JANUARY 31,
1994 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 12,526,122 $ 18,128,279
Net investment income
Net realized gain (loss) (6,130,442) 1,412,613
Change in net unrealized appreciation (depreciation) (4,338,926) 3,281,151
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,056,754 22,822,043
FROM OPERATIONS
Distributions to shareholders from net investment income (9,634,283) (17,531,033)
Share transactions 464,383,749 902,518,648
Net proceeds from sales of shares
Reinvestment of distributions 8,692,627 16,135,275
Cost of shares redeemed (362,444,859) (739,963,733)
Net increase (decrease) in net assets resulting from 110,631,517 178,690,190
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 103,053,988 183,981,200
NET ASSETS
Beginning of period 430,604,545 246,623,345
End of period (including undistributed net investment $ 533,658,533 $ 430,604,545
income of $3,824,311 and $932,472, respectively)
OTHER INFORMATION
Shares
Sold 32,984,831 64,864,558
Issued in reinvestment of distributions 615,110 1,182,763
Redeemed (25,948,012) (53,208,850)
Net increase (decrease) 7,651,929 12,838,471
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED JANUARY 31,
ENDED
JULY 31,
1994
(UNAUDITED) 1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, $ 13.68 $ 13.22 $ 11.60 $ 9.03 $ 9.38 $ 9.01
beginning of period
Income from
Investment
Operations
Net investment .32 .54 .68E .43 .77 .74
income
Net realized and (.12) .52 1.37 2.63 (.61) .17
unrealized gain
(loss)
Total from .20 1.06 2.05 3.06 .16 .91
investment
operations
Less Distributions
From net (.25) (.60) (.43) (.49) (.51) (.54)
investment
income
Net asset value, end $ 13.63 $ 13.68 $ 13.22 $ 11.60 $ 9.03 $ 9.38
of period
TOTAL RETURN B, C 1.40% 8.10% 18.26% 35.00% 2.05% 10.17%
RATIOS AND SUPPLEMENTAL DATA
Net assets, $ 534 $ 431 $ 247 $ 76 $ 45 $ 50
end of period
(in millions)
Ratio of expenses to 1.18%A 1.13% 1.16% 1.24% 1.47% 1.39%
average net
assetsD
Ratio of expenses to 1.21%A 1.17% 1.16% 1.24% 1.47% 1.39%
average net assets
before expense
reductionsD
Ratio of net 4.92%A 4.34% 5.81% 5.84% 8.45% 7.11%
investment income
to average net
assets
Portfolio turnover 78%A 110% 82% 84% 49% 70%
rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
D SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.
E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1994 (Unaudited)
14. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Real Estate Investment Portfolio (the fund) is a fund of Fidelity
Devonshire 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 for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities maturing within sixty days are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective February 1, 1994, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment in securities.
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."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income is accrued as earned. Investment income
is recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
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 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
market discount, partnerships, non-taxable dividends, capital loss
carryforwards, and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes.
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 at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
15. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. The U.S. dollar value of forward foreign currency
contracts is determined using forward currency exchange rates supplied by a
quotation service. Losses may arise due to changes in the value of the
foreign currency or if the counterparty does not perform under the
contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
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 affiliated
entities
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT -
CONTINUED
of FMR, may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more repurchase
agreements that mature in 60 days or less from the date of purchase, and
are collateralized by U.S. Treasury or Federal Agency obligations.
16. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $299,140,091 and $182,411,750, respectively.
17. 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 and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .285% to .52% for the period from February 1, 1994 to
July 31, 1994. These rates were voluntarily implemented by FMR for the
period as they resulted in the same or a lower management fee as compared
to the contractual rates in effect for the fund at the time of the
voluntary implementation. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annualized rate of .63%
of average net assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .27% to .52%. Effective August 1, 1994, FMR voluntarily agreed
to implement this new group fee rate schedule as it results in the same or
a lower management fee.
TRANSFER AGENT FEES. 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 FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $219,315 for the period.
18. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$67,953 under this arrangement.
19. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies which are or
were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
PURCHASE SALES DIVIDEND MARKET
AFFILIATES COST COST INCOME VALUE
Bedford Property Investors, Inc. $ 702,222 $ - $ 69,390 $ 2,825,625
Bradley Real Estate Trust (SBI) 450,543 - 391,888 10,556,150
Crocker Realty Investors, Inc. (a) 139,625 - - 627,750
Developers Diversified Realty Corp. 5,696,948 1,772,000 869,328
32,009,250
EastGroup Properties (SBI) 21,416 787,578 120,830 -
Manufactured Home Community 1,903,380 2,838,685 594,161 -
TOTALS $ 8,914,134 $ 5,398,263 $ 2,045,597 $ 46,018,775
(a) Non-income producing.
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)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(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)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(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
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc. London, England
Fidelity Management & Research
(Far East) Inc. Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Fidelity Fifty
Growth Company Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(trademark) Fund
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UTILITIES
FUND
(FORMERLY FIDELITY UTILITIES INCOME FUND)
SEMIANNUAL REPORT
JULY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 24 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 28 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD
OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The first half of 1994 was an unsettling time for many investors. After
three years of a nearly perfect environment for stock market investing,
stock prices generally fell from February through June. Investors disagree
about whether this decline represents only a short-term correction or
signals the beginning of a longer bear market. One can collect statistics
to support either opinion, but of course, nobody knows for sure what will
happen to stock prices in the months ahead.
We do know, however, that market declines are a normal part of stock market
investing. We have historically seen corrections of 10% or more every two
years. That's why I thought this might be a good time to review three basic
investment principles that have proven helpful to successful stock market
investors in every market cycle.
First, take a long-term approach when investing in stocks and stock funds.
If you can afford to leave your money invested through the market's
inevitable ups and downs, you will greatly reduce your vulnerability to any
single decline. Over time, stock prices have gone up - and have
significantly outperformed other types of investments and stayed ahead of
inflation. But in the short-term, because of their volatility, stocks have
greater risk.
Second, you can further manage risk by diversifying your investments. A
stock mutual fund is already diversified, because it invests in many
different companies. You can increase your diversification by investing in
a number of different stock funds, or in different investment categories,
such as bonds. You should also keep money you'll need in the near future in
a more stable investment.
Finally, it makes good sense to follow a regular investment plan, investing
a set amount of money at the same time each month or quarter. That way, you
can avoid getting caught up in the excitement of a rapidly-rising market -
and won't end up buying all your shares at market highs. This strategy
won't assure a profit or protect you from a loss in a declining market, but
it should help you lower the average cost of your purchases. For this to be
effective, you must continue to buy shares in both up and down markets.
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.SM
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
performance 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 stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1994 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Utilities Fund -4.94% -0.37% 69.11% 128.19%
S&P 500(registered trademark) -3.50% 5.16% 54.91% 133.13%
S&P Utilities Index -5.83% -6.42% 46.89% 121.65%
Average Utility Fund -7.15% -6.27% 49.48% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 27, 1987. For example, if you had
invested $1,000 in a fund that had a 5% return over the past year, you
would have $1,050. You can compare these figures to the performance of the
Standard & Poor's 500 Composite Stock Price Index, a common proxy for the
U.S. stock market, or the Standard & Poor's Utilities Index, an unmanaged
index of 45 gas, electric, and telephone stocks. You can also compare them
to the average utility fund, which reflects the performance of 81 utility
funds tracked by Lipper Analytical Services. All three benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Utilities Fund -0.37% 11.08% 13.14%
S&P 500(registered trademark) 5.16% 9.15% 13.50%
S&P Utilities Index -6.42% 7.99% 12.65%
Average Utility Fund -6.27% 8.33% n/a
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
UtilitiesStandard Standard & Poor's 500 Stock Index
11/27/87 10000.00 10000.00 10000.00
11/30/87 10000.00 9671.16 9438.71
12/31/87 10059.80 9776.58 10157.00
01/31/88 10983.45 10908.71 10584.61
02/29/88 10873.02 10721.08 11077.85
03/31/88 10500.31 10156.08 10735.55
04/30/88 10510.44 10170.29 10854.71
05/31/88 10946.26 10635.08 10949.15
06/30/88 11087.51 10969.02 11451.71
07/31/88 10954.05 10985.47 11408.20
08/31/88 10902.72 10830.58 11020.32
09/30/88 11295.53 11275.71 11489.78
10/31/88 11534.75 11568.88 11809.20
11/30/88 11451.55 11476.33 11640.33
12/31/88 11545.15 11547.48 11844.03
01/31/89 11724.72 12203.38 12711.02
02/28/89 11502.90 11934.91 12394.51
03/31/89 11631.16 12248.79 12683.30
04/30/89 11984.27 13014.34 13341.57
05/31/89 12562.08 13761.37 13881.90
06/30/89 12820.04 13974.67 13802.77
07/31/89 13493.63 15089.85 15049.17
08/31/89 13352.40 14996.29 15344.13
09/30/89 13418.39 15243.73 15281.22
10/31/89 13462.49 15300.13 14926.69
11/30/89 13892.50 15803.50 15231.20
12/31/89 14537.87 16954.00 15596.75
01/31/90 13799.44 15582.42 14550.21
02/28/90 13834.05 15411.01 14737.90
03/31/90 13821.86 15697.66 15128.46
04/30/90 13264.24 15088.59 14750.25
05/31/90 13904.91 16117.63 16188.40
06/30/90 13964.05 15777.55 16078.31
07/31/90 13976.10 15728.64 16026.86
08/31/90 13265.24 14478.21 14578.03
09/30/90 13470.06 15071.82 13868.08
10/31/90 14290.51 16054.50 13808.45
11/30/90 14608.89 16364.35 14700.48
12/31/90 14806.39 16506.72 15110.62
01/31/91 14743.60 16003.27 15769.44
02/28/91 15271.05 16560.18 16896.96
03/31/91 15451.98 16886.42 17305.87
04/30/91 15451.98 16616.24 17347.40
05/31/91 15451.98 16401.89 18096.81
06/30/91 15336.57 16172.26 17267.97
07/31/91 15817.06 16667.13 18072.66
08/31/91 16206.64 17097.14 18500.98
09/30/91 16719.54 17442.51 18192.02
10/31/91 16930.18 17786.12 18435.79
11/30/91 17061.83 17606.48 17692.83
12/31/91 17942.73 18897.04 19716.89
01/31/92 17352.68 17889.83 19350.15
02/29/92 17285.63 17405.01 19601.71
03/31/92 17084.74 17154.38 19219.47
04/30/92 17645.12 18259.12 19784.52
05/31/92 18000.48 18231.73 19881.47
06/30/92 18179.33 18488.80 19585.23
07/31/92 19161.63 19949.42 20386.27
08/31/92 19189.30 19799.80 19968.35
09/30/92 19244.80 19944.33 20203.98
10/31/92 19216.81 19754.86 20274.69
11/30/92 19398.76 19723.25 20966.06
12/31/92 19898.60 20429.35 21223.94
01/31/93 20115.04 20743.96 21402.22
02/28/93 21182.84 22237.52 21693.29
03/31/93 21752.81 22640.02 22151.02
04/30/93 21547.74 22162.32 21614.97
05/31/93 21606.33 22142.37 22194.25
06/30/93 22623.23 23167.56 22258.61
07/31/93 22903.99 23686.52 22169.58
08/31/93 23953.14 24830.58 23009.80
09/30/93 23967.57 24778.43 22832.63
10/31/93 23773.92 24733.83 23305.26
11/30/93 22790.79 23482.30 23083.86
12/31/93 23004.24 23357.84 23363.18
01/31/94 24004.43 23537.70 24157.53
02/28/94 23019.40 22207.82 23502.86
03/31/94 22148.43 21454.97 22478.13
04/30/94 22709.15 21984.91 22765.85
05/31/94 22304.19 21395.72 23139.21
06/30/94 22128.33 21440.65 22572.30
07/31/94 22819.35 22165.34 23312.67
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Utilities Fund on November 27, 1987, when the fund started. As the chart
shows, by July 31, 1994, the value of your investment would have grown to
$22,819 - a 128.19% increase on your initial investment. For comparison,
look at how both the S&P 500 and the S&P Utilities Index did over the same
period. With dividends reinvested, the same $10,000 investment in the S&P
500 would have grown to $23,313 - a 133.13% increase. A $10,000 investment
in the S&P Utilities Index would have grown to $22,165 - a 121.65%
increase.
(checkmark)
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no guarantee of how it will do tomorrow. The
stock market, for example, has a history of growth in the long run and
volatility in the short run. In turn, the share price and return of a fund
that invests in stocks 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.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Muresianu, Portfolio Manager of Fidelity
Utilities Fund
Q. JOHN, HOW DID THE FUND PERFORM?
A. The fund's total return for the six months ended July 31, 1994, was
- -4.94%, compared to -7.15% for the average utility fund during the same
period, according to Lipper Analytical Services. For the year ended July
31, 1994, the fund returned -0.37%, compared to -6.27% for the Lipper
average. The Standard and Poor's Utilities Index returned -5.83% and -6.42%
for six months and one year, respectively.
Q. WHAT FACTORS INFLUENCED THE PERFORMANCE OF THE FUND?
A. While the returns of the fund have been negative, it has still done
better than the average fund and the index. Moreover, if one takes a
two-year view, the picture is not as bad as it might appear looking at the
first six months. Utilities had a very strong year in 1993, but in the
first half of this year most utility stock prices saw a sharp correction.
The fall in utilities prices coincided with a fall in bond prices, which
was driven by higher interest rates, as the Federal Reserve Board tried to
head off possible inflation.
Q. WHAT HAS THE INVESTMENT ENVIRONMENT BEEN LIKE FOR UTILITIES,
SPECIFICALLY?(PHOTO_OF_PORTFOLIO_MANAGER)
A. Last year's market provided a positive environment for utilities stocks
and utilities funds. Utilities do well when interest rates decline. During
the first three quarters of last year, interest rates on long-term
government bonds fell from over 7% to under 6%. In the fourth quarter of
1993, the economy began to accelerate, commodity prices started to pick up,
and interest rates began to reverse their decline. As interest rates rose,
utility stocks fell. This pattern persisted through the end of the second
quarter of 1994. Another factor impacting utilities is deregulation, which
means two things for utilities, one positive and one negative. On the
positive side, deregulation means the removal of a ceiling on earnings set
by regulators. On the negative side, deregulation means price competition
and the removal of a floor on earnings. The pace of deregulation is a
function of political decisions at the federal and state levels, and is
extremely difficult to predict.
Q. WHAT IS YOUR MIX OF UTILITIES
INVESTMENTS?
A. I have a balanced portfolio of telephone, electric and gas utilities.
However, my clear favorite is telephone utilities. While the yield of the
sector is lower than the others, the growth prospects seem to be higher. By
contrast, electric utilities have the highest current yields, but probably
the lowest growth potential. Gas is in between phones and electrics in
yields and growth.
Q. WHAT MAKES PHONE UTILITIES SO
ATTRACTIVE?
A. Superior earnings growth driven by cellular and other new services. As
the business is deregulated, the number of new services which the regional
bell phone companies will be able to offer should increase. The list of
services could ultimately include cable and long distance. The fund's
performance was helped by this group, notably Southwestern Bell and
Ameritech.
Q. AND HOW DID THE GAS COMPANIES HELP THE FUND?
A. Gas utilities have benefited from a tightening gas supply and demand
balance. Enron is one company that did particularly well. It has one of the
best management teams in the gas group, one that has consistently shown the
ability to seize opportunities domestically and internationally. The
company's earnings have grown even in difficult commodity environments.
Another gas utility, Sonat, benefited over the past two years from the
rapid growth of earnings in its exploration and production division.
Q. WHAT WERE SOME OF THE DISAPPOINTMENTS DURING THE PERIOD?
A. One was ENSERCH, a natural gas utility. It has an exploration and
production operation that is sensitive to the price of oil. The stock was
hurt by a collapse in the price of oil, but looking forward the company
should benefit from tightening supply and demand. NYNEX was another company
that didn't do as well as expected, because of disappointing earnings due
to a costly union agreement and a difficult regulatory environment.
Q. WHAT SORTS OF INVESTMENTS DOES THE FUND HAVE OVERSEAS?
A. I've reduced the fund's foreign investments from 19.2% as of January 31
to 10.5% at the end of the period. The fund's performance benefited from
timely profit taking in utilities in Asia, Latin America and Europe, such
as: Telefonos de Mexico and Telebras in Latin America; China Light & Power
and Hong Kong Electric in Hong Kong; and Empresa Nacional De Electricidad,
also known as Endesa, in Spain.
Q. HOW ABOUT NON-UTILITIES INVESTMENTS?
A. The two sectors on which I've been concentrating are international oil
companies - such as British Petroleum - and real estate investment trusts
(REITs) - such as Storage Equities and Simon Properties. The oil companies
have been attractive because they have above-market yields, and because
they tend to do relatively well in rising interest rate environments. The
REITs attract me because they, too, have high yields and have the potential
for earnings growth well in excess of utility companies. As of July 31,
investments in non-utility stocks stood at 11.4%. As utility stocks fell
during the first half of the year, the prospects for the market in general
dimmed, and interest rates rose, I took profits in non-utilities - such as
Citicorp and General Motors - increasing the fund's cash level and
purchasing selected oversold utilities.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. With bond yields over 7.5% as of July 31 and inflation at only about 2%,
there seems to be a potential for a tremendous bond market rally. There is
usually a correlation between the bond market and electrical utility
stocks. On the other hand, we are late in an economic cycle and the
potential for an acceleration of inflation is significant. High inflation
is bad for bonds and utilities. The combination of these facts makes the
current environment very difficult to call. My investment stance is
cautious. I'm comfortable with where the fund is now, but I plan to respond
quickly to changing circumstances.
FUND FACTS
GOAL: to seek a high total
return through a combination
of current income and capital
appreciation
START DATE: November 27, 1987
SIZE: as of July 31, 1994,
more than $1.2 billion
MANAGER: John Muresianu,
since January 1993; analyst,
natural gas pipelines, life
insurance, service
companies, Canadian
stocks, foreign currencies,
1989 - 1992; pension fund
manager, 1987-1989; joined
Fidelity in 1986
(checkmark)
JOHN MURESIANU ON GLOBAL
POWER DEMAND:
"The increasing need for
power around the globe is a
potential source of earnings
growth for electric utility
companies in the developed
world. China needs 100,000
more megawatts during the
next 10 years. Similar power
deficits are projected in India
and other Asian countries.
The privatization of Latin
American utilities is another
investment opportunity.
However, the risks of
overseas investing are
substantial. Balancing the
risks against the rewards is
very challenging. Political and
economic conditions and
market contexts can change
rapidly."
(solid bullet) As of July 31, telephone
utilities accounted for 27.2%
of the fund's investments,
followed by electric utilities at
23.6% and gas utilities at
18.0%.
(solid bullet) The fund must hold at least
65% of its assets in stocks of
public utility companies.
Recently, that figure stood at
69.2%.
(solid bullet) The fund has the authority
to use derivatives, but had no
derivative investments as of
July 31, 1994.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Ameritech Corp. 4.0 2.8
Southwestern Bell Corp. 3.7 3.0
BellSouth Corp. 3.2 2.7
NYNEX Corp. 2.9 2.4
GTE Corp. 2.8 2.6
U.S. West, Inc. 2.8 2.6
Williams Companies, Inc. 2.5 1.7
Bell Atlantic Corp. 2.1 2.9
ENSERCH Corp. 1.9 1.7
Veba Vereinigte Elektrizetaets &
Bergwerks AG Ord. 1.8 0.4
TOP INDUSTRIES AS OF JULY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO
Telephone Service 27.2 27.6
Electric Utility 23.6 25.8
Gas 18.0 19.0
ASSET ALLOCATION
AS OF JULY 31, 1994* AS OF JANUARY 31, 1994**
Row: 1, Col: 1, Value: 12.1
Row: 1, Col: 2, Value: 7.3
Row: 1, Col: 3, Value: 40.6
Row: 1, Col: 4, Value: 40.0
Stocks 80.6%
Bonds 7.3%
Short-term
investments 12.1%
FOREIGN
INVESTMENTS 10.5%
Stocks 95.9%
Bonds 0.9%
Short-term
investments 3.2%
FOREIGN
INVESTMENTS 19.2%
Row: 1, Col: 1, Value: 4.2
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 55.9
Row: 1, Col: 4, Value: 40.0
*
**
INVESTMENTS JULY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 77.9%
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - 1.0%
CHEMICALS & PLASTICS - 0.1%
Agricultural Minerals Co. L.P. 9,200 $ 252
Olin Corp. 10,000 552
Reliance Industries Ltd. GRS (c) 14,800 333
1,137
IRON & STEEL - 0.1%
Armco, Inc. (a) 83,400 490
Nucor Corp. 11,725 809
1,299
METALS & MINING - 0.7%
Alcan Aluminium Ltd. 150,000 3,679
Alumax, Inc. 10,000 308
Viag AG 17,900 5,433
9,420
PAPER & FOREST PRODUCTS - 0.1%
Georgia-Pacific Corp. 10,000 645
Weyerhaeuser Co. 10,000 420
1,065
TOTAL BASIC INDUSTRIES 12,921
CONSTRUCTION & REAL ESTATE - 4.4%
BUILDING MATERIALS - 0.0%
Centex Construction (a) 35,000 416
CONSTRUCTION - 0.2%
Hopewell Holdings Ltd. 877,000 817
YTL Corporation 300,000 1,423
2,240
ENGINEERING - 0.0%
Glenayre Technologies, Inc. (a) 10,000 495
REAL ESTATE INVESTMENT TRUSTS - 4.2%
Amli Residential Properties Trust (SBI) 20,000 430
Associated Estates Realty Corp. 70,500 1,516
Avalon Properties, Inc. 23,300 492
CBL & Associates Properties 85,300 1,717
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Camden Property Trust (SBI) 75,600 $ 1,739
Centerpoint Properties Corp. 10,000 206
Chateau Properties, Inc. 10,000 224
Crown American Realty Trust (SBI) 85,000 1,211
Debartolo Realty Corp. 123,000 1,753
Developers Diversified Realty 54,600 1,672
Equity Residential Property Trust (SBI) 91,100 2,984
Federal Realty Investment Trust 37,300 928
First Industrial Realty Trust 10,500 236
G&L Realty Corp. 49,400 772
Haagen Alexander Properties, Inc. 112,400 1,967
Health Care Property Investors, Inc. 10,900 305
JDN 33,000 730
Kimco Realty Corp. 29,100 1,077
LTC Properties, Inc. 108,700 1,549
Macerich Company 21,000 415
Manufactured Home Community 12,600 258
McArthur/Glen Realty Corp. (a) 10,000 164
Merry Land & Investment Co., Inc. 55,229 1,139
Oasis Residential, Inc. 64,000 1,568
Post Properties, Inc. 109,900 3,407
Simon Properties Group, Inc. 172,000 4,579
Storage Equities, Inc. 352,000 5,324
Storage USA 32,000 848
Summit Property Trust 52,600 1,026
Taubman Centers, Inc. 153,400 1,764
Trinet Corporate Realty Trust 33,700 944
Urban Shoppong Centers 114,200 2,512
Vornado Realty Trust 55,600 2,043
Walden Residential Properties 81,000 1,650
Weingarten Realty Investors (SBI) 44,300 1,661
50,810
TOTAL CONSTRUCTION & REAL ESTATE 53,961
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - 0.5%
AUTOS, TIRES, & ACCESSORIES - 0.2%
General Motors Corp. 40,000 $ 2,055
CONSUMER ELECTRONICS - 0.3%
Matsushita Electric Industrial Co. Ltd. 110,000 1,806
Sony Corp. 32,000 1,880
3,686
TEXTILES & APPAREL - 0.0%
NIKE, Inc. Class B 1,000 61
Westpoint Stevens, Inc. (a) 10,000 154
215
TOTAL DURABLES 5,956
ENERGY - 2.2%
COAL - 0.0%
Eastern Enterprises Co. 10,000 230
ENERGY SERVICES - 0.2%
Halliburton Co. 30,000 1,020
Schlumberger Ltd. 20,000 1,180
2,200
INDEPENDENT POWER - 0.2%
California Energy Co., Inc. 59,700 977
Magma Power Co. (a) 57,100 1,663
2,640
OIL & GAS - 1.8%
Amerada Hess Corp. 6,400 333
British Petroleum PLC ADR 30,000 2,280
Burlington Resources, Inc. 10,000 391
Coastal Corp. 364,200 11,427
Exxon Corp. 10,000 595
Norsk Hydro AS 10,000 369
Nuevo Energy Corp. (a) 14,500 286
Occidental Petroleum Corp. 96,900 1,926
Pennzoil Co. 10,000 504
Petroleum Heat & Power, Inc. Class A 182,000 1,365
Texaco, Inc. 10,000 635
Total Compagnie Francaise des Petroles Class B 5,000 288
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Western Gas Resources, Inc. 40,000 $ 905
Woodside Petroleum Ltd. 347,000 1,237
22,541
TOTAL ENERGY 27,611
FINANCE - 0.4%
BANKS - 0.2%
Citicorp 30,000 1,237
Deutsche Bank AG 500 231
Grupo Financiero Bancomer Class B 130,000 108
NationsBank Corp. 10,000 558
2,134
CLOSED END INVESTMENT COMPANY - 0.1%
Jardine Fleming India Fund, Inc. (b) 34,600 502
Morgan Stanley India Investment Fund (a) 34,600 493
995
CREDIT & OTHER FINANCE - 0.0%
Dean Witter Discover & Co. 15,112 606
INSURANCE - 0.1%
Allstate Corp. 35,900 898
SECURITIES INDUSTRY - 0.0%
Merrill Lynch & Co., Inc. 22,800 835
TOTAL FINANCE 5,468
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
U.S. Healthcare, Inc. 10,000 379
HOLDING COMPANIES - 0.1%
Burgenland Holding 28,000 1,065
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
ELECTRICAL EQUIPMENT - 0.1%
Alcatel Alsthom CGE 11,000 1,318
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
Caterpillar, Inc. 10,000 $ 1,084
Kenetech Corp. (a) 150,700 2,411
Tenneco, Inc. 46,600 2,237
5,732
POLLUTION CONTROL - 0.0%
WMX Technologies, Inc. 10,000 291
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 7,341
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Tele-Communications, Inc. Class A (a) 37,700 879
LODGING & GAMING - 0.0%
Promus Companies, Inc. (a) 10,000 290
TOTAL MEDIA & LEISURE 1,169
NONDURABLES - 0.1%
TOBACCO - 0.1%
Philip Morris Companies, Inc. 10,000 550
RJR Nabisco Holdings Corp. (a) 120,000 735
UST, Inc. 10,000 289
1,574
RETAIL & WHOLESALE - 0.1%
GENERAL MERCHANDISE STORES - 0.1%
Sears, Roebuck & Co. 30,000 1,418
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Lowe's Companies, Inc. 10,000 360
TOTAL RETAIL & WHOLESALE 1,778
SERVICES - 0.3%
Chemed Corp. 102,300 3,478
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 0.2%
COMMUNICATIONS EQUIPMENT - 0.0%
DSC Communications Corp. (a) 10,000 $ 245
COMPUTERS & OFFICE EQUIPMENT - 0.1%
EMC Corp. (a) 10,000 149
International Business Machines Corp. 5,000 309
Itron, Inc. (a) 4,000 66
Sun Microsystems, Inc. (a) 10,000 222
746
ELECTRONICS - 0.1%
Hitachi, Ltd. 10,000 975
TOTAL TECHNOLOGY 1,966
UTILITIES - 67.9%
CELLULAR - 0.9%
Airtouch Communications (a) 406,800 10,577
ELECTRIC UTILITY - 21.7%
AES China Generating Co. Class A (a) 17,000 200
AES Corp. 206,484 3,613
Baltimore Gas & Electric Co. 75,900 1,736
Boston Edison Co. 229,600 6,142
CMS Energy Corp. 217,400 4,919
Capex SA GDR (c) 50,000 925
Carolina Power & Light Co. 10,000 266
Centerior Energy Corp. 609,600 6,172
Central & South West Corp. 63,900 1,446
Central Costanera SA ADR (c) 24,600 775
Central Hudson Gas & Electric Corp. 70,300 1,880
Central Louisiana Electirc Co., Inc. 112,600 2,632
Central Puerto SA ADR (c) 29,800 924
Cesc Ltd. GDR (c) 92,500 729
Cesc Ltd. GDR (warrants) (a) (c) 37,000 33
China Light & Power Co. Ltd. 275,000 1,445
Cincinnati Gas & Electric Co. 172,750 3,865
Commonwealth Energy Systems (SBI) 1,000 40
Consolidated Edison Co. of New York, Inc. 40,000 1,150
Consolidated Electric Power Asia Ltd. 600,000 1,099
DPL, Inc. 405,650 8,265
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
DQE, Inc. 297,200 $ 8,953
Destec Energy, Inc. (a) 9,700 91
Detroit Edison Company 365,200 9,632
Dominion Resources, Inc. (Va.) 11,400 415
Duke Power Co. 70,700 2,704
EVN (Energie-Versor Nieder) 23,100 2,849
Eastern Utilities Associates 214,669 5,313
Electricidad de Caracas, LA (a) 237,120 459
Electrobras PN B 4,100,000 1,055
Empresa Nacional De Electricidad SA Ord. 45,000 2,118
Enersis SA sponsored ADR 55,400 1,281
Entergy Corp. 480,161 12,244
FECSA (Fuerzas Elec Cat) SA Class A 327,800 2,338
General Public Utilities Corp. 173,500 4,468
Hawaiian Electric Industries, Inc. 14,500 468
Hidro Cantabrico (a) 5,000 149
Hong Kong Electric Holdings Ord. 485,000 1,469
IES Industries, Inc. 74,600 2,005
Iberdrola SA 183,700 1,334
Illinova Corp. Holdings Co. 682,000 14,237
Korea Electric Power Corp. 14,000 466
LG&E Energy Corp. 30,000 1,144
Long Island Lighting Co. 85,300 1,578
Montana Power Co. 71,600 1,674
NIPSCO Industries, Inc. 548,200 16,035
National Power PLC (c) 150,000 1,035
New England Electric Systems 135,600 4,441
Niagara Mohawk Power Corp. 452,500 7,466
Northeast Utilities 328,000 7,667
Northern Ireland Electric PLC (UK) 120,000 665
Nova Scotia Power, Inc. 193,700 1,554
Ohio Edison Co. 190,000 3,610
PSI Resources, Inc. 310,600 6,872
Pacific Gas & Electric Co. 78,800 1,901
PacifiCorp. 308,100 5,469
Peco Energy Co. 258,400 6,751
Pinnacle West Capital Corp. 555,400 9,789
Portland General Corp. 202,500 3,594
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Powergen PLC Ord. 50,000 $ 394
Public Service Co. of Colorado 261,849 7,070
Public Service Co. of New Mexico (a) 551,500 6,687
Public Service Enterprise Group, Inc. 106,400 2,953
Regional Electricity Companies England & Wales ADR (a) (c) 10,000 971
Rhein West Electric 3,500 978
Rochester Gas & Electric Corp. 41,000 943
SCE Corp. 143,400 1,936
Scottish Hydro-Electric PLC Ord. 270,000 1,542
Sevillana de Electricidad 395,000 2,177
Sithe Energies, Inc. (a) 154,000 1,752
Southern Co. 417,600 8,143
Tata Electric Companies GDR (c) 640 320
Tenega Nasional BHD 160,000 820
Texas Utilities Co. 10,000 329
Union Electrica Fenosa 497,000 2,491
United Illuminating Co. 79,200 2,673
Veba Vereinigte Elektrizetaets & Bergwerks AG Ord. 66,500 21,828
Verbund Gesellschaft 26,600 1,450
Wing Shan International 372,000 88
269,094
GAS - 17.8%
Aquila Gas Pipeline Corp. 43,800 422
Brooklyn Union Gas Co. (The) 300,300 7,545
Columbia Gas System, Inc. (The) (a) 341,800 9,570
Consolidated Natural Gas Co. 153,200 5,936
ENSERCH Corp. 1,476,400 23,253
El Paso Natural Gas Co. 199,800 6,818
Energen Corp. 104,700 2,264
Enron Corp. 262,600 8,502
Equitable Resources, Inc. 6,200 209
Hong Kong & China Gas Co. Ltd. 552,000 1,040
Hong Kong & China Gas Co. Ltd. (warrant) (a) 109,000 51
MCN Corp. 218,100 8,697
MDU Resources Group, Inc. 44,500 1,190
NICOR, Inc. 95,000 2,387
National Fuel Gas Co. 10,000 300
Noram Energy Corp. 109,700 658
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - CONTINUED
Nova Corp. 239,000 $ 2,090
ONEOK, Inc. 336,300 6,222
Pacific Enterprises 987,900 20,252
Panhandle Eastern Corp. 354,700 7,271
Questar Corp. 375,900 12,499
Sonat, Inc. 524,500 17,374
Southern Union Company 16,301 300
Tejas Gas Corp. (Del.) (a) 73,500 3,620
Tejas Power Corp. (a) 223,600 2,264
Transco Energy Co. 111,600 1,688
Transportation De Gas Del Sur. Class B (c) 37,000 96
TransCanada PipeLines Ltd. 575,400 7,108
Trident NGL Holdings 100,000 1,075
UGI Corp. 254,945 5,386
WICOR, Inc. 128,700 3,829
Washington Gas Light Co. 93,400 3,549
Westcoat Energy, Inc. 826,100 13,408
Western Resources, Inc. 54,600 1,536
Williams Companies, Inc. 944,000 30,798
Yankee Energy System, Inc. 62,600 1,416
220,623
TELEPHONE SERVICES - 27.0%
ALC Communications Corp. (a) 72,200 2,338
Ameritech Corp. 1,223,300 50,155
BCE, Inc. 125,300 4,135
Bell Atlantic Corp. 449,800 25,470
BellSouth Corp. 635,200 39,700
Compania Peruana Telefonos 140,855 533
GTE Corp. 1,091,800 34,665
Hong Kong Telecommunications Ltd. 1,228,000 2,448
Hong Kong Telecommunication Ltd. ADR 87,300 1,768
Koninklijke PTT Nederland (c) 77,200 2,171
LCI International, Inc. (a) 60,000 1,095
LDDS Communications (a) 25,500 497
NYNEX Corp. 927,600 35,713
Pacific Telesis Group 561,800 18,399
Rochester Telephone Corp. 362,000 8,733
SIP Spa 1,990,000 5,669
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Southwestern Bell Corp. 1,096,500 $ 46,053
Sprint Corporation 115,400 4,227
Telebras PN 43,400,000 2,034
Telecom Argentina Stet France 87,000 551
Telefonica Argentina Class B 76,000 508
Telefonica de Espana SA sponsored ADR 139,500 5,946
Telefonos de Mexico SA sponsored ADR representing
shares Ord. Class L 130,000 7,898
U.S. West, Inc. 856,924 34,491
335,197
WATER - 0.5%
American Water Works, Inc. 115,488 3,219
Generale des Eaux 34,480 3,641
6,860
TOTAL UTILITIES 842,351
TOTAL COMMON STOCKS
(Cost $888,767) 967,018
PREFERRED STOCKS - 2.7%
CONVERTIBLE PREFERRED STOCKS - 1.4%
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.1%
Olin Corp., Series A 19,200 965
METALS & MINING - 0.4%
Alumax, Inc., Series A, $4.00 9,366 1,267
Cyprus Amax Minerals Co., Series A, $4.00 18,733 1,292
Kaiser Aluminum Corp. $0.96 55,000 605
Reynolds Metals Co. $3.31 42,000 2,163
5,327
PAPER & FOREST PRODUCTS - 0.0%
Bowater, Inc. depositary shares representing 1/4 shares
Series B 20,000 500
TOTAL BASIC INDUSTRIES 6,792
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
ENERGY - 0.5%
COAL - 0.1%
Pittston Co. $3.125 (c) 21,000 $ 840
OIL & GAS - 0.4%
Tosco Corp., Series F, $4.375 16,500 1,064
Valero Energy $3.125 16,000 704
Western Gas Resources, Inc. $2.625 75,000 3,038
4,806
TOTAL ENERGY 5,646
INDUSTRIAL MACHINERY & EQUIPMENT - 0.4%
ELECTRICAL EQUIPMENT - 0.3%
Westinghouse Electric Corp. $1.30 (c) 280,000 3,920
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Kenetech Corp. 8.25% Pride (a) 49,000 937
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 4,857
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands International, Inc. $2.875 10,000 403
TOTAL CONVERTIBLE PREFERRED STOCKS 17,698
NONCONVERTIBLE PREFERRED STOCKS - 1.3%
UTILITIES - 1.3%
ELECTRIC UTILITY - 1.1%
Alabama Power Co. Class A, 7.60% 116,200 2,818
Cleveland Electric Illuminating Co., Series L adj. rate (a) 7,700 539
Gulf Power Co. Class A, 7.30% 120,000 2,700
Mississippi Power Co. depositary shares representing
1/4 share 7 1/4% 135,600 3,068
Northern Indiana Public Service Co., Series A adj. rate 29,100 1,371
Public Service Co. of New Hampshire Co., Series A 77,500 1,996
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
ELECTRIC UTILITY - CONTINUED
Texas Utilities Electric Co.:
Series A adj. rate 7,700 $ 697
Series B adj. rate 4,175 397
13,586
TELEPHONE SERVICES - 0.2%
GTE North, Inc. $7.60 6,800 665
SIP (Societa Ital Per L'Eser) Spa Di Risp Ord. 200,000 470
Stet Societa Finanziaria Telefonica Spa (a) 500,000 1,378
2,513
TOTAL NONCONVERTIBLE PREFERRED STOCKS 16,099
TOTAL PREFERRED STOCKS
(Cost $32,755) 33,797
CORPORATE BONDS - 1.2%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
CONVERTIBLE BONDS - 0.4%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Camden Property Trust 7.33%, 4/1/01 -- $ 1,500 1,403
ENERGY - 0.1%
INDEPENDENT POWER - 0.1%
Thermo Electron Corp. 5%, 4/15/01 BBB+ 1,000 1,040
UTILITIES - 0.2%
GAS - 0.2%
Consolidated Natural Gas Co. 7 1/4%,
12/15/15 A2 2,250 2,306
TOTAL CONVERTIBLE BONDS 4,749
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (G) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (F) (000S) (000S)
NONCONVERTIBLE BONDS - 0.8%
UTILITIES - 0.8%
ELECTRIC UTILITY - 0.8%
Georgia Power Co. 1st mtg. 6 7/8%, 9/1/02 A2 $ 10,000 $ 9,496
TOTAL CORPORATE BONDS
(Cost $14,188) 14,245
U.S. TREASURY OBLIGATIONS - 12.9%
U.S. Treasury Bill yields at date of purchase
4.23%, 9/29/94 -- 85,000 84,447
8 1/8%, 8/15/19 Aaa 70,000 74,954
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $159,480) 159,401
REPURCHASE AGREEMENTS - 5.3%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements,
(U.S. Treasury obligations), in a joint
trading account at 4.23% dated
7/29/94 due 8/1/94 $ 66,224 66,201
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,161,391) $ 1,240,662
LEGEND
(a) Non-income producing.
(b) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Jardine Fleming India
Fund, Inc. 3/3/94 $500,000
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $13,072,000 or 1.0% of net
assets.
OTHER INFORMATION
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 89.5%
Canada 2.6
Germany 2.3
Spain 1.3
Others (individually less than 1%) 4.3
TOTAL 100.0%
INCOME TAX INFORMATION
At July 31, 1994, the aggregate cost of investment securities for income
tax purposes was $1,161,463,000. Net unrealized appreciation aggregated
$79,199,000, of which $111,721,000 related to appreciated investment
securities and $32,522,000 related to depreciated investment securities.
On December 31, 1991, the fund acquired substantially all of the assets of
Fidelity Corporate Trust: Adjustable Rate Preferred Portfolio in a tax-free
exchange for the shares of Fidelity Utilities Fund; Fidelity Corporate
Trust: Adjustable Rate Preferred Portfolio had a capital loss carryover of
approximately $26,645,000 (subject to certain limitations) available to
offset future capital gains in Fidelity Utilities Fund, to the extent
provided by regulations.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1994
(UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 1,240,662
agreements of $66,201) (cost $1,161,391)
(Notes 1 and 2) - See accompanying schedule
Receivable for investments sold 25,425
Receivable for fund shares sold 15,815
Dividends receivable 5,959
Interest receivable 2,958
Other receivables 89
TOTAL ASSETS 1,290,908
LIABILITIES
Payable for investments purchased $ 18,782
Payable for fund shares redeemed 5,672
Accrued management fee 535
Other payables and accrued expenses 470
Collateral on securities loaned, at value (Note 5) 5,247
TOTAL LIABILITIES 30,706
NET ASSETS $ 1,260,202
Net Assets consist of (Note 1):
Paid in capital $ 1,126,556
Undistributed net investment income 7,738
Accumulated undistributed net realized gain (loss) on 46,636
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 79,272
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 86,730 shares outstanding $ 1,260,202
NET ASSET VALUE, offering price and redemption price per $14.53
share ($1,260,202 (divided by) 86,730 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1994 (UNAUDITED)
INVESTMENT INCOME $ 25,190
Dividends
Interest (including security lending fees of $11) (Note 5) 4,636
TOTAL INCOME 29,826
EXPENSES
Management fee (Note 4) $ 3,342
Transfer agent fees (Note 4) 1,645
Accounting and security lending fees (Note 4) 270
Non-interested trustees' compensation 4
Custodian fees and expenses 163
Registration fees 48
Audit 27
Legal 5
Miscellaneous 111
Total expenses before reductions 5,615
Expense reductions (Note 6) (94) 5,521
NET INVESTMENT INCOME 24,305
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1, 2, AND 3)
Net realized gain (loss) on:
Investment securities 46,619
Foreign currency transactions (43) 46,576
Change in net unrealized appreciation (depreciation) on:
Investment securities (143,086)
Assets and liabilities in foreign currencies 10 (143,076)
NET GAIN (LOSS) (96,500)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (72,195)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED JULY 31, JANUARY 31,
1994 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 24,305 $ 47,314
Net investment income
Net realized gain (loss) 46,576 47,637
Change in net unrealized appreciation (depreciation) (143,076) 122,727
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (72,195) 217,678
FROM OPERATIONS
Distributions to shareholders: (19,183) (47,168)
From net investment income
From net realized gain (27,311) (19,433)
TOTAL DISTRIBUTIONS (46,494) (66,601)
Share transactions 337,375 1,145,727
Net proceeds from sales of shares
Reinvestment of distributions 41,054 58,516
Cost of shares redeemed (455,953) (901,215)
Net increase (decrease) in net assets resulting from (77,524) 303,028
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (196,213) 454,105
NET ASSETS
Beginning of period 1,456,415 1,002,310
End of period (including undistributed net investment $ 1,260,202 $ 1,456,415
income of $7,738 and $2,616, respectively)
OTHER INFORMATION
Shares
Sold 23,117 75,304
Issued in reinvestment of distributions 2,795 3,889
Redeemed (31,155) (59,108)
Net increase (decrease) (5,243) 20,085
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED JANUARY 31,
MONTHS
ENDED
JULY 31,
1994
(UNAUDITE 1994 1993 1992 1991 1990
D)
SELECTED PER-SHARE DATA
Net asset value, $ 15.84 $ 13.94 $ 12.94 $ 11.74 $ 11.96 $ 11.10
beginning of period
Income from Investment
Operations
Net investment .28 .50 .61 .63 .67 .72
income
Net realized and (1.06) 2.14 1.37 1.38 .10 1.21
unrealized gain
(loss)
Total from investment (.78) 2.64 1.98 2.01 .77 1.93
operations
Less Distributions
From net investment (.22) (.52) (.60) (.63) (.69) (.76)
income
From net realized gain (.31) (.22) (.38) (.18) (.30) (.31)
Total distributions (.53) (.74) (.98) (.81) (.99) (1.07)
Net asset value, end of $ 14.53 $ 15.84 $ 13.94 $ 12.94 $ 11.74 $ 11.96
period
TOTAL RETURN B,C (4.94)% 19.34% 15.92% 17.70% 6.84% 17.70%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 1,260 $ 1,456 $ 1,002 $ 647 $ 220 $ 157
period (in millions)
Ratio of expenses to .88%A .86% .87% .95% .94% 1.02%
average net assets
Ratio of expenses to .89%A .87% .87% .95% .94% 1.02%
average net assets
before expense
reductions
Ratio of net investment 3.86% 3.39% 4.57% 5.11% 5.93% 6.19%
income to average net A
assets
Portfolio turnover rate 122% 47% 73% 39% 43% 61%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN. SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1994 (Unaudited)
20. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Utilities Fund (the fund)(formerly Fidelity Utilities Income Fund)
is a fund of Fidelity Devonshire 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 for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
are valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Effective February 1, 1994, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment in securities.
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."
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
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 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
foreign currency transactions, partnerships, non-taxable dividends, and
losses deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part of
the dividends paid deduction for income tax purposes.
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 at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
21. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may enter into forward foreign currency contracts.
These contracts involve market risk in excess of the amount reflected in
the fund's Statement of Assets and Liabilities. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does
not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
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,
2. OPERATING POLICIES -
CONTINUED
REPURCHASE AGREEMENTS -
CONTINUED
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 affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, restricted securities (excluding 144A issues) amounted
to $502,000 or .04%
of net assets.
22. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $684,878,000 and $926,478,000, respectively, of which U.S.
government and government agency obligations aggregated $109,182,000 and
$33,863,000, respectively.
23. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic 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
.2850% to .5200% and is based on the monthly average net assets of all the
mutual funds advised by FMR. The annual individual fund fee rate is .20%.
The basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .15%) based on the fund's investment performance as compared
to the appropriate index over a specified period of time. The fund's
performance adjustment will not take effect until December 1994. For the
period, the management fee was equivalent to an annualized rate of .53% of
average net assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .27% to .52%. Effective August 1, 1994, FMR has voluntarily
agreed to implement this new group fee rate schedule as it results in the
same or a lower management fee.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
TRANSFER AGENT FEE - CONTINUED
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 AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee is based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the month
plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $401,000 for the period.
24. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, the value of the
securities loaned and the value of collateral amounted to $5,064,000 and
$5,247,000, respectively.
25. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$94,000 under this arrangement.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan Fund
Real Estate Investment Portfolio
Utilities 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 1-800-544-0118for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
SPARTAN(registered trademark)
(registered trademark)
LONG-TERM GOVERNMENT BOND
FUND
SEMIANNUAL REPORT
JULY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 12 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 16 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The first half of the year has been an unsettling time for bond investors.
The bond market declined after the Federal Reserve Board raised short-term
interest rates from February through May. These rate hikes caused bond
yields to rise and bond prices to fall. The board raised the rate again in
August, and 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 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 can 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 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 short-term
investments.
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 10 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.SM
Periodic investment plans do not, of course, assure a profit, nor do they
protect against a loss in a declining market.
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), and the effect of the $5 account
closeout fee. You can also look at the fund's income.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1994 PAST 6 PAST 1 LIFE OF
MONTHS YEAR FUND
Spartan Long-Term Government -12.76% -8.05% 46.14%
Lehman Brothers Long-Term Government -7.86% -3.01% n/a
Bond Index
Average General U.S. Government -4.54% -1.64% n/a
Bond Fund
Consumer Price Index 1.50% 2.77% 11.83%
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 28, 1990. 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 Long-Term Government
Bond Index - a broad measure of the performance of long-term government
bonds. To measure how the fund stacked up against its peers, you can also
look at the average general U.S. government bond fund, which reflects the
performance of 156 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 CPI returns begin on the month
end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1994 PAST 1 LIFE OF
YEAR FUND
Spartan Long-Term Government -8.05% 10.37%
Lehman Brothers Long-Term Government Bond Index -3.01% n/a
Average General U.S. Government Bond Fund -1.64% n/a
Consumer Price Index 2.77% 2.96%
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
Spartan LLehman Brothers Long-Term Government Bond Index
09/30/90 10000.00 10000.00
10/31/90 10380.00 10232.00
11/30/90 10820.00 10663.79
12/31/90 11019.82 10876.00
01/31/91 11140.92 11006.51
02/28/91 11161.10 11059.34
03/31/91 11182.92 11102.47
04/30/91 11367.25 11243.48
05/31/91 11377.50 11234.48
06/30/91 11297.11 11150.22
07/31/91 11484.52 11325.28
08/31/91 11901.01 11718.27
09/30/91 12162.30 12088.57
10/31/91 12151.72 12107.91
11/30/91 12299.78 12173.29
12/31/91 12934.77 12909.77
01/31/92 12587.53 12504.41
02/29/92 12674.34 12580.68
03/31/92 12576.86 12444.81
04/30/92 12631.97 12431.12
05/31/92 12940.60 12784.17
06/30/92 13117.72 12964.42
07/31/92 13543.77 13507.63
08/31/92 13577.41 13600.84
09/30/92 13745.02 13806.21
10/31/92 13505.68 13516.28
11/30/92 13653.85 13578.45
12/31/92 13976.82 13954.58
01/31/93 14343.39 14352.28
02/28/93 14780.90 14840.26
03/31/93 14944.93 14875.88
04/30/93 15017.01 14985.96
05/31/93 15065.07 15035.41
06/30/93 15588.43 15675.92
07/31/93 15893.61 15939.28
08/31/93 16394.10 16594.38
09/30/93 16563.72 16649.14
10/31/93 16737.16 16772.34
11/30/93 16192.06 16337.94
12/31/93 16304.31 16388.59
01/31/94 16751.37 16780.28
02/28/94 15725.77 16092.28
03/31/94 14897.33 15384.22
04/30/94 14586.69 15201.15
05/31/94 14262.54 15096.26
06/30/94 14166.33 14948.32
07/31/94 14611.27 15459.55
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Long-Term Government Bond Fund on September 30, 1990, shortly after the
fund started. As the chart shows, by July 31, 1994, the value of your
investment, with dividends reinvested would have grown to $14,616 - a
46.16% increase on your initial investment. This assumes you still owned
the fund on July 31, 1994 and therefore does not include the effect of the
$5 account closeout fee. For comparison, look at how the Lehman Brothers
Long-Term Government Bond Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $15,460 - a
54.60% 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)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED JANUARY 31, FROM
ENDED SEPTEMBER 28,
JULY 31, 1990 TO
1994 1994 1993 1992 JANUARY 31, 1991
</TABLE>
Dividend return 2.30% 7.14% 7.69% 7.15% 1.01%
Capital appreciation -15.06% 9.63% 6.24% 5.82% 10.38%
return
Total return -12.76% 16.77% 13.93% 12.97% 11.39%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED JULY 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share - 30.00(cents) 74.00(cents)
Annualized dividend rate - 5.48% 6.12%
30-day annualized yield 6.63% - -
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 $11.03 over
the past six months and $12.10 over the past year, you can compare the
fund's income over these three periods. The 30-day annualized YIELD is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity Spartan
Long-Term Government Bond 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
one year ended July 31, 1994, the fund had total returns of -12.76% and
- -8.05%, respectively. According to Lipper Analytical Services, the average
general U.S. government bond fund had returns of -4.54% and -1.64% over the
same periods.
Q. IT SOUNDS LIKE THE BOND MARKET HAD AN ESPECIALLY DIFFICULT PAST SIX
MONTHS.
A. That's true. Bond prices fell during this time for several reasons.
First, the economy started growing 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. In addition, worries about future inflation
led the Federal Reserve Board to raise short-term interest rates in
February, March, April and May of 1994. In response, yields on short-,
intermediate- and long-term Treasuries also rose. During the past year, the
yield on the 30-year Treasury bond increased from 6.56% to 7.39%. Keep in
mind, bond yields and prices move in opposite directions. So the rise in
yields meant a drop in bond prices.
Q. WHY DID THE DOWNTURN HURT THE FUND MORE THAN SOME OF ITS COMPETITORS?
A. The fund fell more than similar funds because it owned more long-term
bonds - those with maturities of 10 or more years - than the average fund
in its group. Long-term bonds are extremely sensitive to changes in
interest rates. So when interest rates increase - as they did over the past
six months - the fund typically does poorly. On the other hand, when
interest rates decrease - as they did for most of the one year period
ending January 31, 1994 - the fund usually performs extremely well.
Q. CURT, WHAT IS THE GREATEST SOURCE OF RISK IN THIS FUND?
A. The fact that the fund owns long-term securities. Given the fund's
holdings, if the yield on long-term Treasuries rises 1%, the fund's share
price will drop about 10%. As a result, this is not a good fund for people
who plan to be invested in a fund for a short period.
Q. LET'S TALK ABOUT YOUR INVESTMENT STRATEGY . . .
A. During the period, I began concentrating on sector weights and security
selection. By sectors, I mean Treasuries; federal agency bonds; and
mortgage securities, such as those issued by the Government National
Mortgage Association (Ginnie Mae) and the Federal National Mortgage
Association (Fannie Mae). My job is to determine the right mix of these
sectors and adjust the mix as market conditions change. Security selection
refers to the fund's attempt to purchase the most attractively valued
securities in each of these sectors.
Q. WHY DID YOU SELL ALL OF THE FUND'S FOREIGN GOVERNMENT SECURITIES DURING
THE PERIOD?
A. Last fall, when yields on U.S. Treasury bonds were relatively low, I
thought that a number of foreign government securities offered better
relative value. As a result, I invested approximately 15% of the fund in
selected foreign government securities. Near the end of the period,
however, yields on U.S. Treasury bonds rose so much that I thought they
looked attractive again. So, I sold the fund's foreign government
securities and moved back into U.S. Treasury bonds.
Q. WHAT'S BEHIND THE DROP IN THE FUND'S SHORT-TERM OBLIGATIONS?
A. The fund's cash and short-term investments fell at the end of the period
when the fund bought 10- year Treasury bonds. These bonds were attractive
because their yields had risen more than yields on 30-year Treasury bonds.
Q. LET'S SWITCH DIRECTION A BIT AND TALK ABOUT A TOPIC THAT'S BEEN IN THE
NEWS LATELY - DERIVATIVES . . .
A. While the fund has the authority to use futures contracts or other
derivatives, I haven't used them much in the past. That's because I've been
able to implement the fund's strategies without them. However, over the
past year, the fund did hold some forward foreign currency contracts that
were used to hedge against currency risk. Going forward, I might use other
derivatives, either for hedging or arbitrage purposes.
Q. THINKING BACK OVER THE PAST SIX MONTHS, WOULD YOU CHANGE SOME OF YOUR
INVESTMENT DECISIONS?
A. Yes. I wish I had structured the fund more defensively during the period
so that its share price would have fallen less in response to rising
interest rates.
Q. HOW DOES THE FUND LOOK GOING FORWARD OVER THE NEXT SIX MONTHS?
A. Forecasting interest rates is extraordinarily difficult. However, in my
opinion, inflation is the single most important variable affecting bond
market performance over the long haul. During the last 12 months, the
consumer price index (CPI) rose only 2.8%, and my expectation is that
inflation will remain under control going forward. Given this outlook,
30-year Treasury bonds, which currently are yielding 7.4%, are reasonably
attractive.
FUND FACTS
GOAL: to provide income and
increase the value of the
fund's shares by investing
mainly in long-term U.S.
government and government
agency securities.
START DATE: September 28,
1990
SIZE: as of July 31, 1994,
more than $58 million
MANAGER: Curt
Hollingsworth, since October
1993; Fidelity Advisor
Government Investment
Portfolio, since January
1992; Spartan Short-
Intermediate Government
Fund, since December 1992;
Fidelity Short-Intermediate
Government Fund, since
October 1991; Fidelity
Government Securities
Fund, since February 1990;
Spartan Limited Maturity
Government Fund, since
May 1988; Fidelity
Institutional Short-
Intermediate Government
Portfolio, since 1987; joined
Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON YIELD
SPREAD:
"The fund invests largely in
U.S. Treasuries and
government agency bonds.
My job is to find a mix of these
two types of bonds that will
produce the best results. I try
to do this by looking at yield
spreads - the difference
between the yields on
Treasuries, which usually pay
the lowest yields, and other
types of bonds, such as
agencies. In general, it makes
sense to sell Treasuries and
buy agency bonds when the
yield spread is wide, meaning
that agencies yield much
more than Treasuries. On the
other hand, it's generally a
good move to sell agencies
and buy Treasuries when the
yield spread is narrow, or
when agencies yield only a
little more than Treasuries.
"Here's an example of how I
use yield spreads. Near the
end of the period, the yield
spread was narrow. So, the
fund sold its agencies and
bought Treasuries. At the end
of the period, 80.8% of the
fund was in Treasuries and
19.2% of the fund was in
agency bonds. "
INVESTMENT CHANGES
TOP ISSUERS AS OF JULY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
U.S. Treasury 80.8 45.1
Financing Corporation
(U.S. Government Agency) 18.0 27.9
Tennessee Valley Authority
(U.S. Government Agency) 1.2 6.0
EXCLUDING REPURCHASE AGREEMENTS
AVERAGE YEARS TO MATURITY AS OF JULY 31, 1994
6 MONTHS AGO
Years 22.6 21.3
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL OF THE
BONDS IN THE FUND IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF JULY 31, 1994
6 MONTHS AGO
Years 10.2 15.4
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, THE SHARE PRICE OF A FUND WITH A
FIVE-YEAR DURATION WILL FALL 5%.
ASSET ALLOCATION
AS OF JULY 31, 1994 AS OF JANUARY 31, 1994
Row: 1, Col: 1, Value: 19.2
Row: 1, Col: 2, Value: 80.8
U.S. government
agency
obligations 36.4%
U.S. Treasury
obligations 45.1%
Short-term
obligations 4.4%
Foreign
investments 14.1%
U.S. Treasury
obligations 80.8%
U.S. government
agency
obligations 19.2%
Row: 1, Col: 1, Value: 14.1
Row: 1, Col: 2, Value: 4.4
Row: 1, Col: 3, Value: 45.1
Row: 1, Col: 4, Value: 36.4
INVESTMENTS JULY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securites
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 100%
PRINCIPAL VALUE (NOTE 1)
AMOUNT
U.S. TREASURY OBLIGATIONS - 80.8%
6 1/4%, 2/15/03 $ 1,800,000 $ 1,704,942
8 7/8%, 8/15/17 39,000,000 44,862,090
46,567,032
U.S. GOVERNMENT AGENCY OBLIGATIONS - 19.2%
Financing Corporation:
10.70%, 10/6/17 2,000,000 2,620,625
9.80%, 11/30/17 540,000 656,438
10.35%, 8/3/18 5,000,000 6,382,812
9.65%, 11/2/18 600,000 721,313
Tennessee Valley Authority:
8 1/4%, 4/15/42 (Callable 2012) 500,000 504,690
6 7/8%, 12/15/43 200,000 170,656
11,056,534
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $56,577,499) $ 57,623,566
INCOME TAX INFORMATION
At July 31, 1994, the aggregate cost of investment securities for income
tax purposes was $56,577,499. Net unrealized appreciation aggregated
$1,046,067, of which $1,094,995 related to appreciated investment
securities and $48,928 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JULY 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (cost $56,577,499) $ 57,623,566
(Notes 1 and 2) - See accompanying schedule
Receivable for investments sold 195,204
Receivable for fund shares sold 159,677
Interest receivable 1,997,882
TOTAL ASSETS 59,976,329
LIABILITIES
Payable to custodian bank $ 865,735
Payable for investments purchased 123,267
Payable for fund shares redeemed 315,367
Dividends payable 278
Accrued management fee 30,972
TOTAL LIABILITIES 1,335,619
NET ASSETS $ 58,640,710
Net Assets consist of (Note 1):
Paid in capital $ 62,084,968
Undistributed net investment income 320,371
Accumulated undistributed net realized gain (loss) on (4,813,504)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 1,048,875
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 5,469,366 shares outstanding $ 58,640,710
NET ASSET VALUE, offering price and redemption price per $10.72
share ($58,640,710 (divided by) 5,469,366 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1994 (UNAUDITED)
INVESTMENT INCOME $ 1,619,809
Interest
EXPENSES
Management fee (Note 4) $ 200,454
Non-interested trustees' compensation 194
TOTAL EXPENSES 200,648
NET INVESTMENT INCOME 1,419,161
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1, 2 AND 3)
Net realized gain (loss) on:
Investment securities (4,136,820)
Foreign currency transactions (636,686) (4,773,506)
Change in net unrealized appreciation (depreciation) on:
Investment securities (5,699,193)
Assets and liabilities in foreign currencies 169,733 (5,529,460)
NET GAIN (LOSS) (10,302,966)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ (8,883,805)
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JULY 31, JANUARY 31,
1994 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 1,419,161 $ 5,493,483
Net investment income
Net realized gain (loss) (4,773,506) 5,465,921
Change in net unrealized appreciation (depreciation) (5,529,460) 2,639,826
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (8,883,805) 13,599,230
FROM OPERATIONS
Distributions to shareholders: (1,598,760) (5,701,388)
From net investment income
From net realized gain (564,582) (2,855,797)
TOTAL DISTRIBUTIONS (2,163,342) (8,557,185)
Share transactions 97,403,953 131,601,595
Net proceeds from sales of shares
Reinvestment of distributions 2,032,976 8,169,134
Cost of shares redeemed (97,052,619) (160,517,979)
Net increase (decrease) in net assets resulting from 2,384,310 (20,747,250)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (8,662,837) (15,705,205)
NET ASSETS
Beginning of period 67,303,547 83,008,752
End of period (including undistributed net investment $ 58,640,710 $ 67,303,547
income of $320,371 and $499,970, respectively)
OTHER INFORMATION
Shares
Sold 8,908,989 10,329,522
Issued in reinvestment of distributions 182,224 649,261
Redeemed (8,905,504) (12,536,136)
Net increase (decrease) 185,709 (1,557,353)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED JANUARY 31, SEPTEMBER 28,
ENDED 1990
JULY 31, (COMMENCEMENT
1994 OF
OPERATIONS) TO
JANUARY 31,
(UNAUDITED) 1994 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, $ 12.740 $ 12.130 $ 11.600 $ 11.040 $ 10.000
beginning of period
Income from .264 .847 .847 .776 .144
Investment
Operations
Net investment
income
Net realized and (1.874) 1.123 .703 .604 .996
unrealized gain
(loss)
Total from (1.610) 1.970 1.550 1.380 1.140
investment
operations
Less Distributions (.300) (.840) (.840) (.740) (.100)
From net investment
income
From net realized (.110) (.520) (.180) (.080) -
gain on investments
Total distributions (.410) (1.360) (1.020) (.820) (.100)
Net asset value, end $ 10.720 $ 12.740 $ 12.130 $ 11.600 $ 11.040
of period
TOTAL RETURN B (12.75)% 16.79% 13.95% 12.98% 11.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 58,641 $ 67,304 $ 83,009 $ 62,992 $ 33,833
period (000 omitted)
Ratio of expenses to .65%A .65% .65% .65% .65%A
average net assets
Ratio of net 4.60%A 6.41% 7.35% 7.30% 7.26%A
investment income
to average net
assets
Portfolio turnover rate 750%A 153% 135% 335% 256%A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Long-Term Government Bond Fund (the fund) is a fund of Fidelity
Devonshire 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.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Effective February 1, 1994, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment in securities.
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."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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
foreign currency transactions and losses deferred due to wash sales. The
fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
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 at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may enter into forward foreign currency contracts. The
U.S. dollar value of forward foreign currency contracts is determined using
forward currency exchange rates supplied by a quotation service. Losses may
arise due to changes in the value of the foreign currency or if the
counterparty does not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
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 affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $224,308,168 and $219,258,113, respectively, of which U.S.
government and government agency obligations aggregated $219,075,571 and
$206,900,857, respectively.
4. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.65% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. For
the period, FMR or its affiliates collected certain transaction fees from
shareholders which aggregated $6,935.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
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 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
2249 Galiano Street
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
175 East 400 South Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
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)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(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)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(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
Thomas J. Steffanci, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
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THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
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