SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (N. 2-24389)
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UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 81_ [x]
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
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Amendment No. [ ]
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Fidelity Devonshire Trust ______________________
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, MA
02109__________________________________________________
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
617-570-7000__________________________
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, MA
02109_________________________________________________________________
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[ X ] On March 21, 1994 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485.
[ ] On pursuant to paragraph (a) of Rule 485.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and will file the notice required by such
Rule on or before March 31, 1994.
FIDELITY UTILITIES INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
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1................................... Cover Page
...
2a.................................. Expenses
..
b, Contents; The Fund at a Glance; Who May Want to
c................................ Invest
3a.................................. Financial Highlights
..
*
b...................................
.
Performance
c....................................
4a Charter
i.................................
The Fund at a Glance; Investment Principles and
ii............................... Risks; Fundamental Investment Policies and
Restrictions.
Investment Principles and Risks
b...................................
Who May Want to Invest; Investment Principles and
c.................................... Risks
5a.................................. Charter
..
b(i)................................ Doing Business with Fidelity; Charter
Charter; Breakdown of Expenses
(ii)..............................
..(iii)........................... Expenses; Breakdown of Expenses
c, Charter; FMR and Its Affiliates; Breakdown of
d................................ Expenses, Cover Page
FMR and Its Affiliates
e....................................
Expenses
f....................................
g(i)................................ FMR and its Affiliates
..
(ii)................................. *
..
5A................................. Performance
.
6a Charter
i.................................
How to Buy Shares; How to Sell Shares; Transaction
ii................................ Details; Exchange Restrictions
*
iii...............................
*
b...................................
.
Exchange Restrictions
c....................................
*
d...................................
.
Doing Business with Fidelity; How to Buy Shares;
e.................................... How to Sell Shares; Investor Services
f,g................................. Dividends, Capital Gains, and Taxes
..
7a.................................. Cover Page; Charter
..
How to Buy Shares; Transaction Details
b...................................
.
*
c....................................
How to Buy Shares
d...................................
.
*
e...................................
f ................................ Breakdown of Expenses
8................................... How to Sell Shares; Investor Services; Transaction
... Details; Exchange Restrictions
9................................... *
...
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* Not Applicable
FIDELITY UTILITIES INCOME FUND
CROSS REFERENCE SHEET
(continued)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
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10, 11.......................... Cover Page
12.................................. *
..
13a - Investment Policies and Limitations
c............................
*
d..................................
14a - Trustees and Officers
c............................
15a, *
b..............................
Trustees and Officers
c..................................
16a FMR, Portfolio Transactions
i................................
Trustees and Officers
ii..............................
Management Contract
iii.............................
Management Contract
b.................................
c, Contracts with Companies Affiliated with FMR
d.............................
e - *
g...........................
Description of the Trust
h.................................
Contracts with Companies Affiliated with FMR
i................................
17a - Portfolio Transactions
c............................
*
d,e..............................
18a................................ Description of the Trust
..
*
b.................................
19a................................ Additional Purchase and Redemption Information
..
Additional Purchase and Redemption Information;
b.................................. Valuation of Portfolio Securities
*
c..................................
20.................................. Distributions and Taxes
..
21a, Contracts with Companies Affiliated with FMR
b..............................
*
c.................................
22.................................. Performance
..
23.................................. Financial Statements
..
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* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
A Statement of Additional Information dated March 21, 1994 has been filed
with the Securities and Exchange Commission, and is incorporated herein by
reference (is legally considered a part of this prospectus). The Statement
of Additional Information is available free upon request by calling
Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, savings association, insured depositary
institution, or government agency, nor are they federally insured or
otherwise protected by the FDIC, the Federal Reserve Board, or any other
agency. Investments in the fund involve investment risk, including
possible loss of principal. The value of the investment and its return will
fluctuate and are not guaranteed. When sold, the value of the investment
may be higher or lower than the amount originally invested.
Utilities Income seeks high current income by investing mainly in public
utility companies. The fund may also consider growth potential.
FIDELITY
UTILITIES INCOME
FUND
PROSPECTUS
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109MARCH 21,
1994
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
UIF-pro-394
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES The fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL CHARTER How the fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-sheltered retirement
plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High current income and growth potential. As with any mutual fund,
there is no assurance that the fund will achieve its goal.
STRATEGY: Invests mainly in the equity securities of public utility
companies.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager. Foreign affiliates of FMR
help choose investments for the fund.
SIZE: As of January 31, 1994, the fund had over $ 1.4 billion in
assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for conservative stock market investors who are
willing to ride out stock market fluctuations in pursuit of potentially
high long-term returns. The fund is designed for those looking for income
and some potential for growth through an investment that focuses on public
utility companies. These companies have a tradition of above-average
dividends, making their stocks attractive to long-term, income-oriented
investors. Utility stocks have tended to be less volatile than the stock
market in general, although they also offer less growth potential. While
stock market investing is often risky, public utility stocks are generally
considered to be among the most conservative equity securities. The fund is
not in itself a balanced investment plan.
Over time, stocks have shown greater growth potential than other types of
securities. In the short term, however, stock prices can fluctuate
dramatically in response to company, market, or economic news. The value of
the fund's investments and the income they generate will vary from day to
day. When you sell your fund shares, they may be worth more or less than
what you paid for them.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Utilities
Income is in the GROWTH AND
INCOME category.
(bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(bullet) INCOME Seeks income by
investing in bonds.
(arrow) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee that varies based on its performance. It also incurs
other expenses for services such as maintaining shareholder records and
furnishing shareholder statements and fund reports. The fund's expenses are
factored into its share price or dividends and are not charged directly to
shareholder accounts (see page ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets. A portion of the
brokerage commissions that the fund paid was used to reduce fund expenses.
Without this reduction, the total fund operating expenses would have been
.87% .
Management fee .53 %
12b-1 fee None
Other expenses .33 %
Total fund operating expenses . 86 %
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses if you
close your account after the number of years indicated:
After 1 year $ 9
After 3 years $ 27
After 5 years $ 4 8
After 10 years $ 106
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The table that follows has been audited by Coopers & Lybrand,
independent accountants. Their unqualified report is included in the fund's
Annual Report. The Annual Report is incorporated by reference into (is
legally a part of) the Statement of Additional Information.
SELECTED PER-SHARE DATA
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1.Year ended January 1988C 1989 1990 1991 1992 1993 1994
31
2.Net asset value, $ 10.00 $ 10.94 $ 11.10 $ 11.96 $ 11.74 $ 12.94 $ 13.94
beginning of period
3.Income from
Investment
Operations
4. Net investment .06 .60 .72 .67 .63 .61 .51
income
5. Net realized and .92 .11 1.21 .10 1.38 1.37 2.13
unrealized
gain (loss) on
investments
6. Total from .98 .71 1.93 .77 2.01 1.98 2.64
investment
operations
7.Less Distributions
8. From net (.04) (.52) (.76) (.69) (.63) (.60) (.52)
investment income
9. From net realized -- (.03) (.31) (.30) (.18) (.38) (.22)
gain
10. Total (.04) (.55) (1.07) (.99) (.81) (.98) (.74)
distributions
11.Net asset value, $ 10.94 $ 11.10 $ 11.96 $ 11.74 $ 12.94 $ 13.94 $ 15.84
end of period
12.Total returnB 9.83% 6.75 17.70 6.84 17.70 15.92 19. 34
% % % % % %
13.RATIOS AND SUPPLEMENTAL DATA
14.Net assets, end $ 31 $ 129 $ 157 $ 220 $ 647 $ 1,002 $ 1,456
of period
(000 omitted)
15.Ratio of 2.00%A 1.47 1.02 .94 .95 .87 .86
expenses to % % % % % %E
average net assets
16.Ratio of 2.00% A 1.47 1.02 .94 .95 .87 .87
expenses to average , D % % % % % %E
net assets before
expense reductions
17.Ratio of net 5.36%A 6.14 6.19 5.93 5.11 4.57 3.39
investment income % % % % % %
to average net
assets
18.Portfolio turnover - - 10 61 43 39 73 47
rate % % % % % %
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A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED AND
WOULD HAVE BEEN LESS HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING SOME OF
THE PERIODS SHOWN.
C FROM NOVEMBER 27, 1987 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31,
1988
D DURING THE PERIOD NOVEMBER 27, 1987 (COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1988, EXPENSES WERE LIMITED TO A PERCENTAGE OF AVERAGE NET
ASSETS IN ACCORDANCE WITH A STATE EXPENSE REGULATION. EXPENSES BORNE BY THE
INVESTMENT ADVISER DURING THE PERIOD AMOUNTED TO $.006 PER SHARE.
E FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A
PORTION OF THE FUND'S EXPENSES.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The total
returns that follow are based on historical fund results and do not reflect
the effect of taxes.
The fund's fiscal year runs from February 1 through January 31. The tables
below show the fund's performance over past fiscal years compared to two
measures: investing in a broad selection of utility stocks (S&P
Utilities Index ), and not investing at all (inflation, or CPI). To
help you compare this fund to other funds, the chart on page
displays calendar-year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
January 31, 1994 year years fundA
Utilities Income 19. 34 15. 41 15. 21
S&P Utilities Index 12.88 13.70 15.32
Consumer Price
Index 2.52 3.84 3.91
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
January 31, 1994 year years fundA
Utilities Income 19 .34 104.73 140.04
S&P Utilities Index 12.88 90.05 141.58
Consumer Price
Index 2.52 20.73 26.69
A FROM NOVEMBER 27, 1987
EXAMPLE: Let's say, hypothetically, that an investor put $10,000 in the
fund on November 27, 1987. From that date through January 31, 1994, the
fund's total return was 1 40.04 %. That $10,000 would have grown to
$2 4,004 (the initial investment plus 1 40.04 % of $10,000).
UNDERSTANDING
PERFORMANCE
Because this fund invests in
stocks, its performance is
related to that of the overall
stock market. Historically,
stock market performance
has been characterized by
volatility in the short run and
growth in the long run. You
can see these two
characteristics reflected in the
fund's performance; the
year-by-year total returns on
page 7 show that short-term
returns can vary widely, while
the returns at left show
long-term growth.
(checkmark)
$10,000 OVER LIFE OF FUND
Fiscal years 1988 1991 1994
Row: 1, Col: 1, Value: 10000.0
Row: 2, Col: 1, Value: 10000.0
Row: 3, Col: 1, Value: 10059.8
Row: 4, Col: 1, Value: 10983.45
Row: 5, Col: 1, Value: 10873.02
Row: 6, Col: 1, Value: 10500.31
Row: 7, Col: 1, Value: 10510.44
Row: 8, Col: 1, Value: 10946.26
Row: 9, Col: 1, Value: 11087.51
Row: 10, Col: 1, Value: 10954.05
Row: 11, Col: 1, Value: 10902.72
Row: 12, Col: 1, Value: 11295.53
Row: 13, Col: 1, Value: 11534.75
Row: 14, Col: 1, Value: 11451.55
Row: 15, Col: 1, Value: 11545.15
Row: 16, Col: 1, Value: 11724.72
Row: 17, Col: 1, Value: 11502.9
Row: 18, Col: 1, Value: 11631.16
Row: 19, Col: 1, Value: 11984.27
Row: 20, Col: 1, Value: 12562.08
Row: 21, Col: 1, Value: 12820.04
Row: 22, Col: 1, Value: 13493.63
Row: 23, Col: 1, Value: 13352.4
Row: 24, Col: 1, Value: 13418.39
Row: 25, Col: 1, Value: 13462.49
Row: 26, Col: 1, Value: 13892.5
Row: 27, Col: 1, Value: 14537.87
Row: 28, Col: 1, Value: 13799.44
Row: 29, Col: 1, Value: 13834.05
Row: 30, Col: 1, Value: 13821.86
Row: 31, Col: 1, Value: 13264.24
Row: 32, Col: 1, Value: 13904.91
Row: 33, Col: 1, Value: 13964.05
Row: 34, Col: 1, Value: 13976.1
Row: 35, Col: 1, Value: 13265.24
Row: 36, Col: 1, Value: 13470.06
Row: 37, Col: 1, Value: 14290.51
Row: 38, Col: 1, Value: 14608.89
Row: 39, Col: 1, Value: 14806.39
Row: 40, Col: 1, Value: 14743.6
Row: 41, Col: 1, Value: 15271.05
Row: 42, Col: 1, Value: 15451.98
Row: 43, Col: 1, Value: 15451.98
Row: 44, Col: 1, Value: 15451.98
Row: 45, Col: 1, Value: 15336.57
Row: 46, Col: 1, Value: 15817.06
Row: 47, Col: 1, Value: 16206.64
Row: 48, Col: 1, Value: 16719.54
Row: 49, Col: 1, Value: 16930.18
Row: 50, Col: 1, Value: 17061.83
Row: 51, Col: 1, Value: 17942.73
Row: 52, Col: 1, Value: 17352.68
Row: 53, Col: 1, Value: 17285.63
Row: 54, Col: 1, Value: 17084.74
Row: 55, Col: 1, Value: 17645.12
Row: 56, Col: 1, Value: 18000.48
Row: 57, Col: 1, Value: 18179.33
Row: 58, Col: 1, Value: 19161.63
Row: 59, Col: 1, Value: 19189.3
Row: 60, Col: 1, Value: 19244.8
Row: 61, Col: 1, Value: 19216.81
Row: 62, Col: 1, Value: 19398.76
Row: 63, Col: 1, Value: 19898.6
Row: 64, Col: 1, Value: 20115.04
Row: 65, Col: 1, Value: 21182.84
Row: 66, Col: 1, Value: 21752.81
Row: 67, Col: 1, Value: 21547.74
Row: 68, Col: 1, Value: 21606.33
Row: 69, Col: 1, Value: 22623.23
Row: 70, Col: 1, Value: 22903.99
Row: 71, Col: 1, Value: 23953.14
Row: 72, Col: 1, Value: 23967.57
Row: 73, Col: 1, Value: 23773.92
Row: 74, Col: 1, Value: 22790.79
Row: 75, Col: 1, Value: 23004.24
Row: 76, Col: 1, Value: 23989.27
$
$24,004
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
THE S&P UTILITIES INDEX is an unmanaged index of 45 gas,
electric and telephone stocks that are included in the Standard &
Poor's 500 Composite Stock Price Index. The figures assume reinvestment
of all dividends paid by stocks included in the index. They do not,
however, include any allowance for the brokerage commissions or other fees
you could pay if you actually invested in those stocks.
YEAR-BY-YEAR TOTAL RETURNS
C alendar years 1988 1989 1990 1991 1992 1993
Fidelity Utilities Income Fund 14.77% 25.92% 1.85% 21.18%
10.90% 15.61%
Competitive funds average 15.28% 28.77% -1.37% 21.67%
9.07% 13.1 3%
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 1, Col: 2, Value: nil
Row: 2, Col: 1, Value: nil
Row: 2, Col: 2, Value: nil
Row: 3, Col: 1, Value: nil
Row: 3, Col: 2, Value: nil
Row: 4, Col: 1, Value: nil
Row: 4, Col: 2, Value: nil
Row: 5, Col: 1, Value: 14.77
Row: 5, Col: 2, Value: 15.28
Row: 6, Col: 1, Value: 25.92
Row: 6, Col: 2, Value: 28.77
Row: 7, Col: 1, Value: 1.85
Row: 7, Col: 2, Value: -1.37
Row: 8, Col: 1, Value: 21.18
Row: 8, Col: 2, Value: 21.67
Row: 9, Col: 1, Value: 10.9
Row: 9, Col: 2, Value: 9.07
Row: 10, Col: 1, Value: 15.61
Row: 10, Col: 2, Value: 13.13
Fidelity
Utilities
Income
Fund
Competitive
funds
average
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Utility Funds Average, which
currently reflects the performance of over 67 mutual funds with
similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
Other illustrations of fund performance may show moving averages over
specified periods.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
THE FUND IN DETAIL
CHARTER
FIDELITY UTILITIES INCOME FUND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. In technical
terms, the fund is currently a diversified fund of Fidelity Devonshire
Trust, an open-end management investment company organized as a
Massachusetts business trust on May 31, 1985.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are entitled
to is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs. Fidelity Management & Research (U.K.)
Inc. (FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR
Far East) assist FMR with foreign investments.
John Muresianu is manager of Utilities Income, which he has managed since
December 1992. Mr. Muresianu also manages Select Electric Utilities,
Select Natural Gas, and Select Utilities as well as serving as the senior
electric utility and natural gas analyst. Previously, he served as senior
research analyst following life insurance, service companies,
Canadian and Australian banks , and foreign currencies. Mr.
Muresianu has also been a pension fund manager with the company. He joined
Fidelity in 1986.
FDC distributes and markets Fidelity's funds and services. Fidelity Service
Co. (FSC) performs transfer agent servicing functions for the fund.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
A broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry out
the fund's transactions, provided that the fund receives brokerage services
and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND SEEKS A HIGH LEVEL OF CURRENT INCOME by investing primarily in
equity securities of public utility companies. When consistent with this
goal, the fund may also consider the potential for growth of income and
capital appreciation. FMR normally invests at least 65% of the fund's
total assets in equity securities of public utility companies.
Public u tility companies may include companies that provide
electricity, natural gas, water, public communications services, or
sanitary services to the public. These companies tend to pay
above-average dividends.
The fund's performance is closely tied to conditions affecting the public
utility industry. The industry is sensitive to factors such as interest
rates, government regulations, the price and availability of fuel,
environmental protection or energy conservation regulations, the level of
demand for services, and the risks associated with constructing and
operating nuclear power facilities. These factors may change rapidly. FMR
emphasizes quality in selecting the fund's utility investments, and
looks for companies that have proven dividend records and sound financial
structures. The fund may also buy securities of non-utility companies
and purchase securities which are not currently paying dividends.
THE FUND WILL SPREAD INVESTMENT RISK by limiting its holdings in any one
company or industry. FMR may use various investment techniques to hedge the
fund's risks, but there is no guarantee that these strategies will work as
FMR intends. When you sell your shares, they may be worth more or less than
what you paid for them.
FMR normally invests the fund's assets according to its investment
strategy. When FMR considers it appropriate for defensive purposes,
however, it may temporarily invest substantially in short-term debt
securities and money market instruments.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. As a shareholder, you will receive financial reports
every six months detailing fund holdings and describing recent investment
activities.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. This ownership interest
often gives the fund the right to vote on measures affecting the company's
organization and operations. Although common stocks have a history of
long-term growth in value, their prices tend to fluctuate in the short
term, particularly those of smaller companies.
RESTRICTIONS: With respect to 75% of total assets, the fund may not own
more than 10% of the outstanding voting securities of a single issuer. The
fund may not own 5% or more of the outstanding voting securities of more
than one public utility company.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values .
Debt securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
RESTRICTIONS: The fund does not currently intend to invest in
securities that are rated below A by Moody's Investors Service, Inc. or
Standard & Poor's Corporation, or in unrated securities judged by FMR
to be of equivalent quality.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for the fund, or there may be a
requirement that the fund supply additional cash to a borrower on
demand.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to
the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: With respect to 75% of total assets, the fund may not invest
more than 5% of its total assets in any one issuer. The fund may not invest
more than 25% of its total assets in any one industry (other than public
utility companies). These limitations do not apply to U.S. government
securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering the fund's securities. The
fund may also lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of the fund's
total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks a high level of current income by investing primarily in
equity securities of public utility companies. The fund also seeks growth
of income and capital appreciation, but only when consistent with its
primary investment objective. With respect to 75% of total assets, the fund
may not invest more than 5% of its total assets in any one issuer. The fund
may not invest more than 25% of its total assets in any one industry,
except that the fund will invest more than 25% of total assets in the
securities of public utility companies. The fund may borrow only for
temporary or emergency purposes, but not in an amount exceeding 33 % of its
total assets. Loans, in the aggregate, may not exceed 33 % of the fund's
total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted
from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. The fund also pays OTHER EXPENSES, which
are explained on page .
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The amount of
the fee is determined by taking a BASIC FEE and then applying a PERFORMANCE
ADJUSTMENT. The performance adjustment either increases or decreases the
management fee, depending on how well the fund has performed relative to
the S&P Utilities Index.
Manage = Ba +/- Performa
ment sic nce
fee fee adjustme
nt
THE BASIC FEE (calculated monthly) is calculated by adding a group fee rate
to an individual fund fee rate, and multiplying the result by the fund's
average net assets. The group fee rate is based on the average net assets
of all the mutual funds advised by FMR. This rate cannot rise above .52%,
and it drops as total assets under management increase.
For January 1994, the group fee rate was .3229 %. The individual fund
fee rate is .20%. The basic fee rate for fiscal 1994 was .53 %.
THE PERFORMANCE ADJUSTMENT rate is calculated monthly by comparing
the fund's performance to that of the S&P Utilities Index. The
performance period began on December 1, 1993 and will eventually span 36
months, but the performance adjustment will not take effect until November
1994. The difference is translated into a dollar amount that is added to or
subtracted from the basic fee. The maximum annualized performance
adjustment rate is ".15%. The total management fee rate for fiscal 1994
was .53%.
UNDERSTANDING THE
MANAGEMENT FEE
The basic fee FMR receives
is designed to be responsive
to changes in FMR's total
assets under management.
Building this variable into the
fee calculation assures
shareholders that they will
pay a lower rate as FMR's
assets under management
increase.
Another variable, the
performance adjustment,
rewards FMR when the fund
outperforms the S&P
Utilities Index (an established
index of stock market
performance) and reduces
FMR's fee when the fund
underperforms this index.
(checkmark)
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on companies
based outside the United States. Under the sub-advisory agreements, FMR
pays FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively,
of the costs of providing these services. The sub-advisers may also
provide investment management services. In return, FMR
pays FMR U.K. and FMR Far East 50% of its management fee rate with respect
to the fund's investments that the sub-adviser manages on a discretionary
basis.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform many transaction and accounting
functions. These services include processing shareholder transactions,
valuing the fund's investments, and handling securities loans. In fiscal
1994, the fund paid FSC fees equal to .3 % of its average net
assets .
The fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
The fund has adopted a Distribution and Service Plan. This plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. It is important to
note, however, that the fund does not pay FMR any separate fees for this
service.
The fund's portfolio turnover rate for fiscal 1994 was 47 %. This
rate varies from year to year.
<r>YOUR ACCOUNT</r>
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers the fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over 200
(bullet) Assets in Fidelity mutual
funds: over $ 225 billion
(bullet) Number of shareholder
accounts: over 15 million
(bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age
and under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS
allow self-employed individuals or small business owners (and their
employees) to make tax-deductible contributions for themselves and any
eligible employees up to $30,000 per year.
(bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(bullet) 401(K) PROGRAMS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
THE FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. The fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business
days to ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity retirement accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity retirement accounts $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity retirement accounts $500
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
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<CAPTION>
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Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to "Fidelity
check payable to Utilities Income Fund."
"Fidelity Utilities Indicate your fund
Income Fund." Mail to account number on
the address indicated your check and mail to
on the application. the address printed on
your account statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
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Wire (wire_graphic) (bullet) Call 1-800-544-7777 to (bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Fidelity Utilities
Bank Routing Income Fund"and
#021001033, include your account
Account #00163053. number and your
Specify "Fidelity name.
Utilities Income Fund"
and include your new
account number and
your name.
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Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to other Fidelity funds, which can be
requested by phone or in writing. Call 1-800-544-6666 for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open ($500 for retirement
accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
ACCOUNT TYPE SPECIAL REQUIREMENTS
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Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
except retirement $100,000.
(bullet) For Money Line transfers to
All account types your bank account; minimum:
$10 ; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Retirement account names appear on the
account.
(bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (bullet) The trustee must sign the
Organization letter indicating capacity as
trustee. If the trustee's name
is not in the account
registration, provide a copy of
the trust document certified
Executor, within the last 60 days.
Administrator, (bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or revoked,
see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly or quarterly redemptions
from your account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply to retirement accounts. Call
1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net income and capital gains
to shareholders each year. Normally, dividends are distributed in March,
June, September, and December. Capital gains are distributed in March and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
When the fund deducts a distribution from its NAV, the reinvestment price
is the fund's NAV at the close of business that day. Cash distribution
checks will be mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
The fund earns dividends
from stocks and interest from
bond, money market, and
other investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund
realizes capital gains
whenever it sells securities
for a higher price than it paid
for them. These are passed
along as CAPITAL GAIN
DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how your investment in the fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were paid
on December 31.
For federal tax purposes, the fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
distribution from its NAV, you will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable
distribution.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, the fund
may have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's NAV as of the close of
business of the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations.
If quotations are not readily available, assets are valued by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they are of
a size that would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) The fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees the fund or its transfer agent
has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUND THROUGH A BROKER, who may charge you
a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
Fidelity Distributors Corporation (FDC) may enter confirmed purchase orders
on behalf of customers by phone, with payment to follow no later than the
time when the fund is priced on the following business day. If payment is
not received by that time, the financial institution could be held liable
for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect the
fund, it may take up to seven days to pay you.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) The fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the fund without reimbursement
from the fund. Qualified recipients are securities dealers who have sold
fund shares or others, including banks and other financial institutions,
under special arrangements in connection with FDC's sales activities. In
some instances, these incentives may be offered only to certain
institutions whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. See your plan materials for further
information.
(bullet) The fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if the fund receives
or anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincides with a
"market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY UTILITIES INCOME FUND
A Fund of Fidelity Devonshire Trust
STATEMENT OF ADDITIONAL INFORMATION
MARCH 21, 1994
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 21 , 1994). Please retain
this document for future reference. The Annual Report for the fiscal year
ended January 31, 1994 is incorporated herein by reference. To obtain an
additional copy of the Prospectus or the Annual Report, please call
Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Distribution and Service Plan
Contracts With Companies Affiliated With FMR
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
UIF-ptb-394
1.INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than obligations issued or guaranteed by the
government of the United States, or any of its agencies or
instrumentalities) if, as a result thereof, (a) more than 5% of the fund's
total assets would be invested in the securities of such issuer, or (b) the
fund would hold more than 10% of the voting securities of such issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry except that the fund will
invest more than 25% of its total assets in securities of public utility
companies;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or
from investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to purchase any security of any
public utility company if, as a result, it would own 5% or more of the
outstanding voting securities of more than one public utility company (as
defined by the Public Utility Holding Company Act of 1935).
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market system.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and
in connection therewith, assuming any associated unfunded commitments of
the sellers (This limitation does not apply to purchases or debt securities
or to repurchase agreements.)
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of reorganization, consolidation, or merger.
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(x) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(xi) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xii) The fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the trust and those officers and
directors of FMR who individually own more than 1/2 of 1% of the securities
of such issuer together own more than 5% of such issuer's securities.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does not intend to direct or
administer the day-to-day operations of any company. The fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that the fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
a company's direction or policies; seeking the sale or reorganization of
the company or a portion of its assets; or supporting or opposing third
party takeover efforts. This area of corporate activity is increasingly
prone to litigation and it is possible that the fund could be involved in
lawsuits related to such activities. FMR will monitor such activities with
a view to mitigating, to the extent possible, the risk of litigation
against the fund and the risk of actual liability if the fund is involved
in litigation. No guarantee can be made, however, that litigation against
the fund will not be undertaken or liabilities incurred.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS are interests in amounts owed by a
corporate, governmental, or other borrower to another party. They may
represent amounts owed to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments involve a risk
of loss in case of default or insolvency of the lending bank or other
financial intermediary. Direct debt instruments may also include standby
financing commitments that obligate the fund to supply additional cash to
the borrower on demand.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
over-the-counter options, and non-government stripped fixed-rate
mortgage-backed securities. Also, FMR may determine some restricted
securities, government-stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, and swap agreements to be
illiquid. However, with respect to over-the-counter options the fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement the fund may have to close out the option before
expiration. In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed
by the Board of Trustees. If through a change in values, net assets, or
other circumstances, the fund were in a position where more than 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed upon price on an agreed upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value (at least equal to the amount of the agreed
upon resale price and marked to market daily) of the underlying security.
The fund may engage in repurchase agreements with respect to any security
in which it is authorized to invest. While it does not presently appear
possible to eliminate all risks from these transactions (particularly the
possibility of a decline in the market value of the underlying securities,
as well as delays and costs to the fund in connection with bankruptcy
proceedings), it is the fund's current policy to limit repurchase agreement
transactions to parties whose creditworthiness has been reviewed and found
satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
INTERFUND BORROWING PROGRAM. The fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates. Interfund loans and borrowing normally will extend overnight,
but can have a maximum duration of seven days. Loans may be called on one
day's notice. The fund will lend through the program only when the returns
are higher than those available at the same time from other short-term
instruments (such as repurchase agreements), and will borrow through the
program only when the costs are equal to or lower than the cost of bank
loans. The fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a
lending fund could result in a lost investment opportunity or additional
borrowing costs.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that the fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease the fund's exposure to long- or
short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
security prices or inflation rates. Swap agreements can take many different
forms and are known by a variety of names. The fund is not limited to any
particular form of swap agreement if FMR determines it is consistent with
the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make
payments only under specified circumstances, usually in return for payment
of a fee by the other party. For example, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an interest
rate floor is obligated to make payments to the extent that a specified
interest rate falls below an agreed-upon level. An interest rate collar
combines elements of buying a cap and selling a floor.
Swap agreements will tend to shift the fund's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from the fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. The fund expects to be able to eliminate
its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If the fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than the underlying instrument s .
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and
interest from such securities, can change significantly when foreign
currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity
than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be
more difficult to obtain reliable information regarding an issuer's
financial condition and operations. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be difficult
to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate or counter these potential
events.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable abroad, they may be less liquid
than foreign securities of the same class that are not subject to such
restrictions.
American Depositary Receipts and European Depositary Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
corporation held in trust by a bank or similar financial institution.
Designed for use in U.S. and European securities markets, respectively,
ADRs and EDRs are alternatives to the purchase of the underlying securities
in their national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The fund may hold foreign currency deposits
from time to time, and may convert dollars and foreign currencies in the
foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may
be exchanged on a spot (i.e., cash) basis, or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. Forward contracts generally are traded in an interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange.
The fund may use currency forward contracts to manage currency risks and to
facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the fund.
In connection with purchases and sales of securities denominated in foreign
currencies, the fund may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing the fund's foreign investments. The fund
could also enter into forward contracts to purchase or sell a foreign
currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not
yet been selected by FMR.
The fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if the fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. The fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
cash and appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, the fund
will segregate assets to cover currency forward contracts, if any, whose
purpose is essentially speculative. The fund will not segregate assets to
cover forward contracts entered into for hedging purposes, including
settlement hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change the fund's investment exposure to changes in currency
exchange rates, and could result in losses to the fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged the fund by selling that currency in exchange for
dollars, the fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly, if
FMR increases the fund's exposure to a foreign currency, and that
currency's value declines, the fund will realize a loss. There is no
assurance that FMR's use of forward currency contracts will be advantageous
to the fund or that it will hedge at an appropriate time. The policies
described in this section are non-fundamental policies of the fund.
2.LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has
filed a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading
Commission (CFTC) and the National Futures Association, which regulate
trading in the futures markets. The fund intends to comply with Section 4.5
of the regulations under the Commodity Exchange Act, which limits the
extent to which the fund can commit assets to initial margin deposits and
option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Composite Stock
Price Index (S&P 500). Futures can be held until their delivery dates,
or can be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. The fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
the fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply
with guidelines established by the SEC with respect to coverage of options
and futures strategies by mutual funds, and if the guidelines so require,
will set aside appropriate liquid assets in a segregated custodial account
in the amount prescribed. Securities held in a segregated account cannot be
sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the fund's assets could impede
portfolio management or the fund's ability to meet redemption requests or
other current obligations.
3.SHORT SALES. The fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security the fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. The fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal circumstances.
When the fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. The fund will
incur transaction costs, including interest expense, in connection with
opening, maintaining, and closing short sales.
4.PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the management
contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment adviser. In selecting broker-dealers, subject to
applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions, and arrangements for payment of fund
expenses. Commissions for foreign investments traded on foreign exchanges
generally will be higher than for U.S. investments and may not be subject
to negotiation.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers
generally is made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI)
and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of FMR Corp., if
the commissions are fair, reasonable, and comparable to commissions charged
by non-affiliated, qualified brokerage firms for similar services.
FMR may allocate brokerage transactions to broker-dealers who have entered
into arrangements with FMR under which the broker-dealer allocates a
portion of the commissions paid by the fund toward payment of the fund's
expenses, such as transfer agent fees of FSC or custodian fees. The
transaction quality must, however, be comparable to those of other
qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied . Pursuant to such requirements , the
Board of Trustees has authorized FBSI to effect fund portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC rules .
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal years ended January 31, 1994, and 1993, the fund's portfolio
turnover rates were 47 % and 73%, respectively.
For fiscal 1994, 1993, and 1992, the fund paid brokerage commissions of
$ 1,810,658 , $1,360,362, and $738 , 952, respectively. During
fiscal 1994, approximately $ 1,270,742 or 70.2 % of these
commissions were paid to brokerage firms that provided research services,
although the provision of such services was not necessarily a factor in the
placement of all of this business with such firms. The fund pays both
commissions and spreads in connection with the placement of portfolio
transactions; FBSI is paid on a commission basis. During fiscal 1994, 1993,
and 1992, the fund paid brokerage commissions of $ 427,299 , $363,908,
and $146,751, respectively, to FBSI. During fiscal 1994, this amounted to
23.6 % of the aggregate brokerage commissions paid by the fund for
transactions involving 39.5 % of the aggregate dollar amount of
transactions in which the fund paid brokerage commissions. The difference
between the percentage of brokerage commissions paid to and the percentage
of the dollar amount of transactions effected through FBSI is a result of
the low commission rates charged by FBSI.
During the fiscal year ended January 31, 1994, the fund paid no
brokerage commissions to FBSL.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment,
whether it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as the fund is
concerned. In other cases, however, the ability of the fund to participate
in volume transactions will produce better executions and prices for the
fund. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the fund outweighs any disadvantages
that may be said to exist from exposure to simultaneous transactions.
5.VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Equity securities for which the
primary market is the U.S. are valued at last sale price or, if no sale has
occurred, at the closing bid price. Equity securities for which the primary
market is outside the U.S. are valued using the official closing price or
the last sale price in the principal market where they are traded. If the
last sale price (on the local exchange) is unavailable, the last evaluated
quote or last bid price is normally used. Short-term securities are valued
either at amortized cost or at original cost plus accrued interest, both of
which approximate current value. Fixed-income securities are valued
primarily by a pricing service that uses a vendor security valuation matrix
which incorporates both dealer-supplied valuations and electronic data
processing techniques. This twofold approach is believed to more accurately
reflect fair value because it takes into account appropriate factors such
as institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon quoted, exchange, or
over-the-counter prices. Use of pricing services has been approved by the
Board of Trustees.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed each day at the close
of the NYSE. The values of any such securities held by the fund are
determined as of such time for the purpose of computing the fund's net
asset value. Foreign security prices are furnished by independent brokers
or quotation services which express the value of securities in their local
currency. FSC gathers all exchange rates daily at the close of the NYSE
using the last quoted price on the local currency and then translates the
value of foreign securities from their local currency into U.S. dollars.
Any changes in the value of forward contracts due to exchange rate
fluctuations and days to maturity are included in the calculation of net
asset value. If an extraordinary event that is expected to materially
affect the value of a portfolio security occurs after the close of an
exchange on which that security is traded, then the security will be valued
as determined in good faith by a committee appointed by the Board of
Trustees.
6.PERFORMANCE
The fund may quote its performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. The fund's share price, yield, and
total returns fluctuate in response to market conditions and other factors,
and the value of fund shares when redeemed may be more or less than their
original cost.
YIELD CALCULATIONS. Yields for the fund used in advertising are computed by
dividing the fund's interest and dividend income for a given 30-day or one
month period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the fund's
net asset value per share (NAV) at the end of the period, and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. Income is calculated for purposes of yield quotations in
accordance with standardized methods applicable to all stock and bond
funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a
premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at
a discount by adding a portion of the discount to daily income. Capital
gains and losses generally are excluded from the calculation.
Income calculated for the purposes of calculating the fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, the yield quoted for the fund may differ
from the rate of distributions the fund paid over the same period or the
rate of income reported in the fund's financial statements.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV over the
period. Average annual returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in the fund over a
stated period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative
return of 100% over ten years would produce an average annual return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual returns are
a convenient means of comparing investment alternatives, investors should
realize that the fund's performance is not constant over time, but changes
from year to year, and that average annual returns represent averaged
figures as opposed to the actual year-to-year performance of the fund.
In addition to average annual returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or series of
redemptions over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given on page . Total returns may be quoted on a before-tax
or after-tax basis. Total returns, yields, and other performance
information may be quoted numerically, or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
MOVING AVERAGES. The fund may illustrate performance using moving averages.
A long-term moving average is the average of each week's adjusted closing
NAV for a specified period. A short-term moving average is the average of
each day's adjusted closing NAV for a specified period. Moving Average
Activity Indicators combine adjusted closing NAVs from the last business
day of each week with moving averages for a specified period to produce
indicators showing when an NAV has crossed, stayed above, or stayed below
its moving average. On January 28 , 1994 the 13-week and
39-week long-term moving averages were 15.18 and 15.15 ,
respectively.
HISTORICAL FUND RESULTS. The following table shows the income and capital
elements of the fund's total return for the period November 27, 1987
(commencement of operations) through January 31, 1994. The table compares
the fund's return to the record of the Standard & Poor's 500 Composite
Stock Price Index (S&P 500), the Standard & Poor's Utilities
Index (S&P Utilities), the Dow Jones Industrial Average (DJIA),
the Dow Jones Utilities Average (DJUA), and the cost of living (measured by
the Consumer Price Index, or CPI) over the same period. The comparisons to
the S&P 500, the DJIA, the S&P Utilities, and the DJUA are provided
to show how the fund's total return compared to the record of a broad
average of common stock prices, a narrower set of stocks of major
industrial companies, and two indices of utility stocks, respectively, over
the same period. The fund has the ability to invest in securities not
included in any of these indices, and its investment portfolio may or may
not be similar in composition to the indices. The S&P 500, S&P
Utilities, DJIA, and DJUA indices are based on the prices of unmanaged
groups of stocks and, unlike the fund's returns, their returns do not
include the effect of paying brokerage commissions and other costs of
investing.
During the period from November 27, 1987 (commencement of operations)
through January 31, 1994, a hypothetical $10,000 investment in Fidelity
Utilities Income Fund would have grown to $ 24,004 assuming all
distributions were reinvested. This was a period of widely fluctuating
stock prices and should not necessarily be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the fund today.
25.FIDELITY UTILITIES INCOME FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE OF VALUE OF VALUE OF
PERIOD INITIAL REINVESTED REINVESTED
ENDED $10,000 DIVIDEND/INCOME CAPITAL GAIN TOTAL S& S&
;P ;P
JANUARY 31 INVESTMENT DISTRIBUTIONS DISTRIBUTIONS VALUE 500 UTILITIES DJIA DJUA CPI**
1994 $ 15,840 $5,928 $2,337 $24,004 $24,158 $23,526 $25,168 $ 19,766 $ 12,669
1993 13,940 4,511 1,664 20,115 21,402 20,7 44 20,36 0 18,7 53 12,357
1992 12,940 3,380 1,033 17,353 19,350 17,890 19,249 16,354 11,967
1991 11,740 2,285 718 14,744 15,769 16,003 15,819 15,048 11,664
1990 11,960 1,472 367 13,799 14,550 15,582 14,409 15,192 11,040
1989 11,100 593 32 11,725 12,711 12,203 1 2 ,551 12,098 10,494
1988* 10,940 43 0 10,983 10,585 10,909 10,123 10,729 10,026
</TABLE>
* From November 27, 1987 (commencement of operations).
**From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on November
27, 1987, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 16,426 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
the cash payments for the period would have come to $ 3,760 for
income dividends and $ 1,420 for capital gain distributions. Tax
consequences of different investments have not been factored into the above
figures.
The annualized yield of the S&P 500 for the fiscal year ended January
31, 1994 was 2.61 % calculated by dividing the dollar value of
dividends paid by the S&P 500 stocks during the period by the value of
the S&P 500 on January 31, 1994. The S&P 500 yield is
calculated differently from the fund's yield; among other things, the
fund's yield calculation treats dividends as accrued in anticipation of
payment, rather than recording them when paid.
The fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, the fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time, the fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these
measures to those of other funds. Measures of volatility seek to compare
the fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
an investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
The fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
As of January 31, 1994, FMR managed approximately $ 145 billion in
equity fund assets as defined and tracked by Lipper Analytical Services
Inc. This figure represents the largest amount of equity fund assets under
management by a mutual fund investment adviser in the United States, making
FMR America's leading equity (stock) fund manager.
7.ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1994:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day (observed), Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolios securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when investors
do not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payment
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), the fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, the fund has notified shareholders that is reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
8.DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. A portion of the fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that the fund's income is derived from qualifying dividends. Because
the fund may earn other types of income, such as interest income from
securities loans, non-qualifying dividends, and short-term capital gains,
the percentage of dividends from the fund that qualifies for the deduction
generally will be less than 100%. The fund will notify corporate
shareholders annually of the percentage of fund dividends that qualifies
for the dividends-received deduction. A portion of the fund's dividends
derived from certain U.S. government obligations may be exempt from state
and local taxation. Gains (losses) attributable to foreign currency
fluctuations are generally taxable as ordinary income and therefore will
increase (decrease) dividend distributions. The fund will send each
shareholder a notice in January describing the tax status of dividends and
capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by the fund are taxable to
shareholders as dividends, not as capital gains. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction.
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 shares of Fidelity Utilities Income Fund. Fidelity Corporate
Trust: Adjustable Rate preferred Portfolio had a capital loss carryover of
approximately $2 6,645 ,000 (subject to certain limitations) available
to offset future capital gains in Fidelity Utilities Income Fund, to the
extent provided by regulations.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because the fund does not
currently anticipate that securities of foreign issuers will constitute
more than 50% of its total assets at the end of its fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction
on their federal income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes at the fund level,
the fund intends to distribute substantially all of its net investment
income and net realized capital gains within each calendar year as well as
on a fiscal year basis. The fund intends to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from the sale of securities held less than three months
constitute less than 30% of the fund's gross income for each fiscal year.
Gains from some forward currency contracts, futures contracts, and options
are included in this 30% calculation, which may limit the fund's
investments in such instruments.
If the fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the Internal
Revenue Code, it may be subject to U.S. federal income tax on a portion of
any excess distribution or gain from the disposition of such shares.
Interest charges may also be imposed on the fund with respect to deferred
taxes arising from such distributions or gains.
The fund is treated as a separate entity from the other funds of Fidelity
Devonshire Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions. Investors should consult their tax
advisers to determine whether the fund is suitable to their particular tax
situation.
9.FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services, to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East
research and visit thousands of domestic and foreign companies each year.
FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies
portfolio management and research services in connection with certain money
market funds advised by FMR.
10.TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with either
the Trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the
Board and of the Executive Committee of FMR; a Director of FMR, Chairman
and a Director of FMR Texas Inc. (1989), Fidelity Management & Research
(U.K.) Inc., and Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc. and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration
and production, 1990). Until March 1990, Mr. Cox was President and
Chief Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Bonneville Pacific Corporation
(independent power, 1989), Sandfill Corporation (non-hazardous waste,
1993) and CH2M Hill Companies (engineering). In addition, he served on
the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton , NY, Trustee
(1992). Prior to her retirement in September 1991, Mrs. Davis was the
Senior Vice President of Corporate Affairs of Avon Products, Inc. She is
currently a Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores, 1990), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she serves as a Director
of the New York City Chapter of the National Multiple Sclerosis Society,
and is a member of the Advisory Council of the International Executive
Service Corps. and the President's Advisory Council of The University of
Vermont School of Business Administration .
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc. (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments; Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich,
CT, Trustee, is a Professor at Columbia University Graduate School of
Business and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuation, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman
of the Board of Trustees of the Greenwich Hospital Association .
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992) .
Prior to his retirement on May 31, 1990, he was a Director of FMR (1989)
and Executive Vice President of FMR (a position he held until March 31,
1991); Vice President of Fidelity Magellan Fund and FMR Growth Group
Leader; and Managing Director of FMR Corp. Mr. Lynch was also Vice
President of Fidelity Investments Corporate Services (1991-1992). He is
a Director of W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen
Corporation (engineering and construction ). In addition he serves as
a Trustee of Boston College, Massachusetts Eye & Ear Infirmary,
Historic Deerfield (1989) and Society for the Preservation of New England
Antiquities, and as an Overseer of the Museum of Fine Arts of Boston
(1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), and York International Corp. (air conditioning and
refrigeration, 1989). Commercial Intertech Corp. (water treatment
equipment, 1992) and Associated Estates Realty Corporation (a real estate
investment trust 1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). He is also
a Trustee of Rensselaer Polytechnic Institute and of Corporate Property
Investors and a member of the Advisory Boards of Butler Capital Corporation
Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's
Cabinet. (1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee , is President of The Wales Group, Inc. (management and
financial advisory services). Prior to retiring in 1987, Mr. Williams
served as Chairman of the Board of First Wachovia Corporation (bank holding
company), and Chairman and Chief Executive Officer of The First National
Bank of Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software ), Georgia Power Company (electric utility),
Gerber Alley & Associates, Inc. (computer software), National Life
Insurance Company of Vermont, American Software, Inc. (1989), and
AppleSouth, Inc. (restaurants , 1992 ).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President - Legal of FMR Corp., and Vice President and Clerk
of FDC.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of FMR.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustees fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
As of January 31, 1994, the Trustees and officers owned, in the aggregate,
less than 1 % of the fund's total outstanding shares.
11.MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provides the management and administrative services necessary
for the operation of the fund. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
law; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC, the fund pays all of its expenses, without limitation, that are not
assumed by those parties. The fund pays for typesetting, printing, and
mailing proxy material to shareholders, legal expenses, and the fees of the
custodian, auditor, and non-interested Trustees. Although the fund's
management contract provides that the fund will pay for typesetting,
printing, and mailing of prospectuses, statements of additional
information, notices, and reports to existing shareholders, the trust has
entered into a revised transfer agent agreement with FSC, pursuant to which
FSC bears the cost of providing these services to existing shareholders.
Other expenses paid by the fund include interest, taxes, brokerage
commissions, the fund's proportionate share of insurance premiums and
Investment Company Institute dues, and the costs of registering shares
under federal and state securities laws. The fund is also liable for such
nonrecurring expenses as may arise, including costs of any litigation to
which the fund may be a party and any obligation it may have to indemnify
the trust's officers and Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated December
1, 1993, which was approved by shareholders on November 17, 1993. For the
services of FMR under the contract, the fund pays FMR a monthly management
fee composed of the sum of two elements: a basic fee and a performance
adjustment based on a comparison of the fund's performance to that of the
Standard & Poor's Utilities Index.
COMPUTING THE BASIC FEE. The fund's basic fee rate is composed of two
elements: a group fee rate and an individual fund fee rate. The group fee
rate is based on the monthly average net assets of all of the registered
investment companies with which FMR has management contracts and is
calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown on the left on the chart on page . On the right, the
effective fee rate schedule shows the results of cumulatively applying the
annualized rates at varying asset levels. For example, the effective annual
fee rate at $ 244 billion of group net assets - their approximate
level for January 1994 was .3229 %, which is the weighted average of
the respective fee rates for each level of group net assets up to that
level.
GROUP FEE EFFECTIVE ANNUAL
31.RATE SCHEDULE* FEE RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Average Annualized Group Effective Annual
Group Assets Rate Net Assets Fee Rates
$ 0 - 3 billion .520% $ 0.5 billion .5200%
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 150 .3371
21 - 24 .360 175 .3325
24 - 30 .350 200 .3284
30 - 36 .345 225 .3253
36 - 42 .340 250 .3223
42 - 48 .335 275 .3198
48 - 66 .325 300 .3175
66 - 84 .320 325 .3153
84 - 102 .315 350 .3133
102 - 138 .310
138 - 174 .305
174 - 228 .300
228 - 282 .295
282 - 336 .290
Over 336 .285
</TABLE>
* The rates shown for average group assets in excess of $174 billion were
adopted by FMR on a voluntary basis on November 1, 1993 pending shareholder
approval of a new management contract reflecting the extended schedule. The
extended schedule provides for lower management fees as total assets under
management increase.
The individual fund fee rate is .20%. Based on the average net assets of
funds advised by FMR for January 1994, the annual management fee would be
calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
.3229 % + .20% = .5229 %
</TABLE>
One twelfth (1/12) of this annual management fee rate is then applied to
the fund's average net assets for the current month, giving a dollar amount
which is the fee for that month.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee is subject to upward or
downward adjustment, depending upon whether, and to what extent the fund's
investment performance for the performance period exceeds, or is exceeded
by the record of the S&P Utilities Index over the same period. The
fund's performance period commenced on December 1, 1993. Starting with the
twelfth month, the performance adjustment will take effect. Each month
subsequent to the twelfth month, a new month will be added to the
performance period until the performance period equals 36 months.
Thereafter, the performance period will consist of the most recent month
plus the previous 35 months. Each percentage point of difference (up to
a maximum difference of + or - 7.5) is multiplied by a performance
adjustment rate of .02%. Thus, the maximum annualized adjustment rate is +
or - .15%. This performance comparison is made at the end of each month.
One twelfth (1/12) of this rate is then applied to the fund's average net
assets for the entire performance period, giving a dollar amount which is
added to (or subtracted from) the basic fee.
The fund's performance is calculated based on change in net asset value.
For purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by the fund are treated as if reinvested in
fund shares at the net asset value as of the record date for payment. The
record of the S&P Utilities Index is based on change in value and is
adjusted for any cash distributions from the companies whose securities
compose the S&P Utilities Index.
Because the adjustment to the basic fee is based on the fund's performance
compared to the investment record of the S&P Utilities Index, the
controlling factor is not whether the fund's performance is up or down per
se, but whether it is up or down more or less than the record of the
S&P Utilities Index. Moreover, the comparative investment performance
of the fund is based solely on the relevant performance period without
regard to the cumulative performance over a longer or shorter period of
time.
During the fiscal years ended January 31, 1994, 1993, and 1992, FMR
received $7,340,380, $4,208,341, and $2,092,679, respectively, for its
services as investment adviser to the fund. These fees were equivalent to
.5 3 %, .53%, and .5 4 %, respectively, of the average net assets
of the fund for each of those years.
To comply with the California Code of Regulations, FMR will reimburse the
fund if, and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this regulation, the
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its custodian fees attributable to
investments in foreign securities.
SUB-ADVISERS. On December 1, 1993, FMR entered into new sub-advisory
agreements with FMR U.K., and FMR Far East, wholly owned subsidiaries of
FMR, which were approved by shareholders on November 17, 1993. Pursuant to
the sub-advisory agreements, FMR may receive investment advice and research
services with respect to companies based outside the U.S. from the
sub-advisers and may grant the sub-advisers investment management authority
as well as the authority to buy and sell securities if FMR believes it
would be beneficial to the fund.
The sub-advisory agreements provide that FMR will pay fees to FMR U.K. and
FMR Far East equal to 110% and 105%, respectively, of FMR U.K.'s and FMR
Far East's costs incurred in connection with providing investment advice
and research services. FMR also will pay fees equal to 50% of its monthly
management fee (including performance adjustment) with respect to the
fund's average net assets managed by the sub-advisers on a discretionary
basis.
Prior to December 1, 1993, FMR had sub-advisory agreements with FMR U.K.
and FMR Far East on behalf of the fund, pursuant to which each sub-adviser
provided FMR with investment advice and research services. Under those
agreements, FMR U.K. and FMR Far East were compensated for their services
according to the same formulas as they are compensated currently for
providing investment advice and research services.
The fees paid to FMR U.K. and FMR Far East for fiscal 1994, 1993, and 1992,
are shown in the following table.
FISCAL YEAR ENDED FEES PAID TO FEES PAID TO
JANUARY 31 FMR U.K. FMR FAR EAST
1994 $ 18,049.8 $ 28,583.9
1993 $ 8,622.7 $ 12,018.0
1992 $ 6,548.0 $ 8,501.0
12.DISTRIBUTION AND SERVICE PLAN
The fund has adopted a distribution and service plan (the plan) pursuant to
Rule 12b-1 the Investment Company Act of 1940 Act (the Rule). The Rule
provides in substance that a mutual fund may not engage directly or
indirectly in financing any activity that is primarily intended to result
in the sale of shares of the fund except pursuant to a plan adopted by the
fund under the Rule. The fund's Board of Trustees has adopted the Plan to
allow the fund and FMR to incur certain expenses that might be considered
to constitute indirect payment by the fund of distribution expenses. Under
the plan, if the payment to FMR of management fees should be deemed to be
indirect financing by the fund of the distribution of its shares, such
payment is authorized by the plan.
The plan also specifically recognizes that FMR, either directly or through
FDC, may use its management fee revenue, past profits or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the fund. In addition, the
plan provides that FMR may use its resources, including management fee
revenues, to make payments to third parties that provide assistance in
selling shares of the fund, or to third parties, including banks, that
render shareholder support services. The Trustees have not authorized such
payments to date.
The fund's plan has been approved by the Trustees. As required by the Rule,
the Trustees carefully considered all pertinent factors relating to the
implementation of the plan prior to its approval, and have determined that
there is a reasonable likelihood that the plan will benefit the fund and
its shareholders. In particular, the Trustees noted that the plan does not
authorize payments by the fund other than those made to FMR under its
management contract with the fund. To the extent that the plan gives FMR
and FDC greater flexibility in connection with the distribution of shares
of the fund, additional sales of the fund's shares may result.
Additionally, certain shareholder support services may be provided more
effectively under the plan by local entities with whom shareholders
have other relationships. The plan was approved by shareholders of the fund
on November 17, 1993.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. The fund may execute portfolio
transactions with and purchase securities issued by depository institutions
that receive payments under the plan. No preference will be shown in the
selection of investments for the instruments of such depository
institutions. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein, and banks and
financial institutions may be required to register as dealers pursuant to
state law.
13.CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC is transfer, dividend disbursing, and shareholders' servicing agent for
the fund. Under the trust's contract with FSC, the fund pays an annual fee
of $ 26.03 per basic retail account with a balance of $5,000 or more,
$ 15.31 per basic retail account with a balance of less than $5,000,
and a supplemental activity charge of $ 2.25 for standing order
transactions and $6.11 for monetary transactions. These fees and
charges are subject to annual cost escalation based on postal rate changes
and changes in wage and price levels as measured by the National Consumer
Price Index for Urban Areas. With respect to certain institutional
client master accounts, the fund pays FSC a per-account fee of $95, and
monetary transaction charges of $20 or $17.50, depending on the nature of
services provided. With respect to certain broker-dealer master accounts,
the fund pays FSC a per-account fee of $30, and a charge of $6 for monetary
transactions. Fees for certain institutional retirement plan accounts are
based on the net assets of all such accounts in the fund.
Under the contract, FSC pays out-of-pocket expenses associated with
providing transfer agent services. In addition, FSC bears the expense of
typesetting, printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
shareholders, with the exception of proxy statements. Transfer agent fees,
including reimbursement for out-of-pocket expenses, paid to FSC for the
fiscal years ended January 31, 1994, 1993, and 1992 were $ 3,616,048 ,
$1,959,848, and $1,107,695, respectively. If a portion of the fund's
brokerage commissions had not resulted in payment of certain of these fees,
the fund would have paid transfer agent fees of $ 3,679,010 for the
fiscal year ended January 31, 199 4 .
The trust's contract with FSC also provides that FSC will perform the
calculations necessary to determine the fund's net asset value per share
and dividends and maintain the fund's accounting records. Prior to July 1,
1991, the annual fee for these pricing and bookkeeping services was based
on two schedules, one pertaining to the fund's average net assets, and one
pertaining to the type and number of transactions the fund made. The fee
rates in effect as of July 1, 1991 are based on the fund's average net
assets, specifically, .06% for the first $500 million of average net assets
and .03% for average net assets in excess of $500 million. The fee is
limited to a minimum of $45,000 and a maximum of $750,000 per year. Pricing
and bookkeeping services, including related out-of-pocket expenses, paid to
FSC for fiscal 1994, 1993, and 1992 were $ 574,301 , $392,149, and
$197,003, respectively.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at net
asset value. Promotional and administrative expenses in connection with
the offer and sale of shares are paid by FMR.
14.DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Utilities Income Fund is a fund of Fidelity
Devonshire Trust (the trust) an open-end management investment company
originally organized as a Massachusetts corporation on December 16, 1965.
On May 31, 1985, the Trust was reorganized as a Massachusetts business
trust, at which time its name was changed from Fidelity Equity-Income Fund,
Inc. to Fidelity Equity-Income Fund. On December 19, 1986, the Board of
Trustees voted to change the name of the Trust from Fidelity Equity-Income
Fund to Fidelity Devonshire Trust. Currently, there are six funds of the
trust: Fidelity Adjustable Rate Government Fund, Fidelity Equity-Income
Fund, Fidelity Real Estate Investment Portfolio, Spartan Long-Term
Government Bond Fund, Fidelity Mid-Cap Stock Fund and Fidelity
Utilities Income Fund. The Declaration of Trust permits the Trustees to
create additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names,
"Fidelity" and "Spartan" may be withdrawn.
The assets of the Trust received for the issue or sale of the shares of
each fund and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to such
fund and constitute the underlying assets of such fund. The underlying
assets of each fund are segregated on the books of account, and are to be
charged with the liabilities with respect to such fund and with a share of
the general expenses of the trust. Expenses with respect to the
trust are to be allocated in proportion to the asset value of the
respective funds except where allocations of direct expense can otherwise
be fairly made. The officers of the trust, subject to the general
supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable
to all of the funds. In the event of the dissolution or liquidation of the
trust, shareholders of each fund are entitled to receive as a class the
underlying assets of such fund available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations
created thereby to the trust and its assets. The Declaration of
Trust provides for indemnification out of each fund's property of any
shareholder held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which a fund itself would be unable to meet
its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar of net
asset value per share you own. The shares have no preemptive or conversion
rights; the voting and dividend rights, the right of redemption, and the
privilege of exchange are described in the Prospectus. Shares are fully
paid and nonassessable, except as set forth under the heading "Shareholder
and Trustee Liability" above. Shareholders representing 10% or more of the
trust or a fund may, as set forth in the Declaration of Trust, call
meetings of the trust or a fund for any purpose related to the trust or
fund, as the case may be, including, in the case of a meeting of the entire
trust, the purpose of voting on removal of one or more Trustees. The trust
or any fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the trust or the fund , as determined by the current
value of each shareholder's investment in the fund or trust. If not so
terminated, the trust and its funds will continue indefinitely.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of the fund's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the fund or in deciding which
securities are purchased or sold by the fund. The fund may, however, invest
in obligations of the custodian and may purchase or sell securities from or
to the custodian.
FMR, its officers and directors, its affiliated companies and the trust's
Trustees from time to time have transactions with various banks including
custodian banks and subcustodian banks for certain of the funds advised by
FMR. The Boston branch of the fund's custodian bank leases its office space
from an affiliate of FMR at a lease payment which, when entered into, was
consistent with prevailing market rates. T ransactions that have
occurred to date have included mortgages and personal and general business
loans. In the judgment of FMR, the terms and conditions of those
transactions were not influenced by existing or potential custodial or
other fund relationships.
AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts, serves as the trust's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax,
and related services.
15.FINANCIAL STATEMENTS
The fund's Annual Report for the fiscal year ending January 31, 1994 is a
separate report supplied with this Statement of Additional Information and
is incorporated herein by reference.
16.APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through A in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end
of its generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
The ratings from AA to A may be modified by the addition of a plus or minus
to show relative standing within the major rating category.
FIDELITY DEVONSHIRE TRUST
FIDELITY EQUITY-INCOME FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Fund at a Glance;
Who May Want to Invest
3 a, .............................. Financial Highlights
b, *
c .............................. Performance
4 a i............................. Charter
ii........................... The Fund at a Glance; Investment
Principles and Risks; Fundamental
Investment Policies and Restrictions
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment
Principles and Risks
5 a .............................. Charter
b i............................. Doing Business with Fidelity;
Charter
ii........................... Charter; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Charter; Breakdown of Expenses;
Cover Page; FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g i............................. FMR and its Affiliates
.
ii............................ *
..
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell
Shares; Transaction Details;
Exchange Restrictions
iii.......................... *
b ............................. *
c .............................. Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How
to Buy Shares; How to Sell Shares;
Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction
Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor
Services; Transaction Details;
Exchange Restrictions
9 .............................. *
</TABLE>
* Not applicable
FIDELITY DEVONSHIRE TRUST
FIDELITY EQUITY-INCOME FUND
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Contracts with Companies Affiliated
with FMR
e ............................ *
f ............................ Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with Companies Affiliated
with FMR
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption
Information
b ............................ Additional Purchase and Redemption
Information; Valuation of Portfolio
Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with Companies Affiliated
with FMR
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements.
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
A Statement of Additional Information dated has been filed with the
Securities and Exchange Commission, and is incorporated herein by reference
(is legally considered a part of this prospectus). The Statement of
Additional Information is available free upon request by calling Fidelity
at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, savings association, insured depositary
institution, or government agency, nor are they federally insured or
otherwise protected by the FDIC, the Federal Reserve Board, or any other
agency. Investments in the fund involve investment risk, including possible
loss of principal. The value of the investment and its return will
fluctuate and are not guaranteed. When sold, the value of the investment
may be higher or lower than the amount originally invested.
Equity-Income seeks reasonable income by investing mainly in
income-producing equity securities. In selecting investments, the fund also
considers the potential for capital appreciation.
FIDELITY
EQUITY-INCOME
FUND
PROSPECTUS
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES The fund's sales
charge (load) and its yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL CHARTER How the fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-sheltered retirement
plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
SALES CHARGE REDUCTIONS AND
WAIVERS
<r>KEY FACTS</r>
THE FUND AT A GLANCE
GOAL: Reasonable income and the potential for capital appreciation. As with
any mutual fund, there is no assurance that the fund will achieve its goal.
STRATEGY: Invests mainly in income-producing equity securities.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager. Foreign affiliates of FMR
help choose investments for the fund.
SIZE: As of January 31, 1994, the fund had over $ 6 billion in
assets.
WHO MAY WANT TO INVEST
The fund may be appropriate for investors who are willing to ride out stock
market fluctuations in pursuit of potentially high long-term returns. The
fund is designed for those who want some income from equity and bond
investments, but also want to be invested in the stock market for its
long-term growth potential. The fund is not in itself a balanced investment
plan.
Over time, stocks have shown greater growth potential than other types of
securities. In the short term, however, stock prices can fluctuate
dramatically in response to company, market, or economic news. The value of
the fund's investments and the income they generate will vary. When you
sell your fund shares, they may be worth more or less than what you paid
for them.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Fidelity
Utilities Income Fund is in the
GROWTH AND INCOME
category.
(bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(bullet) INCOME Seeks income by
investing in bonds.
(arrow) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund. See pages and - for an explanation of how and when these
charges apply.
Maximum sales charge on purchases,
after December 31, 1995
(as a % of offering price) 2.00%
Maximum sales charge on
reinvested dividends None
Deferred sales charge on redemptions None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to FMR. It also incurs other expenses for services
such as maintaining shareholder records and furnishing shareholder
statements and fund reports. The fund's expenses are factored into its
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses adjusted to
reflect the current management contract and are calculated as a
percentage of average net assets.
Management fee .44 %
12b-1 fee None
Other expenses .28 %
Total fund operating expenses .72 %
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses if you
close your account after the number of years indicated:
After 1 year $ 7
After 3 years $ 23
After 5 years $ 42
After 10 years $ 96
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. As an
investor, you pay some of
these costs directly. Others
are paid from the fund's
assets; the effect of these
other expenses is already
factored into any quoted
share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The table that follows has been audited by Coopers & Lybrand,
independent accountants. Their unqualified report is included in the fund's
Annual Report. The Annual Report is incorporated by reference into (is
legally a part of) the Statement of Additional Information.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
37.Year ended 1985 1986 1987 1988 1989 1990 1991 1992 1993B 1994
January 31
38.Net asset $ 26.6 $ 25.7 $ 28.1 $ 29.9 $ 23.3 $ 26.8 $ 25.2 $ 22.3 $ 26.5 $ 29.8
value, 3 5 1 3 1 1 5 8 7 7
beginning of
period
39.Income
from
Investment
Operations
40. Net 1.76 1.91 1.73 1.54C 1.62 1.71 1.46 1.18 1.11C
1.11
investment
income
41. Net 2.11 2.67 4.87 (2.73) 3.39 (.36) (2.48) 4.21 3.27 5.48
realized and
unrealized
gain (loss)
on
investments
42. Total from 3.87 4.58 6.60 (1.19) 5.01 1.35 (1.02) 5.39 4.38
6.59
investment
operations
43.Less
Distributions
44. From net (1.63) (1.70) (1.70) (1.51) (1.51) (1.75) (1.55) (1.20) (1.08) (1.15)
investment
income
45. From net (3.12) (.52) (3.08) (3.92) - (1.16) (.30) - - (.12)
realized gain
46. Total (4.75) (2.22) (4.78) (5.43) (1.51) (2.91) (1.85) (1.20) (1.08) (1.27)
distributions
47.Net asset $ 25.7 $ 28.1 $ 29.9 $ 23.3 $ 26.8 $ 25.2 $ 22.3 $ 26.5 $ 29.8 $ 35.1
value, 5 1 3 1 1 5 8 7 7 9
end of period
48.Total returnA 18.39 18.85 25.66 (4.32) 22.15 4.70% (3.94) 24.61 16.92 22.52
% % % % % % % % %
49.RATIOS AND SUPPLEMENTAL DATA
50.Net assets, $ 1,35 $ 2,36 $ 3,81 $ 3,68 $ 4,40 $ 4,75 $ 3,94 $ 4,42 $ 5,12 $ 6,94
end of period 1 2 8 4 0 2 1 1 3 3
(in millions)
51.Ratio of .72% .66% .65% .66% .63% .71% .70% .68% .67% .66%
expenses to
average net
assets
52.Ratio of net 7.90% 7.10% 5.80% 5.50% 6.50% 6.10% 6.18% 4.81% 4.02% 3.55%
investment
income to
average net
assets
53.Portfolio 123% 118% 110% 120% 68% 92% 107% 111% 84% 70%
turnover rate
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
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.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The total
returns that follow are based on historical fund results and do not reflect
the effect of taxes.
The fund's fiscal year runs from February 1 through January 31. The tables
below show the fund's performance over past fiscal years compared to two
measures: investing in a broad selection of stocks (S&P 500), and not
investing at all (inflation, or CPI). To help you compare this fund to
other funds, the chart on page displays calendar-year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
January 31, 1994 year years years
Utilities Income 22.52% 12.42% 14.01%
Utilities Income
(load adj. A ) 20.07% 11.96% 13.78%
S&P 500 12.88% 13.70% 15.39%
Consumer Price
Index 2.52% 3.84% 3.68%
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Past 10
January 31, 1994 year years years
Utilities Income 22.52% 79.53% 271.02%
Utilities Income
(load adj. A ) 20.07% 75.94% 263.60%
S&P 500 12.88% 90.05% 318.37%
Consumer Price
Index 2.52% 20.73% 43.47%
A LOAD-ADJUSTED RETURNS INCLUDE THE EFFECT OF PAYING THE FUND'S 2%
SALES CHARGE , WHICH IS WAIVED THROUGH DECEMBER 31, 1995.
EXAMPLE: Let's say, hypothetically, that an investor put $10,000 in the
fund on January 31, 1984. From that date through January 31, 1994, the
fund's total return, including the effect of paying the 2% sales charge was
263.60 %. That $10,000 would have grown to $ 36,360 (the
initial investment plus 263.60 % of $10,000).
UNDERSTANDING
PERFORMANCE
Because this fund invests in
stocks, its performance is
related to that of the overall
stock market. Historically,
stock market performance
has been characterized by
volatility in the short run and
growth in the long run. You
can see these two
characteristics reflected in the
fund's performance; the
year-by-year total returns on
page show that short-term
returns can v a ry widely, while
the returns at left show
long-term growth.
(checkmark)
$10,000 OVER TEN YEARS
Fiscal years 19 84 19 89 19 94
Row: 1, Col: 1, Value: 9800.0
Row: 2, Col: 1, Value: 9394.6
Row: 3, Col: 1, Value: 9471.26
Row: 4, Col: 1, Value: 9458.48
Row: 5, Col: 1, Value: 9062.440000000001
Row: 6, Col: 1, Value: 9231.299999999999
Row: 7, Col: 1, Value: 9213.98
Row: 8, Col: 1, Value: 9954.67
Row: 9, Col: 1, Value: 10205.3
Row: 10, Col: 1, Value: 10394.37
Row: 11, Col: 1, Value: 10504.29
Row: 12, Col: 1, Value: 10791.46
Row: 13, Col: 1, Value: 11602.51
Row: 14, Col: 1, Value: 11611.52
Row: 15, Col: 1, Value: 11572.23
Row: 16, Col: 1, Value: 11567.56
Row: 17, Col: 1, Value: 12183.26
Row: 18, Col: 1, Value: 12352.25
Row: 19, Col: 1, Value: 12413.71
Row: 20, Col: 1, Value: 12427.89
Row: 21, Col: 1, Value: 12121.46
Row: 22, Col: 1, Value: 12519.12
Row: 23, Col: 1, Value: 13050.93
Row: 24, Col: 1, Value: 13495.72
Row: 25, Col: 1, Value: 13790.06
Row: 26, Col: 1, Value: 14668.19
Row: 27, Col: 1, Value: 15486.06
Row: 28, Col: 1, Value: 15412.17
Row: 29, Col: 1, Value: 15459.67
Row: 30, Col: 1, Value: 15670.37
Row: 31, Col: 1, Value: 15104.04
Row: 32, Col: 1, Value: 15958.88
Row: 33, Col: 1, Value: 15209.64
Row: 34, Col: 1, Value: 15863.87
Row: 35, Col: 1, Value: 16026.08
Row: 36, Col: 1, Value: 15799.65
Row: 37, Col: 1, Value: 17328.09
Row: 38, Col: 1, Value: 17837.57
Row: 39, Col: 1, Value: 18151.25
Row: 40, Col: 1, Value: 17921.25
Row: 41, Col: 1, Value: 17815.57
Row: 42, Col: 1, Value: 18312.54
Row: 43, Col: 1, Value: 18859.27
Row: 44, Col: 1, Value: 19393.44
Row: 45, Col: 1, Value: 18962.42
Row: 46, Col: 1, Value: 15633.67
Row: 47, Col: 1, Value: 14941.24
Row: 48, Col: 1, Value: 15540.99
Row: 49, Col: 1, Value: 16579.42
Row: 50, Col: 1, Value: 17354.7
Row: 51, Col: 1, Value: 17145.34
Row: 52, Col: 1, Value: 17382.97
Row: 53, Col: 1, Value: 17584.6
Row: 54, Col: 1, Value: 18581.16
Row: 55, Col: 1, Value: 18544.73
Row: 56, Col: 1, Value: 18173.1
Row: 57, Col: 1, Value: 18708.45
Row: 58, Col: 1, Value: 19040.29
Row: 59, Col: 1, Value: 18855.93
Row: 60, Col: 1, Value: 19036.33
Row: 61, Col: 1, Value: 20252.54
Row: 62, Col: 1, Value: 20071.24
Row: 63, Col: 1, Value: 20460.66
Row: 64, Col: 1, Value: 21223.65
Row: 65, Col: 1, Value: 21729.72
Row: 66, Col: 1, Value: 21796.47
Row: 67, Col: 1, Value: 23212.84
Row: 68, Col: 1, Value: 23496.12
Row: 69, Col: 1, Value: 23210.35
Row: 70, Col: 1, Value: 21978.29
Row: 71, Col: 1, Value: 22272.4
Row: 72, Col: 1, Value: 22590.49
Row: 73, Col: 1, Value: 21204.82
Row: 74, Col: 1, Value: 21238.42
Row: 75, Col: 1, Value: 21252.92
Row: 76, Col: 1, Value: 20454.13
Row: 77, Col: 1, Value: 21771.29
Row: 78, Col: 1, Value: 21683.12
Row: 79, Col: 1, Value: 21373.61
Row: 80, Col: 1, Value: 19714.27
Row: 81, Col: 1, Value: 18287.81
Row: 82, Col: 1, Value: 17921.88
Row: 83, Col: 1, Value: 19045.81
Row: 84, Col: 1, Value: 19423.18
Row: 85, Col: 1, Value: 20369.76
Row: 86, Col: 1, Value: 21798.74
Row: 87, Col: 1, Value: 22115.95
Row: 88, Col: 1, Value: 22226.53
Row: 89, Col: 1, Value: 23387.62
Row: 90, Col: 1, Value: 22364.83
Row: 91, Col: 1, Value: 23558.61
Row: 92, Col: 1, Value: 24090.22
Row: 93, Col: 1, Value: 23972.44
Row: 94, Col: 1, Value: 24340.52
Row: 95, Col: 1, Value: 23377.85
Row: 96, Col: 1, Value: 25134.23
Row: 97, Col: 1, Value: 25382.61
Row: 98, Col: 1, Value: 26156.42
Row: 99, Col: 1, Value: 25803.81
Row: 100, Col: 1, Value: 26673.28
Row: 101, Col: 1, Value: 26934.12
Row: 102, Col: 1, Value: 26623.78
Row: 103, Col: 1, Value: 27286.94
Row: 104, Col: 1, Value: 26740.81
Row: 105, Col: 1, Value: 26956.18
Row: 106, Col: 1, Value: 27231.85
Row: 107, Col: 1, Value: 28127.76
Row: 108, Col: 1, Value: 28822.8
Row: 109, Col: 1, Value: 29677.25
Row: 110, Col: 1, Value: 30392.6
Row: 111, Col: 1, Value: 31392.22
Row: 112, Col: 1, Value: 31332.1
Row: 113, Col: 1, Value: 31893.21
Row: 114, Col: 1, Value: 32278.61
Row: 115, Col: 1, Value: 32773.65
Row: 116, Col: 1, Value: 33874.86
Row: 117, Col: 1, Value: 33826.27
Row: 118, Col: 1, Value: 34406.67
Row: 119, Col: 1, Value: 33856.81
Row: 120, Col: 1, Value: 34964.77
Row: 121, Col: 1, Value: 36359.65
$
$36,360
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
THE S&P 500(Registered trademark) is the Standard & Poor's 500
Composite Stock Price Index, a widely recognized, unmanaged index of common
stock prices. The S&P 500 figures assume reinvestment of all dividends
paid by stocks included in the index. They do not, however, include any
allowance for the brokerage commissions or other fees you would pay if you
actually invested in those stocks.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Utility Funds Average Average,
which currently reflects the performance of over 75 mutual funds
with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
Fidelity Utilities Income Fund 10.53 % 25.06 % 17.07 %
-1.64 % 22.49 % 18.67 % -14.02 %
29.40 % 14.68 % 21.31 %
Competitive funds average 7.25 % 26.10 % 16.98 %
-2.58 % 16.55 % 22.36 % -6.61 %
27.09 % 9.64 % 13.38 %
Percentage (%)
Row: 1, Col: 1, Value: 10.53
Row: 1, Col: 2, Value: 7.25
Row: 2, Col: 1, Value: 25.06
Row: 2, Col: 2, Value: 26.1
Row: 3, Col: 1, Value: 17.07
Row: 3, Col: 2, Value: 16.98
Row: 4, Col: 1, Value: -1.64
Row: 4, Col: 2, Value: -2.58
Row: 5, Col: 1, Value: 22.49
Row: 5, Col: 2, Value: 16.55
Row: 6, Col: 1, Value: 18.67
Row: 6, Col: 2, Value: 22.36
Row: 7, Col: 1, Value: -14.02
Row: 7, Col: 2, Value: -6.609999999999999
Row: 8, Col: 1, Value: 29.4
Row: 8, Col: 2, Value: 27.09
Row: 9, Col: 1, Value: 14.68
Row: 9, Col: 2, Value: 9.639999999999999
Row: 10, Col: 1, Value: 21.31
Row: 10, Col: 2, Value: 13.38
Fidelity
Utilities
Income
Fund
Competitive
funds
average
Other illustrations of fund performance may show moving averages over
specified periods.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
<r>THE FUND IN DETAIL</r>
CHARTER
FIDELITY UTILITIES INCOME FUND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. In technical
terms, the fund is currently a diversified fund of Fidelity Devonshire
Trust, an open-end management investment company organized as a
Massachusetts business trust on May 31, 1985.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs. Fidelity Management & Research (U.K.)
Inc. (FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR
Far East) assist FMR with foreign investments.
Stephen Petersen is manager of Equity-Income, which he has managed since
August 1, 1993. Previously, he was vice president and manager of several
trust accounts. Mr. Petersen joined Fidelity in 1980.
FDC distributes and markets Fidelity's funds and services. Fidelity Service
Co. (FSC) performs transfer agent servicing functions for the fund.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
A broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry out
the fund's transactions, provided that the fund receives brokerage services
and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND SEEKS REASONABLE INCOME by investing primarily in income-producing
equity securities. FMR normally invests at least 65% of the fund's total
assets in these securities . In addition to equity securities, which
include convertible securities, the fund has broad flexibility to
invest in all types of domestic and foreign instruments, including
bonds . The fund tries to achieve a yield that beats that of the
S&P 500. The fund does not expect to invest in debt securities of
companies that do not have proven earnings or credit. When choosing the
fund's investments, FMR also considers the potential for capital
appreciation.
THE FUND WILL SPREAD INVESTMENT RISK by limiting its holdings in any one
company or industry. FMR may use various investment techniques to hedge the
fund's risks, but there is no guarantee that these strategies will work as
FMR intends. When you sell your shares, they may be worth more or less than
what you paid for them.
FMR normally invests the fund's assets according to its investment
strategy. When FMR considers it appropriate for defensive purposes,
however, it may temporarily invest substantially in investment-grade bonds,
high-grade preferred stocks, or short-term notes.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. As a shareholder, you will receive financial reports
every six months detailing fund holdings and describing recent investment
activities.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. This ownership interest
often gives the fund the right to vote on measures affecting the company's
organization and operations. Although common stocks have a history of
long-term growth in value, their prices tend to fluctuate in the short
term, particularly those of smaller companies.
RESTRICTIONS: With respect to 75% of total assets, the fund may not own
more than 10% of the outstanding voting securities of a single issuer.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities , loans, and other direct debt have varying degrees of
quality and varying levels of sensitivity to changes in interest rates.
Longer-term bonds are generally more sensitive to interest rate changes
than short-term bonds.
Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness. The market prices
of these securities may fluctuate more than higher-quality securities and
may decline significantly in periods of general economic difficulty.
The table below provides a summary of ratings assigned to debt
holdings (not including money market instruments) in the fund's portfolio.
These figures are dollar-weighted averages of month-end portfolio holdings
during fiscal 1994, and are presented as a percentage of total investments.
These percentages are historical and do not necessarily indicate the fund's
current or future debt holdings.
FISCAL 1994 DEBT HOLDINGS, BY RATING
MOODY'S STANDARD &
POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa .84 % AA 1.05 %
Upper-medium grade A A
Medium grade Baa .97 % BBB 1.20 %
LOWER QUALITY
Moderately speculative Ba 2.33 % BB 1.76 %
Speculative B 2.43 % B 1.47 %
Highly speculative Caa .07 % CCC .06 %
Poor quality Ca .07 % CC 0.00 %
Lowest quality, no interest C C
In default, in arrears -- D .09 %
6.71 % 5.63 %
THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO 3.78 %. THIS MAY INCLUDE SECURITIES RATED BY
OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT
FOR
1.49% OF THE FUND'S INVESTMENTS . REFER TO THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
RESTRICTIONS: The fund does not currently intend to invest more than 20% of
its assets in lower-quality debt securities (those rated below Baa by
Moody's or BBB by S&P, and unrated securities judged by FMR to be of
equivalent quality).
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for the fund, or there may be a
requirement that the fund supply additional cash to a borrower on demand.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to
the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry.
RESTRICTIONS: With respect to 75% of total assets, the fund may not invest
more than 5% of its total assets in any one issuer. The fund may not invest
more than 25% of its total assets in any one industry. These limitations do
not apply to U.S. government securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering the fund's securities. The
fund may also lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of the fund's
total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks reasonable income by investing primarily in income-producing
equity securities. In pursuing this objective, the fund will also consider
the potential for capital appreciation. The fund seeks a yield for its
shareholders that exceeds the yield on the securities comprising the
S&P 500. With respect to 75% of total assets, the fund may not invest
more than 5% of its total assets in any one issuer and may not own more
than 10% of the outstanding voting securities of a single issuer. The fund
may not invest more than 25% of its total assets in any one industry. The
fund may borrow only for temporary or emergency purposes, but not in an
amount exceeding 33% of its total assets. Loans, in the aggregate, may not
exceed 33% of the fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted
from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. The fund also pays OTHER EXPENSES, which
are explained on page .
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .52%, and it drops as
total assets under management increase.
For January, 1994, the group fee rate was .32 %. The individual fund
fee rate is currently .20%. This rate will increase on December 1,
1995, 1996, 1997, and 1998, to .14%, .16%, .18%, and .20%, respectively.
The total management fee for fiscal 1994 was .38%.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on companies
based outside the United States. Under the sub-advisory agreements, FMR
pays FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively,
of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East 50% of its management fee rate
with respect to the fund's investments that the sub-adviser manages on a
discretionary basis.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform many transaction and accounting
functions. These services include processing shareholder transactions,
valuing the fund's investments, and handling securities loans. In fiscal
1994, the fund paid FSC fees equal to .25 % of its average net
assets.
The fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
The fund's portfolio turnover rate for fiscal 1994 was 70 %. This
rate varies from year to year.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in
FMR's total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will
pay a lower rate as FMR's
assets under management
increase.
(checkmark)
<r>YOUR ACCOUNT</r>
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed on page .
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers the fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over 200
(bullet) Assets in Fidelity mutual
funds: over $ 225 billion
(bullet) Number of shareholder
accounts: over 15 million
(bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age
and under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS
allow self-employed individuals or small business owners (and their
employees) to make tax-deductible contributions for themselves and any
eligible employees up to $30,000 per year.
(bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(bullet) 401(K) PROGRAMS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
ONCE EACH BUSINESS DAY, TWO SHARE PRICES ARE CALCULATED FOR THE FUND: the
offering price and the net asset value (NAV). The offering price includes
the 2% sales charge, which you pay when you buy shares after December 31,
1995, unless you qualify for a reduction or waiver as described on page .
When you buy shares at the offering price, Fidelity deducts 2% and invests
the rest at the NAV.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity retirement accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity retirement accounts $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity retirement accounts $500
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to "Fidelity
check payable to Equity-Income Fund."
"Fidelity Equity-Income Indicate your fund
Fund." Mail to the account number on
address indicated on the your check and mail to
application. the address printed on
your account statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
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Wire (wire_graphic) (bullet) Call 1-800-544-7777 to (bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Fidelity
Bank Routing Equity-Income Fund"
#021001033, and include your
Account #00163053. account number and
Specify "Fidelity your name.
Equity-Income Fund"
and include your new
account number and
your name.
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Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to other Fidelity funds, which can be
requested by phone or in writing. Call 1-800-544-6666 for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open ($500 for retirement
accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
ACCOUNT TYPE SPECIAL REQUIREMENTS
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Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
except retirement $100,000.
(bullet) For Money Line transfers to
All account types your bank account; minimum:
$10; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Retirement account names appear on the
account.
(bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (bullet) The trustee must sign the
Organization letter indicating capacity as
trustee. If the trustee's name
is not in the account
registration, provide a copy of
the trust document certified
Executor, within the last 60 days.
Administrator, (bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. The shares you exchange will
carry credit for any sales charge you previously paid in connection with
their purchase.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or revoked,
see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly or quarterly redemptions
from your account. Because of the fund's sales charge, you may not want to
set up a systematic withdrawal plan during a period when you are buying
shares on a regular basis.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call
1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
<r>SHAREHOLDER AND ACCOUNT POLICIES</r>
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net income and capital gains
to shareholders each year. Normally, dividends are distributed in March,
June, September, and December. Capital gains are distributed in March and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
5. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
6. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
7. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
8. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
SHARES PURCHASED THROUGH REINVESTMENT of dividend and capital gain
distributions are not subject to the fund's 2% sales charge. Likewise, if
you direct distributions to a fund with a 2% sales charge, you will not pay
a sales charge on those purchases.
When the fund deducts a distribution from its NAV, the reinvestment price
is the fund's NAV at the close of business that day. Cash distribution
checks will be mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
The fund earns dividends
from stocks and interest from
bond, money market, and
other investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund
realizes capital gains
whenever it sells securities
for a higher price than it paid
for them. These are passed
along as CAPITAL GAIN
DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how your investment in the fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were paid
on December 31.
For federal tax purposes, the fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
distribution from its NAV, you will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable
distribution.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, the fund
may have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's net asset value and
offering price as of the close of business of the NYSE, normally 4 p.m.
Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations.
If quotations are not readily available, assets are valued by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates.
THE OFFERING PRICE (price to buy one share) is the fund's NAV plus a sales
charge. The sales charge is 2% of the offering price, or 2.04% of the net
amount invested. The REDEMPTION PRICE (price to sell one share) is the
fund's NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they are of
a size that would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) The fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees the fund or its transfer agent
has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY SHARES OF THE FUND (AT THE OFFERING PRICE) OR SELL THEM THROUGH
A BROKER, who may charge you a fee for this service. If you invest through
a broker or other institution, read its program materials for any
additional service features or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
Fidelity Distributors Corporation (FDC) may enter confirmed purchase orders
on behalf of customers by phone, with payment to follow no later than the
time when the fund is priced on the following business day. If payment is
not received by that time, the financial institution could be held liable
for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect the
fund, it may take up to seven days to pay you.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) The fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC collects the proceeds from the fund's 2% sales charge and may pay a
portion of them to securities dealers who have sold the fund's shares, or
to others, including banks and other financial institutions (qualified
recipients), under special arrangements in connection with FDC's sales
activities. The sales charge paid to qualified recipients is 1. 5 0%
of the fund's offering price.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the fund without reimbursement
from the fund. In some instances, these incentives may be offered only to
certain institutions whose representatives provide services in connection
with the sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. See your plan materials for further
information.
(bullet) The fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if the fund receives
or anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCTIONS. In certain cases, the fund's sales charge may be reduced to
reflect sales charges previously paid in connection with investments in
other Fidelity funds. The sales charge will be reduced in this manner for
shares purchased in the following ways:
1. By exchange from another Fidelity fund.
2. With proceeds of a transaction within a Fidelity brokerage core account,
including any free credit balance, core money market fund, or margin
availability, to the extent such proceeds were derived from redemption
proceeds from another Fidelity fund.
3. With redemption proceeds from one of Fidelity's Foreign Currency Funds,
if the Foreign Currency Fund shares were originally purchased with
redemption proceeds from a Fidelity fund.
4. Through the Directed Dividends Option (see page ).
5. By participants in The CORPORATEplan for Retirement Program when shares
are purchased through plan-qualified loan repayments, and for exchanges
into and out of the Managed Income Portfolio.
If your purchase meets one of these conditions, the fund's sales charge
will be reduced by the percentage sales charges, if any, you previously
paid for purchases and sales of other Fidelity funds (excluding Fidelity's
Foreign Currency Funds). The availability of a sales charge reduction is
contingent upon the continuous ownership of Fidelity fund shares, a
Fidelity brokerage core account, or participation in The CORPORATEplan for
Retirement Program, as noted above.
WAIVERS. The fund's sales charge will not apply:
1. If you buy shares as part of an employee benefit plan having more than
200 eligible employees or a minimum of $3 million in plan assets invested
in Fidelity mutual funds. Plan sponsors are encouraged to notify Fidelity
when they first satisfy either of these requirements.
2. To shares in a Fidelity Rollover IRA account purchased with the proceeds
of a distribution from an employee benefit plan, provided that at the time
of the distribution, the employer or its affiliate maintained a plan that
both qualified for waiver (1) above and had at least some of its assets
invested in Fidelity-managed products.
3. If you are a charitable organization (as defined in Section 501(c)(3) of
the Internal Revenue Code) investing $100,000 or more.
4. If you purchase shares for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code).
5. If you are an investor participating in the Fidelity Trust Portfolios
program.
6. To shares purchased through Portfolio Advisory Services.
7. If you are a current or former trustee or officer of a Fidelity fund or
a current or retired officer, director, or full-time employee of FMR Corp.
or its direct or indirect subsidiaries (a Fidelity Trustee or employee),
the spouse of a Fidelity trustee or employee, a Fidelity trustee or
employee acting as custodian for a minor child, or a person acting as
trustee of a trust for the sole benefit of the minor child of a Fidelity
trustee or employee.
8. If you are a bank trust officer, registered representative, or other
employee of a qualified recipient, as defined on page .
9. To contributions and exchanges to a prototype or prototype-like
retirement plan sponsored by FMR Corp. or FMR and which is marketed and
distributed directly to plan sponsors or participants without any
assistance or intervention from any intermediary distribution channel.
10. If you are a registered investment adviser (RIA) purchasing for your
discretionary accounts, provided you execute a Fidelity RIA load waiver
agreement which specifies certain aggregate minimum and operating
provisions. This waiver is available only for shares purchased directly
from Fidelity, without a broker, and is unavailable if the RIA is part of
an organization principally engaged in the brokerage business.
11. If you are a trust institution or bank trust department purchasing for
your non-discretionary, non-retirement fiduciary accounts, provided you
execute a Fidelity Trust load waiver agreement which specifies certain
aggregate minimum and operating provisions. This waiver is available only
for shares purchased either directly from Fidelity or through a
bank-affiliated broker, and is un available if the trust department
or institution is part of an organization not principally engaged in
banking or trust activities.
These waivers must be qualified through FDC in advance. More detailed
information about waivers (1), (2), (5), and (9) is contained in the
Statement of Additional Information. A representative of your plan or
organization should call Fidelity for more information.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY EQUITY-INCOME FUND
A FUND OF FIDELITY DEVONSHIRE TRUST
STATEMENT OF ADDITIONAL INFORMATION
MARCH 21, 1994
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 21, 1994 ). Please retain
this document for future reference. The Annual Report for the fiscal
year ended January 31, 199 4 is incorporated herein by reference.
To obtain an additional copy of the Prospectus or the Annual Report,
please call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Contracts With Companies Affiliated With FMR
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, wherever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) with respect to 75% of the fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the fund's total assets would be invested in the
securities of that issuer, or (b) the fund would hold more than 10% of the
outstanding voting securities of that issuer;
(2) issue senior securities except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others except to the extent that the
fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of "restricted securities"
acquired in accordance with the fund's investment objective and policies;
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business;
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(ii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iii) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (3)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(iv) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(v) The fund does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the
New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic and foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(ix) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions
with financial institutions that are, or may be considered to be,
"affiliated persons" of the fund under the Investment Company Act of
1940. These transactions may include repurchase agreements with
custodian banks; short-term obligations of, and repurchase
agreements with, the 50 largest U.S. banks (measured by deposits);
municipal securities; U.S. government securities with affiliated
financial institutions that are primary dealers in these
securities; short-term currency transactions; and short-term borrowings.
In accordance with exemptive orders issued by the Securities and Exchange
Commission (SEC), the Board of Trustees has established and periodically
reviews procedures applicable to transactions involving affiliated
financial institutions.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does not intend to direct or
administer the day-to-day operations of any company. The fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that the fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
company's direction or policies; seeking the sale or reorganization of the
company or a portion of its assets; or supporting or opposing third party
takeover efforts. This area of corporate activity is increasingly prone to
litigation and it is possible that the fund could be involved in lawsuits
related to such activities. FMR will monitor such activities with a view to
mitigating, to the extent possible, the risk of litigation against the fund
and the risk of actual liability if the fund is involved in litigation. No
guarantee can be made, however, that litigation against the fund will not
be undertaken or liabilities incurred.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
over-the-counter options, and non-government stripped fixed-rate
mortgage-backed securities. Also, FMR may determine some restricted
securities, government-stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, and swap agreements to be
illiquid. However, with respect to over-the-counter options the fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement the fund may have to close out the option before
expiration. In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed
by the Board of Trustees. If through a change in values, net assets, or
other circumstances, the fund were in a position where more than 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is
required, the fund may be obligated to pay all or part of the registration
expense and a considerable period may elapse between the time it decides to
seek registration and the time the fund may be permitted to sell a security
under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed upon price on an agreed upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value (at least equal to the amount of the agreed
upon resale price and marked to market daily) of the underlying security.
The fund may engage in a repurchase agreement with respect to any security
in which it is authorized to invest. While it does not presently appear
possible to eliminate all risks from these transactions (particularly the
possibility of a decline in the market value of the underlying securities,
as well as delays and costs to the fund in connection with bankruptcy
proceedings), it is the fund's current policy to limit repurchase agreement
transactions to parties whose creditworthiness has been reviewed and found
satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
INTERFUND BORROWING PROGRAM. The fund has received permission
from the SEC to lend money to and borrow money from other funds advised by
FMR or its affiliates. Interfund loans and borrowing normally will extend
overnight, but can have a maximum duration of seven days. Loans may be
called on one day's notice. The fund will lend through the program only
when the returns are higher than those available at the same time from
other short-term instruments (such as repurchase agreements), and will
borrow through the program only when the costs are equal to or lower than
the cost of bank loans. The fund may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity
or additional borrowing cost.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that the fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
LOWER-RATED DEBT SECURITIES. While the market for high-yield corporate debt
securities has been in existence for many years and has weathered previous
economic downturns, the 1980s brought a dramatic increase in the use of
such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
future performance of the high-yield bond market, especially during periods
of economic recession. In fact, from 1989 to 1991, the percentage of
lower-rated debt securities that defaulted rose significantly above prior
levels, although the default rate decreased in 1992.
The market for lower-rated debt securities may be thinner and less active
than that for higher-rated debt securities, which can adversely affect the
prices at which the former are sold. If market quotations are not
available, lower-rated debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value lower-rated debt
securities and the fund's ability to dispose of these securities.
Since the risk of default is higher for lower-rated debt securities, FMR's
research and credit analysis are an especially important part of managing
securities of this type held by the fund. In considering investments for
the fund, FMR will attempt to identify those issuers of high-yielding debt
securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. FMR's
analysis focuses on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease the fund's exposure to long- or
short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
security prices or inflation rates. Swap agreements can take many different
forms and are known by a variety of names. The fund is not limited to any
particular form of swap agreement if FMR determines it is consistent with
the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift the fund's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from the fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. The fund expects to be able to eliminate
its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If the fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than the underlying instruments.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental, or other borrower
to lenders or lending syndicates (loans and loan participations), to
suppliers of goods or services (trade claims or other receivables), or to
other parties. Direct debt instruments are subject to the fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If the fund does not receive scheduled interest
or principal payments on such indebtedness, the fund's share price and
yield could be adversely affected. Loans that are fully secured offer the
fund more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of
borrowers whose creditworthiness is poor involves substantially greater
risks and may be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay only a small
fraction of the amount owed. Direct indebtedness of developing countries
also involves a risk that the governmental entities responsible for the
repayment of the debt may be unable, or unwilling, to pay interest and
principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the fund.
For example, if a loan is foreclosed, the fund could become part owner of
any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the fund could be held
liable as a co-lender. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less legal
protection to the fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, the fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, the fund has direct recourse against the borrower, it
may have to rely on the agent to apply appropriate credit remedies against
a borrower. If assets held by the agent for the benefit of the fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by the fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the fund to pay additional cash on demand. These commitments may
have the effect of requiring the fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
borrower's condition makes it unlikely that the amount will ever be repaid.
The fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
The fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations (1) and
(5)). For purposes of these limitations, the fund generally will treat the
borrower as the "issuer" of indebtedness held by the fund. In the case of
loan participations where a bank or other lending institution serves as
financial intermediary between the fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict the fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks
in addition to the risks inherent in U.S. investments. The value of
securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar.
Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be
highly volatile. Many foreign countries lack uniform accounting and
disclosure standards comparable to those applicable to U.S. companies, and
it may be more difficult to obtain reliable information regarding an
issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to
less government supervision. Foreign security trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be difficult
to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects.
The considerations noted above generally are intensified for investments
in developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
such transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject to
such restrictions.
American Depositary Receipts and European Depositary Receipts (ADRs and
EDRs), are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in the U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The fund may hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies
in the foreign exchange markets. Currency conversion involves dealer
spreads and other costs, although commissions usually are not charged.
Currencies may be exchanged on a spot (i.e., cash) basis, or by entering
into forward contracts to purchase or sell foreign currencies at a future
date and price. Forward contracts generally are traded in an interbank
market conducted directly between currency traders (usually large
commercial banks) and their customers. The parties to a forward contract
may agree to offset or terminate the contract before its maturity, or may
hold the contract to maturity and complete the contemplated currency
exchange.
The fund may use currency forward contracts to manage currency risks and
to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the fund.
In connection with purchases and sales of securities denominated in
foreign currencies, the fund may enter into currency forward contracts to
fix a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing the fund's foreign investments. The fund
could also enter into forward contracts to purchase or sell a foreign
currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not
yet been selected by FMR.
The fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in a foreign currency. For
example, if the fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge, sometimes referred to as a "position hedge," would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. The fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling - for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for
U.S. dollars. This type of hedge, sometimes referred to as a "proxy hedge,"
could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a simple
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
Under certain conditions, SEC guidelines require mutual funds to set
aside appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on FMR's skill
in analyzing and predicting currency values. Forward contracts may
substantially change the fund's investment exposure to changes in currency
exchange rates, and could result in losses to the fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged the fund by selling that currency in exchange for
dollars, the fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly, if
FMR increases the fund's exposure to a foreign currency, and that
currency's value declines, the fund will realize a loss. There is no
assurance that FMR's use of forward currency contracts will be advantageous
to the fund or that it will hedge at an appropriate time. The policies
described in this section are non-fundamental policies of the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund intends to file a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets, before engaging in any purchases or sales of futures
contracts or options on futures contracts. The fund intends to comply with
Section 4.5 of the regulations under the Commodity Exchange Act, which
limits the extent to which the fund can commit assets to initial margin
deposits and option premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When
the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Composite Stock
Price Index (S&P 500). Futures can be held until their delivery dates,
or can be closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. The fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
the fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply with
guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of
the fund's assets could impede portfolio management or the fund's ability
to meet redemption requests or other current obligations.
SHORT SALES. The fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security the fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. The fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal circumstances.
When the fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or securities
convertible or exchangeable into such securities) and will be required
to hold them aside while the short sale is outstanding. The fund
will incur transaction costs, including interest expense, in connection
with opening, maintaining, and closing short sales.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the management
contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment adviser. In selecting broker-dealers, subject to
applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions ; and arrangements for payment of fund
expenses . Commissions for foreign investments traded on foreign
exchanges generally will be higher than for U.S. investments and may not be
subject to negotiation.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers
generally is made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of research
and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid the
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI)
and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of FMR Corp., if
the commissions are fair, reasonable, and comparable to commissions charged
by non-affiliated, qualified brokerage firms for similar services. Prior to
September 4, 1992, FBSL operated under the name Fidelity Portfolio
Services, Ltd. (FPSL) as a wholly owned subsidiary of Fidelity
International Limited (FIL). Edward C. Johnson 3d is Chairman of FIL. Mr.
Johnson 3d, Johnson family members, and various trusts for the benefit of
the Johnson family own, directly or indirectly, more than 25% of the
voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have
entered into arrangements with FMR under which the broker-dealer allocates
a portion of the commissions paid by the fund toward payment of the fund's
expenses, such as transfer agent fees of FSC or custodian fees. The
transaction quality must, however, be comparable to those of other
qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied. Pursuant to such requirements , the
Board of Trustees has authorized FBSI to execute fund
portfolio transactions on national securities exchanges in accordance
with approved procedures and applicable SEC rules .
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal years ended January 31, 199 4 , and 199 3 , the
fund's portfolio turnover rates were 70 % and 84%, respectively.
For the fiscal years ended January 31, 199 4 , 199 3 , and
199 2 , the fund paid brokerage commissions of $8,506,009 ,
$ 8,007,233 , and $ 9,161,815 , respectively. During fiscal
199 4 , approximately $6,107,554 or 72 % of these
commissions were paid to brokerage firms that provided research services,
although the provision of such services was not necessarily a factor in the
placement of all of this business with such firms. The fund pays both
commissions and spreads in connection with the placement of portfolio
transactions; FBSI is paid on a commission basis. During fiscal
199 4 , 199 3 , and 199 2 , the fund paid brokerage
commissions of $2,077,489, $ 2,244,133 , and
$ 2,954,699 , respectively, to FBSI. During fiscal 199 4 , this
amounted to 24 % of the aggregate brokerage commissions paid by the
fund for transactions involving 41 % of the aggregate dollar amount
of transactions in which the fund paid brokerage commissions. The
difference between the percentage of brokerage commissions paid to and the
percentage of the dollar amount of transactions effected through FBSI is a
result of the low commission rates charged by FBSI.
During the fiscal years ended January 31, 199 4 , 199 3 , and
199 2 , the fund paid $0 , $ 11,566 , and $ 82,801 ,
respectively, in brokerage commissions to FBS L.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment,
whether it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases this system could have a detrimental
effect on the price or value of the security as far as the fund is
concerned. In other cases, however, the ability of the fund to participate
in volume transactions will produce better executions and prices for the
fund. It is the current opinion of the Trustees that the desirability of
retaining FMR as investment adviser to the fund outweighs any disadvantages
that may be said to exist from exposure to simultaneous transactions.
VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Most equity securities for
which the primary market is the U.S. are valued at last sale price or, if
no sale has occurred, at the closing bid price. Most equity
securities for which the primary market is outside the U.S. are valued
using the official closing price or the last sale price in the principal
market where they are traded. If the last sale price (on the local
exchange) is unavailable, the last evaluated quote or last bid price is
normally used. Short-term securities are valued either at amortized cost or
at original cost plus accrued interest, both of which approximate current
value. Convertible and fixed-income securities are valued primarily
by a pricing service that uses a vendor security valuation matrix which
incorporates both dealer-supplied valuations and electronic data processing
techniques. This twofold approach is believed to more accurately reflect
fair value because it takes into account appropriate factors such as
institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon quoted, exchange, or
over-the-counter prices. Use of pricing services has been approved by the
Board of Trustees.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g., closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed each day at the close
of the New York Stock Exchange (NYSE). The values of any such securities
held by the fund are determined as of such time for the purpose of
computing the fund's net asset value. Foreign security prices are furnished
by independent brokers or quotation services which express the value of
securities in their local currency. FSC gathers all exchange rates daily at
the close of the NYSE using the last quoted price on the local currency and
then translates the value of foreign securities from their local currency
into U.S. dollars. Any changes in the value of forward contracts due to
exchange rate fluctuations and days to maturity are included in the
calculation of net asset value. If an extraordinary event that is expected
to materially affect the value of a portfolio security occurs after the
close of an exchange on which that security is traded, then the security
will be valued as determined in good faith by a committee appointed by the
Board of Trustees.
PERFORMANCE
The fund may quote its performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. The fund's share price, yield, and
total returns fluctuate in response to market conditions and other factors,
and the value of fund shares when redeemed may be more or less than their
original cost.
YIELD CALCULATIONS. Yields for the fund used in advertising are computed by
dividing the fund's interest and dividend income for a given 30-day or one
month period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the fund's
offering price (excluding the 2% sales charge which is waived through
December 31, 1995) at the end of the period, and annualizing the result
(assuming compounding of income) in order to arrive at an annual percentage
rate. Income is calculated for purposes of yield quotations in accordance
with standardized methods applicable to all stock and bond funds. Dividends
from equity investments are treated as if they were accrued on a daily
basis, solely for the purposes of yield calculations. In general, interest
income is reduced with respect to bonds trading at a premium over their par
value by subtracting a portion of the premium from income on a daily basis,
and is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses generally
are excluded from the calculation.
Income calculated for the purposes of calculating the fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, the fund's yield may not equal its
distribution rate, the income paid to your account, or the rate of income
reported in the fund's financial statements.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV over the
period. Average annual returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in the fund over a
stated period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative
return of 100% over ten years would produce an average annual return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual returns are
a convenient means of comparing investment alternatives, investors should
realize that the fund's performance is not constant over time, but changes
from year to year, and that average annual returns represent averaged
figures as opposed to the actual year-to-year performance of the fund.
In addition to average annual returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or series
of redemptions over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns may be quoted with
or without taking the fund's 2% sales charge (waived through December 31,
1995) into account. Excluding the fund's sales charge from a total return
calculation produces a higher total return figure. Total returns, yields,
and other performance information may be quoted numerically or in a table,
graph, or similar illustration.
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
MOVING AVERAGES. The fund may illustrate performance using moving averages.
A long-term moving average is the average of each week's adjusted closing
NAV for a specified period. A short-term moving average is the average of
each day's adjusted closing NAV for a specified period. Moving Average
Activity Indicators combine adjusted closing NAVs from the last business
day of each week with moving averages for a specified period to produce
indicators showing when an NAV has crossed, stayed above, or stayed below
its moving average. On January 28 , 199 4 , the 13-week and
39-week long-term moving averages were $33.60 and $32.41 ,
respectively.
HISTORICAL FUND RESULTS. The following table shows the income and capital
elements of the fund's cumulative total return over a ten-year period. The
table compares the fund's return to the record of the S&P 500, the Dow
Jones Industrial Average (DJIA), and the cost of living (measured by the
Consumer Price Index or CPI) over the same period. The S&P 500 and the
DJIA comparisons are provided to show how the fund's total return compared
to the record of a broad average of common stock prices and a narrower set
of stocks of major industrial companies, respectively, over the same
period. The fund has the ability to invest in securities not included in
either index, and its investment portfolio may or may not be similar in
composition to the indices. Figures for the S&P 500 and DJIA are based
on the prices of unmanaged groups of stocks and, unlike the fund's returns,
their returns do not include the effect of paying brokerage commissions and
other costs of investing.
During the period from January 31, 198 5 to January 31, 199 4 ,
a hypothetical $10,000 investment in Fidelity Equity-Income Fund would have
grown to $36,360 , after deducting the fund's 2% sales charge and
assuming all distributions were reinvested. This was a period of widely
fluctuating stock prices and should not be considered representative of the
dividend income or capital gain or loss that could be realized from an
investment in the fund today.
FIDELITY EQUITY-INCOME FUND INDICES
VALUE OF VALUE OF VALUE OF
INITIAL REINVESTED REINVESTED
YEARS ENDED $10,000 DIVIDEND CAPITAL GAIN TOTAL
JANUARY 31, INVESTMENT DISTRIBUTIONS DISTRIBUTIONS VALUE S&P 500 DJIA
CPI
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1985 $ 9,476 $ 787 $ 1,340 $ 11,603 $ 11,520 $ 11,077 $ 10,353
1986 10,345 1,717 1,729 13,790 14,159 14,132 10,756
1987 11,014 2,798 3,515 17,328 18,962 20,108 10,913
1988 8,578 3,014 4,988 16,579 18,331 18,822 11,354
1989 9,866 4,650 5,736 20,253 22,013 23,336 11,884
1990 9,292 5,649 6,264 21,205 25,199 26,791 12,502
1991 8,236 6,307 5,827 20,370 27,310 29,414 13,209
1992 9,778 8,687 6,918 25,383 33,511 35,790 13,553
1993 10,992 10,908 7,777 29,677 37,065 37,856 13,994
1994 12,950 14,118 9,291 36,360 41,837 46,796 14,347
</TABLE>
Explanatory Notes: With an initial investment of $10,000 made on January
31, 1984 , the net amount invested in fund shares was $9,800
(assuming that the fund's 2% sales charge had been in effect at that time).
The cost of the initial investment ($10,000), together with the aggregate
cost of reinvested dividends and capital gain distributions for the period
covered (their cash value at the time they were reinvested), amounted to
$27,063 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
the cash payments for the period would have amounted to $5,439 for
income dividends and $ 4,497 for capital gain distributions. Tax
consequences of different investments have not been factored into the above
figures.
The yield of the S&P 500 for the fiscal year ended January 31,
199 4 was 12.88 %, calculated by dividing the dollar value of
dividends paid by the S&P 500 stocks during the period, by the average
value of the S&P 500 on January 31, 199 4 . The S&P 500 yield
is calculated differently from the fund's yield; among other things, the
fund's yield calculation treats dividends as accrued in anticipation of
payment, rather than recording them when paid.
Fidelity is a pioneer in the equity-income or income-driven investment
discipline. This strategy seeks to modify stock market risk by seeking
stocks that have above average dividends, are undervalued, and have been
steadily increasing their dividends. Weisenberger Financial Services
(Weisenberger) annually publishes a survey of information about mutual
funds. According to Weisenberger's 1992 edition of Weisenberger Investment
Companies Services, in 1947, there were only two funds which employed the
equity-income discipline, one of which was Fidelity Puritan Fund. In 1958,
when Lipper began recording equity-income fund performance, it recorded
five funds employing the equity-income discipline, one of which was
Fidelity Puritan Fund. In 1966, when Fidelity Equity-Income Fund was
launched, Lipper recorded twelve funds utilizing this approach.
The fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, the fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time, the fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchSM Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds, retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these
measures to those of other funds. Measures of volatility seek to compare
the fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
an investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
The fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten year
period.
As of January 31, 1994, FMR managed approximately $145 billion in equity
fund assets as defined and tracked by Lipper. This figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
As provided for in Rule 22d-1 under the Investment Company Act of 1940 (the
1940 Act), FDC exercises its right to waive the fund's 2% sales charge on
shares acquired through reinvestment of dividends and capital gain
distributions or in connection with the fund's merger with or acquisition
of any investment company or trust. The sales charge is currently waived on
all fund shares purchased through December 31, 1995.
In addition, the fund's sales charge will not apply (1) if you buy shares
as part of an employee benefit plan (including the Fidelity-sponsored
403(b) and corporate IRA programs but otherwise as defined in the Employee
Retirement Income Security Act) maintained by a U.S. employer and having
more than 200 eligible employees, or a minimum of $3,000,000 in plan assets
invested in Fidelity mutual funds, or as part of an employee benefit plan
maintained by a U.S. employer that is a member of a parent-subsidiary group
of corporations (within the meaning of Section 1563(a)(1) of the Internal
Revenue Code, with "50%" substituted for "80%") any member of which
maintains an employee benefit plan having more than 200 eligible employees,
or a minimum of $3,000,000 in plan assets invested in Fidelity mutual
funds, or as part of an employee benefit plan maintained by a non-U.S.
employer having 200 or more eligible employees, or a minimum of $3,000,000
in plan assets invested in Fidelity mutual funds, the assets of which are
held in a bona fide trust for the exclusive benefit of employees
participating therein; (2) to shares purchased by an insurance company
separate account used to fund annuity contracts purchased by employee
benefit plans (including 403(b) programs, but otherwise as defined in the
Employee Retirement Income Security Act), which, in the aggregate, have
either more than 200 eligible employees or a minimum of $3,000,000 in
assets invested in Fidelity funds; (3) to shares in a Fidelity IRA account
purchased (including purchases by exchange) with the proceeds of a
distribution from an employee benefit plan provided that: (i) at the time
of the distribution, the employer, or an affiliate (as described in
exemption (1) above) of such employer, maintained at least one employee
benefit plan that qualified for exemption (1) and that had at least some
portion of its assets invested in one or more mutual funds advised by FMR,
or in one or more accounts or pools advised by Fidelity Management Trust
Company; and (ii) the distribution is transferred from the plan to a
Fidelity Rollover IRA account within 60 days from the date of the
distribution; (4) if you are a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
(5) if you purchase shares for a charitable remainder trust or life income
pool established for the benefit of a charitable organization (as defined
by Section 501(c)(3) of the Internal Revenue Code); (6) if you are an
investor participating in the Fidelity Trust Portfolios program (these
investors must make initial investments of $100,000 or more in the Trust
Portfolios funds and must, during the initial six-month period, reach and
maintain an aggregate balance of at least $500,000 in all accounts and
subaccounts purchased through the Trust Portfolios program); (7) to shares
purchased through Portfolio Advisory Services; (8) if you are a current or
former Trustee or officer of a Fidelity fund or a current or retired
officer, director, or full-time employee of FMR Corp. or its direct or
indirect subsidiaries (a Fidelity Trustee or employee), the spouse of a
Fidelity Trustee or employee, a Fidelity Trustee or employee acting as
custodian for a minor child, or a person acting as trustee of a trust for
the sole benefit of the minor child of a Fidelity Trustee or employee; (9)
if you are a bank trust officer, registered representative, or other
employee of a Qualified Recipient. Qualified Recipients are securities
dealers or other entities, including banks and other financial
institutions, who have sold the fund's shares under special arrangements in
connection with FDC's sales activities; or (10) to shares purchased by
contributions and exchanges to the following prototype or prototype-like
retirement plans sponsored by FMR Corp. or FMR and that are marketed and
distributed directly to plan sponsors or participants without any
intervention or assistance from any intermediary distribution channel: The
Fidelity IRA, The Fidelity Rollover IRA, The Fidelity SEP-IRA and SARSEP,
The Fidelity Retirement Plan, Fidelity Defined Benefit Plan, The Fidelity
Group IRA, The Fidelity 403(b) Program, The Fidelity Investments 401(a)
Prototype Plan for Tax-Exempt Employers, and The CORPORATEplan for
Retirement (Profit Sharing and Money Purchase Plan). FDC has chosen to
waive the fund's sales charge in these instances because of efficiencies
involved in sales of shares to these investors.
The fund's sales charge may be reduced to reflect sales charges previously
paid in connection with investments in other Fidelity funds. (See the
fund's Prospectus for further information.)
The fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1994:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when investors
do not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (1940 Act),
the fund is required to give shareholders at least 60 days' notice prior to
terminating or modifying its exchange privilege. Under the Rule, the 60-day
notification requirement may be waived if (i) the only effect of a
modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or by the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable
to invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. A portion of the fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that the fund's income is derived from qualifying dividends. Because
the fund may earn other types of income, such as interest income from
securities loans, non-qualifying dividends, and short-term capital gains,
the percentage of dividends from the fund that qualifies for the deduction
generally will be less than 100%. The fund will notify corporate
shareholders annually of the percentage of fund dividends that qualifies
for the dividends-received deduction. A portion of the fund's dividends
derived from certain U.S. government obligations may be exempt from state
and local taxation.
Gains (losses) attributable to foreign currency fluctuations are generally
taxable as ordinary income, and will increase (decrease) dividend
distributions. As a consequence, FMR may adjust the fund's income
distributions to reflect the effect of currency fluctuations. However, if
foreign currency losses exceed the fund's net investment income during a
taxable year, all or a portion of the distributions made in the same
taxable year would be recharacterized as a return of capital to
shareholders, thereby reducing each shareholder's cost basis in his or her
fund shares. The fund will send each shareholder a notice in January
describing the tax status of dividends and capital gain distributions for
the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by the fund are taxable to
shareholders as dividends, not as capital gains. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because the fund does not
currently anticipate that securities of foreign issuers will constitute
more than 50% of its total assets at the end of its fiscal
year,shareholders should not expect to claim a foreign tax credit or
deduction on their federal income tax returns with respect to foreign taxes
withheld.
TAX STATUS OF THE FUND. The fund intends to continue to qualify each year
as a "regulated investment company" for tax purposes so that it will not be
liable for federal tax on income and capital gains distributed to
shareholders. In order to qualify as a regulated investment company and
avoid being subject to federal income or excise taxes, the fund intends to
distribute substantially all of its net investment income and net realized
capital gains within each calendar year as well as on a fiscal year basis.
The fund intends to comply with other tax rules applicable to regulated
investment companies, including a requirement that capital gains from the
sale of securities held less than three months constitute less than 30% of
the fund's gross income for each fiscal year. Gains from some forward
currency contracts, futures contracts, and options are included in this 30%
calculation, which may limit the fund's investments in such instruments.
If the fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the Internal
Revenue Code, it may be subject to U.S. federal income tax on a portion of
any excess distribution or gain from the disposition of such shares.
Interest charges may also be imposed on the fund with respect to deferred
taxes arising from such distributions or gains.
The fund is treated as a separate entity from the other funds of Fidelity
Devonshire Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions. Investors should consult their tax
advisers to determine whether the fund is suitable to their particular tax
situation.
FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services, to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East
research and visit thousands of domestic and foreign companies each year.
FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies
portfolio management and research services in connection with certain money
market funds advised by FMR.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with either
the trust or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief
Executive Officer and a Director of FMR Corp.; a Director and Chairman of
the Board and of the Executive Committee of FMR; Chairman and a Director of
FMR Texas Inc. (1989), Fidelity Management & Research (U.K.) Inc., and
Fidelity Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of
FMR; and President and a Director of FMR Texas Inc. (1989), Fidelity
Management & Research (U.K.) Inc., and Fidelity Management &
Research (Far East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February 1994, he
was President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Until March 1990, Mr. Cox was President and Chief
Operating Officer of Union Pacific Resources Company (exploration and
production). He is a Director of Bonneville Pacific Corporation
(independent power, 1989), Sanifill Corporation (non-hazardous waste,
1993), and CH2M Hill Companies (engineering). In addition, he served on
the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation, Hyster-Yale Materials Handling, Inc. (1989), and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as
a Trustee of First Union Real Estate Investments, Chairman of the Board of
Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1-North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior
to his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989),
is Chairman of G.M. Management Group (strategic advisory services). Prior
to his retirement in July 1988, he was Chairman and Chief Executive Officer
of Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee.
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company
of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of
FMR.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
As of January 31, 1994, the Trustees and officers of the fund owned in
the aggregate less than 1% of the outstanding shares of the fund.
MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the fund. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
law; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC, the fund pays all of its expenses, without limitation, that are not
assumed by those parties. The fund pays for typesetting, printing, and
mailing proxy material to shareholders, legal expenses, and the fees of the
custodian, auditor, and non-interested Trustees. Although the fund's
management contract provides that the fund will pay for typesetting,
printing, and mailing of prospectuses, statements of additional
information, notices, and reports to existing shareholders, the trust has
entered into a revised transfer agent agreement with FSC, pursuant to which
FSC bears the cost of providing these services to existing shareholders.
Other expenses paid by the fund include interest, taxes, brokerage
commissions, the fund's proportionate share of insurance premiums and
Investment Company Institute dues, and the costs of registering shares
under federal and state securities laws. The fund is also liable for such
nonrecurring expenses as may arise, including costs of any litigation to
which the fund may be a party and any obligation it may have to indemnify
the trust's officers and Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated December
1, 1993, which was approved by shareholders on November 17, 1993. For the
services of FMR under the contract, the fund pays FMR a monthly management
fee composed of the sum of two elements: a group fee rate and an individual
fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown on the left of the table below . On the right, the
effective fee rate schedules show the results of cumulatively applying the
annualized rates at varying asset levels. For example, the effective annual
group fee rate at $ 245 billion of group net assets-their approximate
level for January 199 4 was .3229 %, which is the weighted
average of the respective fee rates for each level of group net assets up
to $ 245 billion.
GROUP FEE EFFECTIVE ANNUAL
RATE SCHEDULE* FEE RATES
Average Group Annualized Group Net Effective
Assets Rate Assets Annual
Fee Rate
$ 0 - 3 billion .520% $ 0.5 billion .5200%
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 150 .3371
21 - 24 .360 175 .3325
24 - 30 .350 200 .3284
30 - 36 .345 225 .3253
36 - 42 .335 250 .3223
42 - 48 .325 275 .3198
48 - 66 .320 300 .3175
66 - 84 .315 325 .3153
84 - 102 .310 350 .3133
102 - 138 .305
138 - 174 .305
174 - 228 .300
228 - 282 .295
282 - 336 .290
Over 336 .285
* Prior to January 1, 1992, the group fee rate was based on a schedule
with breakpoints ending at .310% for average group assets in excess of $84
billion. The group fee breakpoints shown for average group assets between
$84 billion and $228 billion were voluntarily adopted by FMR on January 1,
1992. The fund's management contract dated December 1, 1993 includes these
group fee rate breakpoints . Additional breakpoints for average group
assets in excess of $228 billion were voluntarily added to the group fee
rate schedule by FMR on November 1, 1993, pending shareholder approval of a
new management contract reflecting the extended schedule. The extended
schedule provides for lower management fees as FMR's total assets under
management increase.
The individual fund fee rate is currently .12%. Based on the average net
assets of funds advised by FMR for January 199 4 , the annual
management fee would have been calculated as follows:
GROUP FEE INDIVIDUAL FUND MANAGEMENT
RATE FEE RATE FEE RATE
. 3229 % + .12% = . 4429 %
One twelfth (1/12) of this annual management fee rate is then applied to
the fund's average net assets for the current month, giving a dollar amount
which is the fee for that month.
Pursuant to the amended Management Contract effective December 1, 1993, the
individual fund fee rate was increased from .04% to .12% . This
rate will be increased on December 1, 1995, December 1, 1996, December
1, 1997, and December 1, 1998, to .14%, .16%, .18% and .20% ,
respectively .
During the fiscal years ended January 31, 199 4 , 199 3 , and
199 2 , FMR received $23,042,012 , $ 17,439,154 , and
$ 16,021,634 , respectively, for its services as investment adviser to
the fund. These fees were equivalent to .38 %, .37% , and
.38 %, respectively, of the average net assets of the fund for each
of those years. These fees reflect the lower individual fund fee rate
previously in effect and FMR's voluntary implementation of the reduced
group fee structures on January 1, 1992 and November 1,
1993 .
To comply with the California Code of Regulations, FMR will reimburse the
fund if, and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this regulation, the
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its custodian fees attributable to
investments in foreign securities.
SUB-ADVISERS. On December 1, 1993, FMR entered into sub-advisory agreements
with FMR U.K. and FMR Far East pursuant to which FMR may receive investment
advice and research services with respect to companies based outside the
U.S. from the sub-advisers and may grant the sub-advisers investment
management authority as well as the authority to buy and sell securities if
FMR believes it would be beneficial to the fund. The sub - advisory
agreements in effect prior to December 1, 1993, did not grant the
sub - advisers investment management authority. The sub-advisory
agreements provide that FMR will pay fees to FMR U.K. and FMR Far East
equal to 110% and 105%, respectively, of FMR U.K.'s and FMR Far East's
costs incurred in connection with providing investment advice and research
services, said costs to be determined in relation to the assets of the fund
that benefit from the services of the sub-advisers. For providing
investment management and portfolio transactions, FMR pays FMR U.K. and FMR
Far East 50% of its monthly management fee with respect to the fund's
average net assets managed by the sub-adviser on a discretionary basis. The
fees paid by FMR to FMR U.K. and FMR Far East with respect to the fund for
fiscal 199 4 , 199 3 , and 199 2 are indicated in table
below.
FISCAL YEAR ENDED
JANUARY 31, FMR U.K. FMR FAR EAST
1994 $223,593 $355,987
1993 $ 81,865 $ 71,190
1992 $102,479 $157,380
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC is transfer, dividend disbursing, and shareholders' servicing agent for
the fund. Under the trust's contract with FSC, the fund pays an annual fee
of $26.03 per basic retail account with a balance of $5,000 or more,
$15.31 per basic retail account with a balance of less than $5,000,
and a supplemental activity charge of $6.11 for monetary
transactions. These fees and charges are subject to annual cost escalation
based on postal rate changes and changes in wage and price levels as
measured by the National Consumer Price Index for Urban Areas. With respect
to institutional client master accounts, the fund pays FSC a per-account
fee of $95.00, and monetary transaction charges of $20 or $17.50, depending
on the nature of services provided. With respect to certain broker-dealer
master accounts, the fund pays FSC a per-account fee of $30, and a charge
of $6 for monetary transactions. Fees for certain institutional retirement
plan accounts are based on the net assets of all such accounts in the fund.
Under the contract, FSC pays out-of-pocket expenses associated with
providing transfer agent services. In addition, FSC bears the expense of
typesetting, printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
shareholders, with the exception of proxy statements.
Transfer agent fees, including reimbursement for out-of-pocket expenses,
paid to FSC for the fiscal years ended January 31, 1994, 1993, and 1992
were $14,205,268, $11,497,940, and $11,283,248, respectively. If a portion
of the fund's brokerage commissions had not resulted in payment of certain
of these fees, the fund would have paid transfer agent fees of $14,454,978
for fiscal 1994.
The trust's contract with FSC also provides that FSC will perform the
calculations necessary to determine the fund's net asset value per share
and dividends, and maintain the fund's accounting records. Prior to July 1,
1991, the annual fee for these pricing and bookkeeping services was based
on two schedules, one pertaining to the fund's average net assets, and one
pertaining to the type and number of transactions the fund made. The fee
rates in effect as of July 1, 1991 are based on the fund's average net
assets, specifically .06% for the first $500 million of average net assets
and .03% for average net assets in excess of $500 million. The fee is
limited to a minimum of $45,000 and a maximum of $750,000 per year.
Pricing and bookkeeping fees, including related out-of-pocket expenses and
securities lending fees, paid to FSC for fiscal 199 4 , 199 3 ,
and 199 2 were $798,031, $796,052, and $622,892,
respectively. Securities lending fees are based on the number and duration
of individual securities loans.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FDC. Sales charge revenue paid to FDC for fiscal
199 4 , 199 3 , and 199 2 amounted to $1,297,169,
$1,834,585, and $1,490,134, respectively. Effective December 1,
1993, FMR is voluntarily waiving the fund's 2% sales charge through
December 31, 1995.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Equity-Income Fund is a fund of Fidelity
Devonshire Trust (the trust), an open-end management investment company
originally organized as a Massachusetts corporation on December 16, 1965.
On May 31, 1985, the trust was reorganized as a Massachusetts business
trust, at which time its name was changed from Fidelity Equity-Income Fund,
Inc., to Fidelity Equity-Income Fund. On December 19, 1986, the Board of
Trustees voted to change the name of the trust from Fidelity Equity-Income
Fund to Fidelity Devonshire Trust. Currently, there are six funds of
the trust: Fidelity Adjustable Rate Government Fund, Fidelity Equity-Income
Fund, Fidelity Real Estate Investment Portfolio, Spartan Long-Term
Government Bond Fund, Fidelity Utilities Income Fund and Fidelity Mid
Cap Stock Fund . The Declaration of Trust permits the Trustees to create
additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against
shareholders, except for the payment of the purchase price of shares, and
requires that each agreement, obligation, or instrument entered into or
executed by the trust or the Trustees include a provision limiting the
obligations created thereby to the trust and its assets. The Declaration of
Trust provides for indemnification out of each fund's property of any
shareholder held personally liable for the obligations of the fund. The
Declaration of Trust also provides that each fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the fund and satisfy any judgment thereon. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which a fund itself would be unable to meet
its obligations. FMR believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects a Trustee
against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar
value of net asset value per share you own. The shares have no
preemptive or conversion rights; the voting and dividend rights, the right
of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth
under the heading "Shareholder and Trustee Liability" above. Shareholders
representing 10% or more of the trust or a fund may, as set forth in the
Declaration of Trust, call meetings of the trust or a fund for any purpose
related to the trust or fund, as the case may be, including, in the case of
a meeting of the entire trust, the purpose of voting on removal of one or
more Trustees. The trust or any fund may be terminated upon the sale of its
assets to another open-end management investment company, or upon
liquidation and distribution of its assets, if approved by vote of the
holders of a majority of the trust or the fund, as determined by the
current value of each shareholder's investment in the fund or trust. If
not so terminated, the trust and its funds will continue indefinitely.
CUSTODIAN. The Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New
York, New York, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of the fund's assets and the appointment of
sub-custodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the fund or in deciding which
securities are purchased or sold by the fund. The fund may, however, invest
in obligations of the custodian and may purchase securities from or sell
securities to the custodian.
FMR, its officers and directors, affiliated companies, and the trust's
Trustees, may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. Transactions that have occurred to date include mortgages and personal
and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts serves as the trust's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The fund's Annual Report for the period ended January 31, 199 4 is a
separate report supplied with this Statement of Additional Information and
is incorporated herein by reference.
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The D rating will
also be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
FIDELITY DEVONSHIRE TRUST
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Fund at a Glance;
Who May Want to Invest
3 a, b .............................. Financial Highlights
c .............................. Performance
4 a i............................. Charter
ii........................... The Fund at a Glance; Investment
Principles and Risks
b .............................. Investment Practices and Risks
c .............................. Who May Want to Invest; Investment
Principles and Risks
5 a .............................. Charter
b i............................. Doing Business with Fidelity;
Charter
ii........................... Charter; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Charter; Breakdown of Expenses;
Cover Page; FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g i............................. FMR and its Affiliates
.
ii............................ *
..
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell
Shares; Transaction Details;
Exchange Restrictions
iii.......................... *
b ............................. *
c .............................. Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How
to Buy Shares; How to Sell Shares;
Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction
Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor
Services; Transaction Details;
Exchange Restrictions
9 .............................. *
</TABLE>
Not applicable
FIDELITY DEVONSHIRE TRUST:
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Contracts with Companies Affiliated
with FMR
e ............................ *
f ............................ Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with Companies Affiliated
with FMR
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption
Information
b ............................ Additional Purchase and Redemption
Information; Valuation of Portfolio
Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with Companies Affiliated
with FMR
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements for the fiscal
year ended January 31, 1994 are
incorporated by reference into the
Statement of Additional Information
and are filed herein.
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
A Statement of Additional Information dated has been filed with the
Securities and Exchange Commission, and is incorporated herein by reference
(is legally considered a part of this prospectus). The Statement of
Additional Information is available free upon request by calling Fidelity
at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, savings association, insured depositary
institution, or government agency, nor are they federally insured or
otherwise protected by the FDIC, the Federal Reserve Board, or any other
agency. Investments in the fund involve investment risk, including possible
loss of principal. The value of the investment and its return will
fluctuate and are not guaranteed. When sold, the value of the investment
may be higher or lower than the amount originally invested.
Real Estate Investment seeks above-average income and long-term capital
growth by investing mainly in equity securities of companies in the real
estate industry.
FIDELITY
REAL ESTATE
INVESTMENT
PORTFOLIO
PROSPECTUS
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
REA-pro-394
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES The fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL CHARTER How the fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-sheltered retirement
plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
<r>KEY FACTS</r>
THE FUND AT A GLANCE
GOAL: Above-average income and long-term capital growth. As with any mutual
fund, there is no assurance that the fund will achieve its goal.
STRATEGY: Invests mainly in the equity securities of companies in the real
estate industry.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager. Foreign affiliates of FMR
help choose investments for the fund.
SIZE: As of January 31, 199 4 , the fund had over $ 430 million
in assets.
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors who are willing
to ride out stock market fluctuations in pursuit of potentially high
long-term returns. The fund is designed for those looking for income and
growth through an investment that focuses on a wide range of securities in
the real estate industry, which is sensitive to general and local economic
conditions, interest rates, property tax rates, and other factors. The fund
is not in itself a balanced investment plan.
Over time, stocks have shown greater growth potential than other types of
securities. In the short term, however, stock prices can fluctuate
dramatically in response to company, market, or economic news. The value of
the fund's investments and the income they generate will vary from day to
day. When you sell your fund shares, they may be worth more or less than
what you paid for them.
THE SPECTRUM OF
FIDELITY FUNDS
Broad categories of Fidelity
funds are presented here in
order of ascending risk.
Generally, investors seeking
to maximize return must
assume greater risk. Fidelity
Utilities Income Fund is in the
GROWTH AND INCOME
category.
(bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(bullet) INCOME Seeks income by
investing in bonds.
(arrow) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to FMR. It also incurs other expenses for services
such as maintaining shareholder records and furnishing shareholder
statements and fund reports. The fund's expenses are factored into its
share price or dividends and are not charged directly to shareholder
accounts (see page ).
The following are projections based on historical expenses and are
calculated as a percentage of average net assets. A portion of the
brokerage commissions that the fund paid w as used to reduce fund
expenses. Without this reduction, the total fund operating expenses would
have been 1.17 %.
Management fee .63 %
12b-1 fee None
Other expenses .50 %
Total fund operating expenses 1.13 %
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses if you
close your account after the number of years indicated:
After 1 year $ 12
After 3 years $ 36
After 5 years $ 62
After 10 years $ 137
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The table that follows has been audited by Coopers & Lybrand,
independent accountants. Their unqualified report is included in the fund's
Annual Report. The Annual Report is incorporated by reference into (is
legally a part of) the Statement of Additional Information.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
54.Years 1987D 1988 1989 1990 1991 1992 1993 1994
ended January
31
55.Net asset $ 10.00 $ 10.38 $ 9.18 $ 9.01 $ 9.38 $ 9.03 $ 11.60 $ 13.22
value,
beginning of
period
56.Income
from
Investment
Operations
57. Net .04 .65 .65 .74 .77 .43 .68C .54
investment
income
58. Net .34 (1.25) (.23) .17 (.61) 2.63 1.37 .52
realized and
unrealized
gain
(loss)
on
investments
59. Total .38 (.60) .42 .91 .16 3.06 2.05 1.06
from
investment
operations
60.Less
Distributions
61. From net -- (.60) (.59) (.54) (.51) (.49) (.43) (.60)
investment
income
62.Net asset $ 10.38 $ 9.18 $ 9.01 $ 9.38 $ 9.03 $ 11.60 $ 13.22 $ 13.68
value, end of
period
63.Total return 3.80% (5.85) 4.68 10.17 2.05 35.00 18.26 8.10
B % % % % % % %E
64.RATIOS AND SUPPLEMENTAL DATA
65.Net assets, $ 86,125 $ 71,429 $ 62,840 $ 50,033 $ 44,530 $ 76,396 $ 246,62 $ 430,60
end of period
3 5
(000 omitted)
66.Ratio of 1.50% 1.50 1.28 1.39 1.47 1.24 1.16 1.13
expenses to
A,B % % % % % % %F
average net
assets
67.Ratio of 1.50% 1.50 1.28 1.39 1.47 1.24 1.16 1.17
expenses to r>A,B % % % % % % %F
average net
assets before
expense
reductions
68.Ratio of 7.17% 6.26 6.87 7.11 8.45 5.84 5.81 4.34
net investment
A % % % % % % %
income to
average net
assets
69.Portfolio 6% 89 42 70 49 84 82 110
turnover rate A % % % % % % %
</TABLE>
A ANNUALIZED
B EXPENSES LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. TOTAL
RETURN WOULD HAVE BEEN LOWER HAD THE LIMITATION NOT BEEN IN EFFECT.
C NET INVESTMENT INCOME HAS BEEN CALCULATED BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
D NOVEMBER 17, 1986 (COMMENCEMENT OF OPERATIONS) TO JULY 31, 1987.
E THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED.
F FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A
PORTION OF THE FUND'S EXPENSES.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. The total
returns that follow are based on historical fund results and do not reflect
the effect of taxes.
The fund's fiscal year runs from February 1 through January 31. The tables
below show the fund's performance over past fiscal years compared to two
measures: investing in a broad selection of stocks (S&P 500), and not
investing at all (inflation, or CPI). To help you compare this fund to
other funds, the chart on page 8 displays calendar-year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
January 31, 1994 year years fundA
Utilities Income 8.10% 14.18% 9.97%
S&P 500 12.88% 13.70% 13.48%
Consumer Price
Index 2.52% 3.84% 3.99%
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Past 5 Life of
January 31, 1994 year years fundA
Utilities Income 8.10% 94.03% 98.50%
S&P 500 12.88% 90.05% 149.00%
Consumer Price
Index 2.52% 20.73% 32.43%
A FROM NOVEMBER 27, 1987
EXAMPLE: Let's say, hypothetically, that an investor put $10,000 in the
fund on November 27, 1987. From that date through January 31, 1994, the
fund's total return was 98.50 %. That $10,000 would have grown to
$ 19,850 (the initial investment plus 98.50 % of $10,000).
UNDERSTANDING
PERFORMANCE
The fund's performance is
related to that of the real
estate industry, but also to that
of the overall stock market.
Historically, stock market
performance has been
characterized by volatility in
the short run and growth in the
long run. You can see these
two characteristics reflected in
the fund's performance; the
year-by-year total returns on
page 8 show that short-term
returns can vary widely, while
the returns at left show
long-term growth.
(checkmark)
$10,000 OVER LIFE OF FUND
Fiscal years 198 6 199 0 199 4
$19,850
Row: 1, Col: 1, Value: 10000.0
Row: 2, Col: 1, Value: 10040.0
Row: 3, Col: 1, Value: 9940.0
Row: 4, Col: 1, Value: 10380.0
Row: 5, Col: 1, Value: 10550.0
Row: 6, Col: 1, Value: 10750.17
Row: 7, Col: 1, Value: 10398.2
Row: 8, Col: 1, Value: 10207.13
Row: 9, Col: 1, Value: 10549.93
Row: 10, Col: 1, Value: 10509.12
Row: 11, Col: 1, Value: 10305.06
Row: 12, Col: 1, Value: 10057.55
Row: 13, Col: 1, Value: 8700.66
Row: 14, Col: 1, Value: 8938.889999999999
Row: 15, Col: 1, Value: 9176.83
Row: 16, Col: 1, Value: 9773.01
Row: 17, Col: 1, Value: 10092.39
Row: 18, Col: 1, Value: 10005.85
Row: 19, Col: 1, Value: 10016.67
Row: 20, Col: 1, Value: 9778.690000000001
Row: 21, Col: 1, Value: 10105.18
Row: 22, Col: 1, Value: 10149.16
Row: 23, Col: 1, Value: 10050.2
Row: 24, Col: 1, Value: 10204.87
Row: 25, Col: 1, Value: 10115.45
Row: 26, Col: 1, Value: 9970.140000000001
Row: 27, Col: 1, Value: 10127.87
Row: 28, Col: 1, Value: 10230.05
Row: 29, Col: 1, Value: 10264.12
Row: 30, Col: 1, Value: 10343.06
Row: 31, Col: 1, Value: 10619.8
Row: 32, Col: 1, Value: 10815.82
Row: 33, Col: 1, Value: 11186.69
Row: 34, Col: 1, Value: 11748.37
Row: 35, Col: 1, Value: 11912.19
Row: 36, Col: 1, Value: 11771.61
Row: 37, Col: 1, Value: 11332.55
Row: 38, Col: 1, Value: 11474.94
Row: 39, Col: 1, Value: 11522.85
Row: 40, Col: 1, Value: 11270.53
Row: 41, Col: 1, Value: 11198.44
Row: 42, Col: 1, Value: 11258.52
Row: 43, Col: 1, Value: 11112.46
Row: 44, Col: 1, Value: 11063.78
Row: 45, Col: 1, Value: 11234.66
Row: 46, Col: 1, Value: 11308.65
Row: 47, Col: 1, Value: 10507.06
Row: 48, Col: 1, Value: 9982.049999999999
Row: 49, Col: 1, Value: 9694.34
Row: 50, Col: 1, Value: 10307.28
Row: 51, Col: 1, Value: 10520.84
Row: 52, Col: 1, Value: 11501.59
Row: 53, Col: 1, Value: 11858.23
Row: 54, Col: 1, Value: 12642.55
Row: 55, Col: 1, Value: 12990.86
Row: 56, Col: 1, Value: 13300.48
Row: 57, Col: 1, Value: 12872.44
Row: 58, Col: 1, Value: 13146.6
Row: 59, Col: 1, Value: 13211.87
Row: 60, Col: 1, Value: 13595.18
Row: 61, Col: 1, Value: 13370.57
Row: 62, Col: 1, Value: 13238.45
Row: 63, Col: 1, Value: 14643.76
Row: 64, Col: 1, Value: 15527.2
Row: 65, Col: 1, Value: 15192.57
Row: 66, Col: 1, Value: 15099.45
Row: 67, Col: 1, Value: 14882.97
Row: 68, Col: 1, Value: 15329.46
Row: 69, Col: 1, Value: 15153.08
Row: 70, Col: 1, Value: 15820.8
Row: 71, Col: 1, Value: 15861.68
Row: 72, Col: 1, Value: 16299.69
Row: 73, Col: 1, Value: 16478.06
Row: 74, Col: 1, Value: 16779.9
Row: 75, Col: 1, Value: 17500.63
Row: 76, Col: 1, Value: 18361.77
Row: 77, Col: 1, Value: 18806.23
Row: 78, Col: 1, Value: 20160.6
Row: 79, Col: 1, Value: 19251.2
Row: 80, Col: 1, Value: 19013.36
Row: 81, Col: 1, Value: 19508.3
Row: 82, Col: 1, Value: 19635.34
Row: 83, Col: 1, Value: 19945.89
Row: 84, Col: 1, Value: 20866.97
Row: 85, Col: 1, Value: 20525.36
Row: 86, Col: 1, Value: 19329.7
Row: 87, Col: 1, Value: 19690.25
Row: 88, Col: 1, Value: 19849.86
$
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
THE S&P 500(Registered trademark) is the Standard & Poor's 500
Composite Stock Price Index, a widely recognized, unmanaged index of common
stock prices. The S&P 500 figures assume reinvestment of all dividends
paid by stocks included in the index. They do not, however, include any
allowance for the brokerage commissions or other fees you would pay if you
actually invested in those stocks.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper Lipper Utility Funds Average
Average, which currently reflects the performance of 9 mutual funds
with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1987 1988 1989 1990 1991 1992 1993
Real Estate -7.68 % 10.36 % 13.77 %
-8.70 % 39.19 % 19.5
1 % 12.51 %
Competitive funds average -7.68 % 15.60 % 10.57 %
-16.89 % 33.12
% 12.74 % 22.63 %
Percentage (%)
Row: 1, Col: 1, Value: nil
Row: 1, Col: 2, Value: nil
Row: 2, Col: 1, Value: nil
Row: 2, Col: 2, Value: nil
Row: 3, Col: 1, Value: nil
Row: 3, Col: 2, Value: nil
Row: 4, Col: 1, Value: -7.68
Row: 4, Col: 2, Value: -7.68
Row: 5, Col: 1, Value: 10.36
Row: 5, Col: 2, Value: 15.6
Row: 6, Col: 1, Value: 13.77
Row: 6, Col: 2, Value: 10.57
Row: 7, Col: 1, Value: -8.699999999999999
Row: 7, Col: 2, Value: -16.89
Row: 8, Col: 1, Value: 39.19
Row: 8, Col: 2, Value: 33.12
Row: 9, Col: 1, Value: 19.51
Row: 9, Col: 2, Value: 12.74
Row: 10, Col: 1, Value: 12.51
Row: 10, Col: 2, Value: 22.63
Real Estate
Competitive
funds
average
Other illustrations of fund performance may show moving averages over
specified periods.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
<r>THE FUND IN DETAIL</r>
CHARTER
FIDELITY UTILITIES INCOME FUND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. In technical
terms, the fund is currently a non-diversified fund of Fidelity Devonshire
Trust, an open-end management investment company organized as a
Massachusetts business trust on May 31, 1985.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs. Fidelity Management & Research (U.K.)
Inc. (FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR
Far East) assist FMR with foreign investments.
Barry Greenfield is manager and vice president of Real Estate Investment,
which he has managed since November 1986. Previously, he managed Fidelity
Fund, and was director of equity research. Mr. Greenfield joined Fidelity
in 1968.
FDC distributes and markets Fidelity's funds and services. Fidelity Service
Co. (FSC) performs transfer agent servicing functions for the fund.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
A broker-dealer may use a portion of the commissions paid by the fund to
reduce the fund's custodian or transfer agent fees. FMR may use its
broker-dealer affiliates and other firms that sell fund shares to carry out
the fund's transactions, provided that the fund receives brokerage services
and commission rates comparable to those of other broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND SEEKS ABOVE-AVERAGE INCOME AND LONG-TERM CAPITAL GROWTH,
consistent with reasonable investment risk, by investing primarily in
equity securities of companies principally engaged in the real estate
industry. FMR normally invests at least 65% of the fund's total assets in
these securities, but has broad flexibility to invest in all types of
domestic and foreign instruments. The fund tries to achieve a yield that
beats that of the S&P 500.
In determining whether an issuer is principally engaged in the real estate
industry, FMR looks at such factors as its assets, income, or profits.
Companies in the real estate industry may include, for example, real estate
investment trusts (REITs) that either own properties or make construction
or mortgage loans, real estate developers, and companies with substantial
real estate holdings. The fund may also invest in companies whose products
and services are related to the real estate industry, such as building
supply manufacturers, mortgage lenders, or mortgage servicing companies.
The fund's performance is closely tied to conditions affecting the real
estate industry. The industry is sensitive to factors such as changes in
real estate values and property taxes, overbuilding, variations in rental
income, and interest rates. Performance also depends on the structure, cash
flow, and management skill of many of the companies in which the fund
invests.
THE FUND WILL SPREAD INVESTMENT RISK by limiting its holdings in any one
company or industry. FMR may use various investment techniques to hedge the
fund's risks, but there is no guarantee that these strategies will work as
FMR intends. When you sell your shares, they may be worth more or less than
what you paid for them.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. As a shareholder, you will receive financial reports
every six months detailing fund holdings and describing recent investment
activities.
EQUITY SECURITIES may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. This ownership interest
often gives the fund the right to vote on measures affecting the company's
organization and operations. Although common stocks have a history of
long-term growth in value, their prices tend to fluctuate in the short
term, particularly those of smaller companies.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
Lower-quality debt securities ( sometimes called "junk bonds") are
often considered to be speculative and involve greater risk of default or
price changes due to changes in the issuer's creditworthiness. The market
prices of these securities may fluctuate more than higher-quality
securities and may decline significantly in periods of general economic
difficulty.
The table above provides a summary of ratings assigned to debt
holdings (not including money market instruments) in the fund's portfolio.
These figures are dollar-weighted averages of month-end portfolio holdings
during fiscal 1994, and are presented as a percentage of total investments.
These percentages are historical and do not necessarily indicate the fund's
current or future debt holdings.
FISCAL 1993 DEBT HOLDINGS, BY RATING
MOODY'S STANDARD &
POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 0.7 % AA 0.7 %
Upper-medium grade A A
Medium grade Baa 0.0 % BBB 1.7 %
LOWER QUALITY
Moderately speculative Ba 3.4 % BB 2.9 %
Speculative B 0.1 % B 0.0 %
Highly speculative Caa 0.0 % CCC 0.0 %
Poor quality Ca 0.0 % CC 0.0 %
Lowest quality, no interest C C
In default, in arrears -- D 0.0 %
4.2 % 5.3 %
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED BY MOODY'S OR
S&P AMOUNTED TO 2.2 %. THIS MAY INCLUDE SECURITIES RATED BY OTHER
NATIONALLY RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES.
FMR
HAS DETERMINED THAT UNRATED SECURITIES THAT ARE LOWER QUALITY ACCOUNT
FOR
0% OF THE FUND'S INVESTMENTS . REFER TO THE FUND'S STATEMENT OF
ADDITIONAL
INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE RATINGS.
RESTRICTIONS: The fund does not currently intend to invest more than 35% of
its assets in lower-quality debt securities (those rated below Baa by
Moody's or BBB by S&P, and unrated securities judged by FMR to be of
equivalent quality).
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
REAL ESTATE INVESTMENT TRUSTS. Equity trusts own real estate directly, and
their value depends upon that of the underlying properties. Mortgage trusts
make construction, development, or long-term mortgage loans, and are
sensitive to the credit quality of the borrower. The value of real estate
investment trusts is also affected by management skill, cash flow, and tax
and regulatory requirements.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, purchasing
indexed securities, and selling securities short.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for the fund, or there may be a
requirement that the fund supply additional cash to a borrower on demand.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to
the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry. A fund that
is not diversified may be more sensitive to changes in the market value of
a single issuer or industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to meet
federal tax requirements at the close of each quarter, the fund does not
invest more than 25% of its total assets in any one issuer and, with
respect to 50% of total assets, does not invest more than 5% of its total
assets in any one issuer. The fund may not invest more than 25% of its
total assets in any one industry (other than the real estate industry).
These limitations do not apply to U.S. government securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering the fund's securities. The
fund may also lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of the fund's
total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks above-average income and long-term capital growth,
consistent with reasonable investment risk, by investing primarily in the
equity securities of companies comprising the S&P 500. Under normal
conditions, at least 65% of the fund's total assets will be invested in the
equity securities of companies principally engaged in the real estate
industry. The fund may borrow only for temporary or emergency purposes, but
not in an amount exceeding 33% of its total assets. Loans, in the
aggregate, may not exceed 33% of the fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted
from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs. FMR in turn pays fees to affiliates who provide
assistance with these services. The fund also pays OTHER EXPENSES, which
are explained on page .
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fee is
calculated by adding a group fee rate to an individual fund fee rate, and
multiplying the result by the fund's average net assets.
The group fee rate is based on the average net assets of all the mutual
funds advised by FMR. This rate cannot rise above .52%, and it drops as
total assets under management increase.
UNDERSTANDING THE
MANAGEMENT FEE
The management fee FMR
receives is designed to be
responsive to changes in
FMR's total assets under
management. Building this
variable into the fee
calculation assures
shareholders that they will
pay a lower rate as FMR's
assets under management
increase.
(checkmark)
For January 1994, the group fee rate was .3229 %. The individual fund
fee rate is .20%. The total management fee rate for fiscal 1994 was
.63 %.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on companies
based outside the United States. Under the sub-advisory agreements, FMR
pays FMR U.K. and FMR Far East fees equal to 110% and 105%, respectively,
of the costs of providing these services.
The sub-advisers may also provide investment management services. In
return, FMR pays FMR U.K. and FMR Far East 50% of its management fee rate
with respect to the fund's investments that the sub-adviser manages on a
discretionary basis.
OTHER EXPENSES
While the management fee is a significant component of the fund's annual
operating costs, the fund has other expenses as well.
The fund contracts with FSC to perform many transaction and accounting
functions. These services include processing shareholder transactions,
valuing the fund's investments, and handling securities loans. In fiscal
1994, the fund paid FSC fees equal to .47 % of its average net
assets.
The fund also pays other expenses, such as legal, audit, and custodian
fees; proxy solicitation costs; and the compensation of trustees who are
not affiliated with Fidelity.
The fund has adopted a Distribution and Service Plan. This plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. It is important to
note, however, that the fund does not pay FMR any separate fees for this
service.
The fund's portfolio turnover rate for fiscal 1994 was 110 %. This
rate varies from year to year. High turnover rates increase transaction
costs and may increase taxable capital gains. FMR considers these effects
when evaluating the anticipated benefits of short-term investing.
<r>YOUR ACCOUNT</r>
DOING BUSINESS
WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers the fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over 200
(bullet) Assets in Fidelity mutual
funds: over $ 225 billion
(bullet) Number of shareholder
accounts: over 15 million
(bullet) Number of investment
analysts and portfolio
managers: over 200
(checkmark)
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age
and under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS
allow self-employed individuals or small business owners (and their
employees) to make tax-deductible contributions for themselves and any
eligible employees up to $30,000 per year.
(bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(bullet) 401(K) PROGRAMS allow employees of corporations of all sizes to
contribute a percentage of their wages on a tax-deferred basis. These
accounts need to be established by the trustee of the plan.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
THE FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. The fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For Fidelity retirement accounts $500
TO ADD TO AN ACCOUNT $250
For Fidelity retirement accounts $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For Fidelity retirement accounts $500
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to "Fidelity Real
check payable to Estate Investment
"Fidelity Real Estate Portfolio." Indicate your
Investment Portfolio." fund account number
Mail to the address on your check and mail
indicated on the to the address printed
application. on your account
statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wire (wire_graphic) (bullet) Call 1-800-544-7777 to (bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Fidelity Real
Bank Routing Estate Investment
#021001033, Portfolio" and include
Account #00163053. your account number
Specify "Fidelity Real and your name.
Estate Investment
Portfolio" and include
your new account
number and your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to other Fidelity funds, which can be
requested by phone or in writing. Call 1-800-544-6666 for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000
worth of shares in the account to keep it open ($500 for retirement
accounts).
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
ACCOUNT TYPE SPECIAL REQUIREMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
except retirement $100,000.
(bullet) For Money Line transfers to
All account types your bank account; minimum:
$10 ; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Retirement account names appear on the
account.
(bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (bullet) The trustee must sign the
Organization letter indicating capacity as
trustee. If the trustee's name
is not in the account
registration, provide a copy of
the trust document certified
Executor, within the last 60 days.
Administrator, (bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
(checkmark)
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For details on
policies and restrictions governing exchanges, including circumstances
under which a shareholder's exchange privilege may be suspended or revoked,
see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly or quarterly redemptions
from your account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call
1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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<CAPTION>
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
<TABLE>
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net income and capital gains
to shareholders each year. Normally, dividends are distributed in March,
June, September, and December. Capital gains are distributed in March and
December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
9. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
10. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
11. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
12. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
When the fund deducts a distribution from its NAV, the reinvestment price
is the fund's NAV at the close of business that day. Cash distribution
checks will be mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
The fund earns dividends
from stocks and interest from
bond, money market, and
other investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund
realizes capital gains
whenever it sells securities
for a higher price than it paid
for them. These are passed
along as CAPITAL GAIN
DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how your investment in the fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take them in cash or reinvest them. However, distributions
declared in December and paid in January are taxable as if they were paid
on December 31.
For federal tax purposes, the fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
distribution from its NAV, you will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable
distribution.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, the fund
may have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's net asset value as of the
close of business of the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations.
If quotations are not readily available, assets are valued by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page . Purchase orders may be refused if, in FMR's opinion, they are of
a size that would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) The fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees the fund or its transfer agent
has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUND THROUGH A BROKER, who may charge you
a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
Fidelity Distributors Corporation (FDC) may enter confirmed purchase orders
on behalf of customers by phone, with payment to follow no later than the
time when the fund is priced on the following business day. If payment is
not received by that time, the financial institution could be held liable
for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect the
fund, it may take up to seven days to pay you.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) The fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
IF YOUR ACCOUNT BALANCE FALLS BELOW $1,000 you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
FDC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the fund without reimbursement
from the fund. Qualified recipients are securities dealers who have sold
fund shares or others, including banks and other financial institutions,
under special arrangements in connection with FDC's sales activities. In
some instances, these incentives may be offered only to certain
institutions whose representatives provide services in connection with the
sale or expected sale of significant amounts of shares.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. See your plan materials for further
information.
(bullet) The fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if the fund receives
or anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
A Fund of Fidelity Devonshire Trust
STATEMENT OF ADDITIONAL INFORMATION
MARCH 21, 1994
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 21, 1994). Please retain this
document for future reference. The Annual Report for the fiscal year ended
January 31, 1994 is incorporated herein by reference. To obtain an
additional copy of the Prospectus or the Annual Report, please call
Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Distribution and Service Plan
Contracts With Companies Affiliated With FMR
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc. (FMR U.K.)
Fidelity Management & Research (Far East) Inc. (FMR Far East)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
REA-ptb-394
17.INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in values,
net assets, or other circumstances will not be considered when determining
whether the investment complies with the fund's investment policies and
limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH
IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed
this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33% limitation;
(3) underwrite securities issued by others, except to the extent that the
fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in the disposition of restricted securities;
(4) purchase any security if, as a result, more than 25% of its total
assets would be invested in the securities of companies having their
principal business activities in the same industry, except that the fund
will invest more than 25% of its total assets in the real estate industry
(this limitation does not apply to securities issued or guaranteed by the
United States government or its agencies or instrumentalities);
(5) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(6) lend any security or make any other loan if, as a result, more than 33%
of its total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to purchase or sell real estate
(except that the fund may purchase and sell mortgage-related securities and
securities of companies that deal in real estate or interests therein and
may liquidate real estate acquired as a result of default on a mortgage)
but this shall not prevent the fund from investing in marketable securities
issued by companies such as real estate investment trusts which deal in
real estate or interests therein and participation interests in pools of
real estate mortgage loans. Additionally, the fund does not currently
intend to invest in securities of real estate limited partnerships that are
not listed on the New York Stock Exchange or the American Stock Exchange or
traded on the NASDAQ National Market System.
(vii) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(viii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(This limitation does not apply to real estate investment trusts.)
(ix) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation. (This limitation does not apply to real
estate investment trusts.)
(x) The fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Included
in that amount, but not to exceed 2% of the fund's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the fund in units or attached to
securities are not subject to these restrictions.
(xi) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xii) The fund does not currently intend to invest in arbitrage
transactions.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page . For the fund's limitations on short sales, see the
section entitled "Short Sales" on page .
AFFILIATED BANK TRANSACTIONS. The fund may engage in transactions with
financial institutions that are, or may be considered to be, "affiliated
persons" of the fund under the Investment Company Act of 1940. These
transactions may include repurchase agreements with custodian banks;
short-term obligations of, and repurchase agreements with, the 50 largest
U.S. banks (measured by deposits); municipal securities; U.S. government
securities with affiliated financial institutions that are primary dealers
in these securities; short-term currency transactions; and short-term
borrowings. In accordance with exemptive orders issued by the Securities
and Exchange Commission, the Board of Trustees has established and
periodically reviews procedures applicable to transactions involving
affiliated financial institutions.
FUND'S RIGHTS AS A SHAREHOLDER. The fund does not intend to direct or
administer the day-to-day operations of any company. The fund, however, may
exercise its rights as a shareholder and may communicate its views on
important matters of policy to management, the Board of Directors, and
shareholders of a company when FMR determines that such matters could have
a significant effect on the value of the fund's investment in the company.
The activities that the fund may engage in, either individually or in
conjunction with others, may include, among others, supporting or opposing
proposed changes in a company's corporate structure or business activities;
seeking changes in a company's directors or management; seeking changes in
a company's direction or policies; seeking the sale or reorganization of
the company or a portion of its assets; or supporting or opposing third
party takeover efforts. This area of corporate activity is increasingly
prone to litigation and it is possible that the fund could be involved in
lawsuits related to such activities. FMR will monitor such activities with
a view to mitigating, to the extent possible, the risk of litigation
against the fund and the risk of actual liability if the fund is involved
in litigation. No guarantee can be made, however, that litigation against
the fund will not be undertaken or liabilities incurred.
REAL ESTATE INVESTMENT TRUSTS. Equity real estate investment trusts own
real estate properties, while mortgage real estate investment trusts make
construction, development, and long-term mortgage loans. Their value may be
affected by changes in the value of the underlying property of the trusts,
or the quality of the credit extended. Both types of trusts are dependent
upon management skill, are not diversified, and are subject to heavy cash
flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free status of income under the
Internal Revenue Code and failing to maintain exemption from the Investment
Company Act of 1940.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days,
over-the-counter options, and non-government stripped fixed-rate
mortgage-backed securities. Also, FMR may determine some restricted
securities, government-stripped fixed-rate mortgage-backed securities,
loans and other direct debt instruments, and swap agreements to be
illiquid. However, with respect to over-the-counter options the fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature
and terms of any agreement the fund may have to close out the option before
expiration. In the absence of market quotations, illiquid investments are
priced at fair value as determined in good faith by a committee appointed
by the Board of Trustees. If through a change in values, net assets, or
other circumstances, the fund were in a position where more than 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed-upon price, which obligation is
in effect secured by the value (at least equal to the amount of the
agreed-upon resale price and marked to market daily) of the underlying
security. The fund may engage in repurchase agreements with respect to any
security in which it is authorized to invest. While it does not presently
appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to the fund in
connection with bankruptcy proceedings), it is the fund's current policy to
limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a fund
sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory to FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may be
delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that the fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
INTERFUND BORROWING PROGRAM. The fund has received permission from the SEC
to lend money to and borrow money from other funds advised by FMR or its
affiliates. Interfund loans and borrowings normally extend overnight, but
can have a maximum duration of seven days. The fund will lend through the
program only when the returns are higher at the same time from other
short-term instruments (such as repurchase agreements), and will borrow
through the program only when the costs are equal to or lower than the cost
of bank loans. The fund will not lend more than 5% of its assets to other
funds, and will not borrow through the program if, after doing so, total
outstanding borrowings would exceed 15% of total assets. Loans may be
called on one day's notice, and the fund may have to borrow from a bank at
a higher interest rate if an interfund loan is called or not renewed. Any
delay in repayment to a lending fund could result in a lost investment
opportunity or additional borrowing costs. The fund's policies regarding
the interfund borrowing program are not fundamental.
LOWER-RATED DEBT SECURITIES. While the market for high-yield corporate debt
securities has been in existence for many years and has weathered previous
economic downturns, the 1980s brought a dramatic increase in the use of
such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of
the future performance of the high-yield bond market, especially during
periods of economic recession. In fact, from 1989 to 1991, the percentage
of lower-rated debt securities that defaulted rose significantly above
prior levels.
The market for lower-rated debt securities may be thinner and less active
than that for higher-rated debt securities, which can adversely affect the
prices at which the former are sold. If market quotations are not
available, lower-rated debt securities will be valued in accordance with
procedures established by the Board of Trustees, including the use of
outside pricing services. Judgment plays a greater role in valuing
high-yield corporate debt securities than is the case for securities for
which more external sources for quotations and last-sale information are
available. Adverse publicity and changing investor perceptions may affect
the ability of outside pricing services to value its lower-rated debt
securities and the fund's ability to dispose of these securities.
Since the risk of default is higher for lower-rated debt securities, FMR's
research and credit analysis are an especially important part of managing
securities of this type held by the fund. In considering investments for
the fund, FMR will attempt to identify those issuers of high-yielding debt
securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. FMR's
analysis focuses on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
The fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to
be in the best interest of the fund's shareholders.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Direct debt instruments are
interests in amounts owed by a corporate, governmental or other borrower to
lenders or lending syndicates (loans and loan participations), to suppliers
of goods or services (trade claims or other receivables), or to other
parties. Direct debt instruments are subject to the fund's policies
regarding the quality of debt securities.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally
recognized rating service. If the fund does not receive scheduled interest
or principal payments on such indebtedness, the fund's share price and
yield could be adversely affected. Loans that are fully secured offer the
fund more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of
borrowers whose creditworthiness is poor involves substantially greater
risks, and may be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay only a small
fraction of the amount owed. Direct indebtedness of developing countries
will also involve a risk that the governmental entities responsible for the
repayment of the debt may be unable, or unwilling, to pay interest and
repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the fund.
For example, if a loan is foreclosed, the fund could become part owner of
any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the fund could be held
liable as a co-lender. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt
instruments that are not in the form of securities may offer less legal
protection to the fund in the event of fraud or misrepresentation. In the
absence of definitive regulatory guidance, the fund relies on FMR's
research in an attempt to avoid situations where fraud or misrepresentation
could adversely affect the fund.
A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. Unless, under the terms of the loan or
other indebtedness, the fund has direct recourse against the borrower, it
may have to rely on the agent to apply appropriate credit remedies against
a borrower. If assets held by the agent for the benefit of the fund were
determined to be subject to the claims of the agent's general creditors,
the fund might incur certain costs and delays in realizing payment on the
loan or loan participation and could suffer a loss of principal or
interest.
Direct indebtedness purchased by the fund may include letters of credit,
revolving credit facilities, or other standby financing commitments
obligating the fund to pay additional cash on demand. These commitments may
have the effect of requiring the fund to increase its investment in a
borrower at a time when it would not otherwise have done so, even if the
company's condition makes it unlikely that the amount will ever be repaid.
The fund will set aside appropriate liquid assets in a segregated custodial
account to cover its potential obligations under standby financing
commitments.
The fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry (see limitations (4) and
(i)). For purposes of these limitations, the fund generally will treat the
borrower as the "issuer" of indebtedness held by the fund. In the case of
loan participations where a bank or other lending institution serves as
financial intermediary between the fund and the borrower, if the
participation does not shift to the fund the direct debtor-creditor
relationship with the borrower, SEC interpretations require the fund, in
appropriate circumstances, to treat both the lending bank or other lending
institution and the borrower as "issuers" for these purposes. Treating a
financial intermediary as an issuer of indebtedness may restrict the fund's
ability to invest in indebtedness related to a single financial
intermediary, or a group of intermediaries engaged in the same industry,
even if the underlying borrowers represent many different companies and
industries.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease the fund's exposure to long- or
short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
security prices or inflation rates. Swap agreements can take many different
forms and are known by a variety of names. The fund is not limited to any
particular form of swap agreement if FMR determines it is consistent with
the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed upon level. An interest rate collar combines elements
of buying a cap and selling a floor.
Swap agreements will tend to shift the fund's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from the fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's creditworthiness
declined, the value of a swap agreement would be likely to decline,
potentially resulting in losses. The fund expects to be able to eliminate
its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the fund
enters into a swap agreement on a net basis, it will segregate assets with
a daily value at least equal to the excess, if any, of the fund's accrued
obligations under the swap agreement over the accrued amount the fund is
entitled to receive under the agreement. If the fund enters into a swap
agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the fund's accrued obligations under the
agreement.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than the underlying instruments.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and
interest from such securities, can change significantly when foreign
currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity
than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be
more difficult to obtain reliable information regarding an issuer's
financial condition and operations. In addition, the costs of foreign
investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be difficult
to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention. There
may be a greater possibility of default by foreign governments or foreign
government-sponsored enterprises. Investments in foreign countries also
involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate these potential events or
counter their effects.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable abroad, they may be less liquid
than foreign securities of the same class that are not subject to such
restrictions.
American Depositary Receipts and European Depositary Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed
for use in the U.S. and European securities markets, respectively, ADRs and
EDRs are alternatives to the purchase of the underlying securities in their
national markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The fund may hold foreign currency deposits
from time to time, and may convert dollars and foreign currencies in the
foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may
be exchanged on a spot (i.e., cash) basis, or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. Forward contracts generally are traded in an interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange.
The fund may use currency forward contracts to manage currency risks and to
facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the fund.
In connection with purchases and sales of securities denominated in foreign
currencies, the fund may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing the fund's foreign investments. The fund
could also enter into forward contracts to purchase or sell a foreign
currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not
yet been selected by FMR.
The fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example,
if the fund owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. The fund could also hedge the
position by selling another currency expected to perform similarly to the
pound sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer
advantages in terms of cost, yield, or efficiency, but generally would not
hedge currency exposure as effectively as a simple hedge into U.S. dollars.
Proxy hedges may result in losses if the currency used to hedge does not
perform similarly to the currency in which the hedged securities are
denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change the fund's investment exposure to changes in currency
exchange rates, and could result in losses to the fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged the fund by selling that currency in exchange for
dollars, the fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly, if
FMR increases the fund's exposure to a foreign currency, and that
currency's value declines, the fund will realize a loss. There is no
assurance that FMR's use of forward currency contracts will be advantageous
to the fund or that it will hedge at an appropriate time. The policies
described in this section are non-fundamental policies of the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Section 4.5 of the
regulations under the Commodity Exchange Act, which limits the extent to
which the fund can commit assets to initial margin deposits and option
premiums.
In addition, the fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to or acquired or traded together with their underlying
securities, and do not apply to securities that incorporate features
similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor's 500 Composite Stock
Price Index (S&P 500 (Registered trademark) ). Futures can be held
until their delivery dates, or can be closed out before then if a liquid
secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the fund sells a futures
contract, by contrast, the value of its futures position will tend to move
in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price
changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund pays
the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the fund assumes the obligation to pay the
strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures
contract the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to
adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the
same underlying instrument, in order to construct a combined position whose
risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at
one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open
and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract
at any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The fund
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign
currencies. The fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
the fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and
if the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of
the fund's assets could impede portfolio management or the fund's ability
to meet redemption requests or other current obligations.
SHORT SALES. The fund may enter into short sales with respect to stocks
underlying its convertible security holdings. For example, if FMR
anticipates a decline in the price of the stock underlying a convertible
security the fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline on the value
of the convertible security. The fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities
underlying its convertible security holdings under normal circumstances.
When the fund enters into a short sale, it will be required to set aside
securities equivalent in kind and amount to those sold short (or securities
convertible or exchangeable into such securities) and will be required to
continue to hold them while the short sale is outstanding. The fund will
incur transaction costs, including interest expense, in connection with
opening, maintaining, and closing short sales.
18.PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the management
contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment adviser. In selecting broker-dealers, subject to
applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions; and arrangements for payment of fund
expenses. Commissions for foreign investments traded on foreign exchanges
generally will be higher than for U.S. investments and may not be subject
to negotiation.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations) in accordance with a ranking of broker-dealers determined
periodically by FMR's investment staff based upon the quality of such
research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf
of other FMR clients may be useful to FMR in carrying out its obligations
to the fund. The receipt of such research has not reduced FMR's normal
independent research activities; however, it enables FMR to avoid
additional expenses that could be incurred if FMR tried to develop
comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will not
attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity funds
to the extent permitted by law. FMR may use research services provided by
and place agency transactions with Fidelity Brokerage Services, Inc. (FBSI)
and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of FMR Corp., if
the commissions are fair, reasonable, and comparable to commissions charged
by non-affiliated, qualified brokerage firms for similar services. Prior to
September 4, 1992, FBSL operated under the name Fidelity Portfolio
Services, Ltd. (FPSL) as a wholly owned subsidiary of Fidelity
International Limited (FIL). Edward C. Johnson 3d is Chairman of FIL. Mr.
Johnson 3d, Johnson family members, and various trusts for the benefit of
Johnson family members own, directly or indirectly, more than 25% of the
voting common stock of FIL.
FMR may allocate brokerage transactions to broker-dealers who have entered
into arrangements with FMR under which the broker-dealer allocates a
portion of the commissions paid by the fund toward payment of fund
expenses, such as transfer agent fees of FSC or custodian fees. The
transaction quality must, however, be comparable to those of other
qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied . Pursuant to such requirements , the
Board of Trustees has authorized FBSI to effect fund
portfolio transactions on national securities exchanges in accordance
with approved procedures and applicable SEC rules .
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to the
benefits to the fund.
For the fiscal years ended January 31, 1994 and 1993, the fund's portfolio
turnover rates amounted to 110 % and 82%, respectively.
For fiscal 1994, 1993, and 1992, the fund paid brokerage commissions of
$ 1,505,683, $391,489, and $188,496, respectively. During fiscal
1994, approximately $ 1,010,473 or 67.1 % of these commissions
were paid to brokerage firms that provided research services, although the
provision of such services was not necessarily a factor in the placement of
all of this business with such firms. The fund pays both commissions and
spreads in connection with the placement of portfolio transactions; FBSI is
paid on a commission basis. During fiscal 1994, 1993, and 1992, the fund
paid brokerage commissions of $ 355,703 , $76,672, and $23,728,
respectively, to FBSI. During fiscal 1994, this amounted to 23.62 %
of the aggregate brokerage commissions paid by the fund for transactions
involving approximately 31.93% of the aggregate dollar amount of
transactions in which the fund paid brokerage commissions. The difference
in the percentage of brokerage commissions paid to and the percentage of
the dollar amount of transactions effected through FBSI is a result of low
commission rates charged by FBSI.
There were no fees paid to FBSL in fiscal 1994, 1993, or 1992.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment,
whether it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases this system could have a detrimental
effect on the price or value of a security as far as the fund is concerned.
In other cases, however, the ability of the fund to participate in volume
transactions will produce better executions and prices for the fund. It is
the current opinion of the Trustees that the desirability of retaining FMR
as investment adviser to the fund outweighs any disadvantages that may be
said to exist from exposure to simultaneous transactions.
19.VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the primary
market or exchange on which they trade. Most e quity securities for
which the primary market is the U.S. are valued at the last sale price or,
if no sale has occurred, at the closing bid price. Most e quity
securities for which the primary market is outside the U.S. are valued
using the official closing price or the last sale price in the principal
market where they are traded. If the last sale price (on the local
exchange) is unavailable, the last evaluated quote or last bid price is
normally used. Convertible and f ixed-income securities are valued
primarily by a pricing service that uses a vendor security valuation matrix
which incorporates both dealer-supplied valuations and electronic data
processing techniques. This twofold approach is believed to more accurately
reflect fair value because it takes into account appropriate factors such
as institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon quoted, exchange, or
over-the-counter prices. Use of pricing services has been approved by the
Board of Trustees.
Securities and other assets for which there is no readily available market
are valued in good faith by a committee appointed by the Board of Trustees.
The procedures set forth above need not be used to determine the value of
the securities owned by the fund if, in the opinion of a committee
appointed by the Board of Trustees, some other method (e.g. closing
over-the-counter bid prices in the case of debt instruments traded on an
exchange) would more accurately reflect the fair market value of such
securities.
Generally, the valuation of foreign and domestic equity securities, as well
as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed at the close of the
NYSE. The values of any such securities held by the fund are determined as
of such time for the purpose of computing the fund's net asset value.
Foreign security prices are furnished by independent brokers or quotation
services which express the value of securities in their local currency. FSC
gathers all exchange rates daily at the close of the NYSE using the last
quoted price on the local currency and then translates the value of the
foreign securities from their local currencies to U.S. dollars. Any changes
in the value of forward contracts due to exchange rate fluctuations and
days to maturity are included in the calculation of net asset value. If an
extraordinary event that is expected to materially affect the value of a
portfolio security occurs after the close of an exchange on which that
currency is traded, then the security will be valued as determined in good
faith by a committee appointed by the Board of Trustees.
20.PERFORMANCE
The fund may quote its performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. The fund's share price, yield, and
total returns fluctuate in response to market conditions and other factors,
and the value of fund shares when redeemed may be worth more or less than
their original cost.
YIELD CALCULATIONS. Yields for the fund used in advertising are computed by
dividing the fund's interest and dividend income for a given 30-day or one
month period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the fund's
NAV at the end of the period, and annualizing the result (assuming
compounding of income) in order to arrive at an annual percentage rate.
Income is calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. Dividends from
equity investments are treated as if they were accrued on a daily basis,
solely for the purpose of yield calculations. In general, interest income
is reduced with respect to bonds trading at a premium over their par value
by subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses generally
are excluded from the calculation.
Income calculated for the purposes of determining the fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed
in yield calculations, the fund's yield may not equal its distribution
rate, the income paid to your account, or the rate of income reported in
the fund's financial statements.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV over the
period. Average annual returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in the fund over a
stated period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative
return of 100% over ten years would produce an average annual return of
7.18%, which is the steady annual rate of return that would equal 100%
growth on a compounded basis in ten years. While average annual returns are
a convenient means of comparing investment alternatives, investors should
realize that the fund's performance is not constant over time, but changes
from year to year, and that average annual returns represent averaged
figures as opposed to the actual year-to-year performance of the fund.
In addition to average annual returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. An example of this type of
illustration is given below. Total returns, yields, and other performance
information may be quoted numerically or in a table, graph, or similar
illustration.
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
MOVING AVERAGES. The fund may illustrate performance using moving averages.
A long-term moving average is the average of each week's adjusted closing
NAV for a specified period. A short-term moving average is the average of
each day's adjusted closing NAV for a specified period. Moving Average
Activity Indicators combine adjusted closing NAVs from the last business
day of each week with moving averages for a specified period to produce
indicators showing when an NAV has crossed, stayed above, or stayed below
its moving average. On January 28 , 1994, the 13-week and 39-week
long-term moving averages were 13.46 and 13.60 , respectively.
HISTORICAL FUND RESULTS. The following table shows the income and capital
elements of the fund's cumulative total return for the period November 17,
1986 (commencement of operations) to January 31, 1994. The table compares
the fund's return to the record of the S&P(Registered trademark) 500,
the Dow Jones Industrial Average (DJIA), and the cost of living (as
measured by the Consumer Price Index, or CPI) over the same period. The
S&P 500 and DJIA comparisons are provided to show how the fund's total
return compared to the record of a broad average of common stock prices and
a narrower set of stocks of major industrial companies, respectively, over
the same period. The fund has the ability to invest in securities not
included in either index, and its investment portfolio may or may not be
similar in composition to the indices. The S&P 500 and DJIA are based
on the prices of unmanaged groups of stocks and, unlike the fund's return,
their returns do not include the effect of paying brokerage commissions and
other costs of investing.
During the period from November 17, 1986 (commencement of operations) to
January 31, 1994, a hypothetical $10,000 investment in Fidelity Real Estate
Investment Portfolio would have grown to $ 19,850 , assuming all
distributions were reinvested. This was a period of widely fluctuating
stock prices and should not be considered representative of the dividend
income or capital gain or loss that could be realized from an investment in
the fund today.
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO INDICES
Value of Value of Value of
Initial Reinvested Reinvested
Year Ended $10,000 Income Capital Gain Total Cost of
January 31 Investment Distributions Distributions Value S&P 500 DJIA
Living**
1994 $13,680 $6,170 $0 $19,850 $24,900 $26,987 $13,243
1993 13,220 5,142 0 18,362 22,060 21,83 2 12,9 1 7
1992 11,600 3,927 0 15,527 19,945 20,641 12,509
1991 9,030 2,472 0 11,502 16,254 16,963 12,192
1990 9,380 1,891 0 11,271 14,998 15,451 11,540
1989 9,010 1,220 0 10,230 13,102 13,458 10,969
1988 9,180 593 0 9,773 10,910 10,855 10,480
1987* 10,380 0 0 10,380 11,286 11,596 10,072
* F rom November 17, 1986 (commencement of operations).
** From month end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on November
17, 1986, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$1 4,574 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
the cash payments for the period would have amounted to $ 3,760 . The
fund did not distribute any capital gains during the period. Tax
consequences of different investments have not been factored into the above
figures. During the period November 17, 1986 through March 31, 1990, the
fund imposed a 2% sales charge which is no longer in effect and is not
reflected in the figures above.
The yield of the S&P 500 for the fiscal year ended January 31, 1994 was
12.88 %, calculated by dividing the dollar value of dividends paid by
the S&P 500 stocks during the period by the average value of the
S&P 500 on January 31, 1994. The S&P 500 yield is calculated
differently from the fund's yield; among other things, the fund's yield
calculation treats dividends as accrued in anticipation of payment, rather
than recording them when paid.
The fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared
by Lipper Analytical Services, Inc. (Lipper), an independent service
located in Summit, New Jersey that monitors the performance of mutual
funds. Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, the fund's
performance may be compared to mutual fund indices prepared by Lipper.
From time to time, the fund's performance also may be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchSM Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the CPI), and combinations of
various capital markets. The performance of these capital markets is based
on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of dollar cost
averaging; saving for college; charitable giving; and the Fidelity credit
card. In addition, Fidelity may quote financial or business publications
and periodicals, including model portfolios or allocations, as they relate
to fund management, investment philosophy, and investment techniques.
Fidelity may also reprint, and use as advertising and sales literature,
articles form Fidelity Focus, a quarterly magazine provided free of charge
to Fidelity shareholders.
The fund may present its fund number, Quotron number(trademark), and CUSIP
number, and discuss or quote its current portfolio manager.
VOLATILITY. The fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the fund may compare these
measures to those of other funds. Measures of volatility seek to compare
the fund's historical share price fluctuations or total returns to those of
a benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation
are calculated using averages of historical data.
MOMENTUM INDICATORS indicate the fund's price movements over specific
periods of time. Each point on the momentum indicator represents the fund's
percentage change in price movements over that period.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
an investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share
can be lower than if fixed numbers of shares had been purchased at the same
intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
The fund may be available for purchase through retirement plans or other
programs offering deferral of or exemption from income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the deferred earnings at the end of the ten year period.
As of January 31, 1994, FMR managed approximately $145 billion in equity
fund assets as defined and tracked by Lipper. This figure represents the
largest amount of equity fund assets under management by a mutual fund
investment adviser in the United States, making FMR America's leading
equity (stock) fund manager.
21.ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1994:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when investors
do not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), the fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
22.DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. A portion of the fund's income may qualify for the
dividends-received deduction available to corporate shareholders to the
extent that the fund's income is derived from qualifying dividends. Because
the fund may earn other types of income, such as interest income from
securities loans, non-qualifying dividends, and short-term capital gains,
the percentage of dividends from the fund that qualify for the deduction
generally will be less than 100%. The fund will notify corporate
shareholders annually of the percentage of fund dividends that qualify for
the dividends-received deduction. A portion of the fund's dividends derived
from certain U.S. government obligations may be exempt from state and local
taxation. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income, and therefore will increase
(decrease) dividend distributions. The fund will send each shareholder a
notice in January describing the tax status of dividends and capital gain
distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are held
for six months or less and are sold at a loss, the portion of the loss
equal to the amount of the long-term capital gain distribution will be
considered a long-term loss for tax purposes.
Short-term capital gains distributed by the fund are taxable to
shareholders as dividends, not as capital gains. Distributions from the
short-term capital gains do not qualify for the dividends-received
deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends or
interest paid with respect to foreign securities. Because the fund does not
currently anticipate that securities of foreign issuers will constitute
more than 50% of its total assets at the end of its fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction
on their federal income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The fund has qualified and intends to continue to
qualify each year as a "regulated investment company" for tax purposes so
that it will not be liable for federal tax at the fund level on income and
capital gains distributed to shareholders. In order to qualify as a
regulated investment company and avoid being subject to federal income or
excise taxes at the fund level, the fund intends to distribute
substantially all of its net investment income and realized capital gains
within each calendar year as well as on a fiscal year basis. The fund
intends to comply with other tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities held for less than three months constitute less than 30% of the
fund's gross income for each fiscal year. Gains from some forward currency
contracts, futures contracts, and options are included in this 30%
calculation, which may limit the fund's investments in such instruments.
If the fund purchases shares in certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the Internal
Revenue Code, it may be subject to U.S. federal income tax on a portion of
any excess distribution or gain from the disposition of such shares.
Interest charges may also be imposed on the fund with respect to deferred
taxes arising from such distributions or gains.
The fund is treated as a separate entity from the other funds of Fidelity
Devonshire Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders of the fund may be subject
to state and local taxes on distributions received from the fund. Investors
should consult their tax advisors to determine whether the fund is suitable
to their particular tax situation.
23.FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. FMR U.K. and FMR Far East, both wholly owned
subsidiaries of FMR formed in 1986, supply investment research, and may
supply portfolio management services, to FMR in connection with certain
funds advised by FMR. Analysts employed by FMR, FMR U.K., and FMR Far East
research and visit thousands of domestic and foreign companies each year.
FMR Texas Inc., a wholly owned subsidiary of FMR formed in 1989, supplies
portfolio management and research services in connection with certain money
market funds advised by FMR.
24.TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
also serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, MA 02109, which is also the address of FMR.
Those Trustees who are "interested persons" (as defined in the Investment
Company Act of 1940) by virtue of their affiliation with either the trust
or FMR are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is a
consultant to Western Mining Corporation (1994). Prior to February, 1994,
he was President of Greenhill Petroleum Corporation (petroleum
exploration and production, 1990). Until March 1990, Mr. Cox was President
and Chief Operating Officer of Union Pacific Resources Company (exploration
and production). He is a Director of Bonneville Pacific Corporation
(independent power, 1989) , Sanifill Corporation (non-hazardous waste,
1993), and CH2M Hill Companies (engineering). In addition, he served on
the Board of Directors of the Norton Company (manufacturer of industrial
devices, 1983-1990) and continues to serve on the Board of Directors of the
Texas State Chamber of Commerce, and is a member of advisory boards of
Texas A&M University and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton , NY, Trustee
(1992). Prior to her retirement in September 1991, Mrs. Davis was the
Senior Vice President of Corporate Affairs of Avon Products, Inc. She is
currently a Director of BellSouth Corporation (telecommunications), Eaton
Corporation (manufacturing, 1991), and the TJX Companies, Inc. (retail
stores, 1990), and previously served as a Director of Hallmark Cards, Inc.
(1985-1991) and Nabisco Brands, Inc. In addition, she serves as a Director
of the New York City Chapter of the National Multiple Sclerosis Society,
and is a member of the Advisory Council of the International Executive
Service Corps. and the President's Advisory Council of The University of
Vermont School of Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and
RPM, Inc. (manufacturer of chemical products, 1990). In addition, he serves
as a Trustee of First Union Real Estate Investments, Chairman of the Board
of Trustees and a member of the Executive Committee of the Cleveland Clinic
Foundation, a Trustee and a member of the Executive Committee of University
School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1 - North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the Financial
Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee (1988).
Prior to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company. He
is a Director of Allegheny Power Systems, Inc. (electric utility), General
Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer). He is also
a Trustee of Rensselaer Polytechnic Institute and of Corporate Property
Investors and a member of the Advisory Boards of Butler Capital Corporation
Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee , is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company
of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President - Legal of FMR Corp., and Vice President and Clerk
of FDC.
ROBERT H. MORRISON, Manager, Security Transactions, is an employee of FMR.
BARRY GREENFIELD, Vice President of the fund (1990), is an employee of FMR.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
As of January 31, 1994, the Trustees and officers of the fund owned , in
the aggregate, less than 1% of the outstanding shares of the fund.
Also as of that date, Charles Schwab & Co., Inc./Mutual Fund
Department, San Francisco, CA were known by the fund to own of record or
beneficially 12.4% of the fund's total outstanding shares.
25.MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the Board of Trustees, directs the
investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the trust, all Trustees who are "interested
persons" of the trust or of FMR, and all personnel of the trust or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the Board
of Trustees, provide the management and administrative services necessary
for the operation of the fund. These services include providing facilities
for maintaining the fund's organization; supervising relations with
custodians, transfer and pricing agents, accountants, underwriters, and
other persons dealing with the fund; preparing all general shareholder
communications and conducting shareholder relations; maintaining the fund's
records and the registration of the fund's shares under federal and state
law; developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects to
the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC, the fund pays all of its expenses, without limitation, that are not
assumed by those parties. The fund pays for typesetting, printing, and
mailing proxy material to shareholders, legal expenses, and the fees of the
custodian, auditor, and non-interested Trustees. Although the fund's
management contract provides that the fund will pay for typesetting,
printing, and mailing prospectuses, statements of additional information,
notices, and reports to existing shareholders, the trust has entered into a
revised transfer agent agreement with FSC, pursuant to which FSC bears the
cost of providing these services to existing shareholders. Other expenses
paid by the fund include interest, taxes, brokerage commissions, the fund's
proportionate share of insurance premiums and Investment Company Institute
dues, and the costs of registering shares under federal and state
securities laws. The fund is also liable for such nonrecurring expenses as
may arise, including costs of any litigation to which the fund may be a
party and any obligation it may have to indemnify the trust's officers and
Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated April 1,
1993, which was approved by shareholders on March 24, 1993. For the
services of FMR under the contract, the fund pays FMR a monthly management
fee composed of the sum of two elements: a group fee rate and an individual
fund fee rate.
The group fee rate is based on the monthly average net assets of all of the
registered investment companies with which FMR has management contracts and
is calculated on a cumulative basis pursuant to the graduated fee rate
schedule shown on the left of the following table . On the right, the
effective fee rate schedule shows the results of cumulatively applying the
annualized rates at varying asset levels. For example, the effective annual
group fee rate at $ 244.7 billion of group net assets - their
approximate level for January 1994 - was . 3229 %, which is the
weighted average of the respective fee rates for each level of group net
assets up to $244.7 billion.
GROUP FEE RATE SCHEDULE* EFFECTIVE
ANNUAL FEE RATES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
</TABLE>
$ 0 - 3 billion .520% $ 0.5 billion .5200%
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 150 .3371
21 - 24 .360 175 .3325
24 - 30 .350 200 .3284
30 - 36 .345 225 .3253
36 - 42 .340 250 .3223
42 - 48 .335 275 .3198
48 - 66 .325 300 .3175
66 - 84 .320 325 .3153
84 - 102 .315 350 .3133
102 - 138 .310
138 - 174 .305
174 - 228 .300
228 - 282 .295
282 - 336 .290
Over 336 .285
* The rates shown for average group assets in excess of $174 billion were
adopted by FMR on a voluntary basis on November 1, 1993 pending shareholder
approval of a new management contract reflecting the extended schedule. The
extended schedule provides for lower management fees as total assets under
management increase.
The individual fund fee rate is .30%. Based on the average net assets of
funds advised by FMR for January 1994, the annual management fee would be
calculated as follows:
Group Fee Rate + Individual Fund Fee Rate = Management Fee Rate
. 3229 % .30% . 6229 %
One twelfth (1/12) of this annual management fee rate is then applied to
the fund's average net assets for the current month, giving a dollar amount
which is the fee for that month.
The schedule shown on page 16 (minus the breakpoints added November 1,
1993) was voluntarily adopted by FMR on January 1, 1992 until shareholders
could meet to approve the amended management contract. Prior to January 1,
1992, the fund's group fee rate was based on a schedule with breakpoints
ending at .310% for average group assets in excess of $102 billion. FMR had
voluntarily adopted the shorter schedules on August 1, 1988.
During the fiscal years ended January 31, 1994, 1993, and 1992, FMR
received $ 2,615,114 , $625,316, and $344,830, respectively, for its
services as investment adviser to the fund. These fees were equivalent to
.63 %, .64%, and .64%, respectively, of the average net assets of the
fund for each of those years.
To comply with the California Code of Regulations, FMR will reimburse the
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2% of the first $30 million, 2% of the next $70
million, and 1% of average net assets in excess of $100 million. When
calculating the fund's expenses for purposes of this regulation, the fund
may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its custodian fees attributable to
investments in foreign securities.
SUB-ADVISERS. On December 1, 1993, FMR entered into new sub-advisory
agreements with FMR U.K. and FMR Far East, wholly owned subsidiaries of
FMR, which were approved by shareholders on November 17, 1993. Pursuant to
the sub-advisory agreements, FMR may receive investment advice and research
services with respect to companies based outside the U.S. from the
sub-advisers and may grant the sub-advisers investment management authority
as well as the authority to buy and sell securities if FMR believes it
would be beneficial to the fund.
The sub-advisory agreements provide that FMR will pay fees to FMR U.K. and
FMR Far East equal to 110% and 105%, respectively, of FMR U.K.'s and FMR
Far East's costs incurred in connection with providing investment advice
and research services. FMR also will pay fees equal to 50% of its monthly
management fee with respect to the fund's average net assets managed by the
sub-advisers on a discretionary basis.
Prior to December 1, 1993, FMR had sub-advisory agreements with FMR U.K.
and FMR Far East on behalf of the fund, pursuant to which each sub-adviser
provided FMR with investment advice and research services. Under those
agreements, FMR U.K. and FMR Far East were compensated for their services
according to the same formulas as they are compensated currently for
providing investment advice and research services.
The fees paid to FMR U.K. and FMR Far East for fiscal 1994, 1993, and 1992,
are shown in the following table.
Fiscal Year Fees Paid to FMR U.K. Fees Paid to FMR Far East
1994 $ 914.80 $ 1,465.80
1993 13.80 49.50
1992 196.50 254.40
26.DISTRIBUTION AND SERVICE PLAN
The fund has adopted a distribution and service plan (the plan) under Rule
12b-1 of the Investment Company Act of 1940 (the Rule). The Rule provides
in substance that a mutual fund may not engage directly or indirectly in
financing any activity that is primarily intended to result in the sale of
shares of the fund except pursuant to a plan adopted by the fund under the
Rule. The Board of Trustees approved the plan to allow the fund and FMR to
incur certain expenses that might be considered to constitute indirect
payment by the fund of distribution expenses. Under the plan, if payment by
the fund to FMR of management fees should be deemed to be indirect
financing by the fund of the distribution of its shares, such payment is
authorized by the plan. The plan was approved by shareholders on November
17, 1993.
The plan specifically recognizes that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the fund. In addition, the
plan provides that FMR may use its resources, including its management fee
revenues, to make payments to third parties that provide assistance in
selling the fund's shares or to third parties, including banks, that render
shareholder support services. The Board of Trustees has not authorized any
third party payments.
As required by the Rule, the Trustees carefully considered all pertinent
factors relating to the implementation of the plan prior to its approval,
and have determined that there is a reasonable likelihood that the plan
will benefit the fund and its shareholders. In particular, the Trustees
noted that the plan does not authorize payments by the fund other than
those made to FMR under its management contract with the fund. To the
extent that the plan gives FMR and FDC greater flexibility in connection
with the distribution of shares of the fund, additional sales of the fund's
shares may result. Additionally, certain shareholder support services may
be provided more effectively under the plan by local entities with whom
shareholders have other relationships.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services, or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
The fund may execute portfolio transactions with and purchase securities
issued by depository institutions that receive payments under the plan. No
preference will be shown in the selection of investments for the
instruments of such depository institutions. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein, and banks and other financial institutions may be
required to register as dealers pursuant to state law.
27.CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC is transfer, dividend disbursing, and shareholders' servicing agent for
the fund. Under the trust's contract with FSC, the fund pays an annual fee
of $2 6.03 per basic retail account with a balance of $5,000 or more,
$15. 31 per basic retail account with a balance of less than
$ 5 ,000 , and a supplemental activity charge of $ 2.25
for standing order transactions and $6.11 for other monetary
transactions. These fees and charges are subject to annual cost escalation
based on postal rate changes and changes in wage and price levels as
measured by the National Consumer Price Index for Urban Areas. With respect
to certain institutional client master accounts, the fund pays FSC a
per-account fee of $95, and monetary transaction charges of $20 or $17.50,
depending on the nature of services provided. With respect to certain
broker-dealer master accounts, the fund pays FSC a per-account fee of $30,
and a charge of $6 for monetary transactions. Fees for certain
institutional retirement plan accounts are based on the net assets of all
such accounts in the fund.
Under the contract, FSC pays out-of-pocket expenses associated with
providing transfer agent services. In addition, FSC bears the expense of
typesetting, printing, and mailing prospectuses, statements of additional
information, and all other reports, notices, and statements to
shareholders, with the exception of proxy statements. Transfer agent fees,
including reimbursement for out-of-pocket expenses, paid to FSC for the
fiscal years ended January 31, 1994, 1993, and 1992, were
$ 1,566,265 , $328,617, and $193,255, respectively. If a portion of
the fund's brokerage commissions had not resulted in payment of certain of
these fees, the fund would have paid transfer agent fees of $ 1,719,258
for the fiscal year ended January 31, 1994 .
The trust's contract with FSC also provides that FSC will perform the
calculations necessary to determine the fund's net asset value per share
and dividends, and maintain the fund's accounting records. Prior to July 1,
1991, the annual fee for these pricing and bookkeeping services was based
on two schedules, one pertaining to the fund's average net assets, and one
pertaining to the type and number of transactions the fund made. The fee
rates in effect as of July 1, 1991 are based on the fund's average net
assets, specifically, .06% for the first $500 million of average net assets
and .03% for average net assets in excess of $500 million. The fee is
limited to a minimum of $45,000 and a maximum of $750,000 per year. Pricing
and bookkeeping fees, including related out-of-pocket expenses, paid to FSC
for fiscal 1994, 1993, and 1992, were $ 251,620 , $60,243, and
$59,888, respectively.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to use
all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at net
asset value. Promotional and administrative expenses in connection with the
offer and sale of shares are paid by FMR.
28.DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Real Estate Investment Portfolio is a fund of
Fidelity Devonshire Trust, an open-end management investment company
originally organized as a Massachusetts corporation on December 16, 1965.
On May 31, 1985, the trust was reorganized as a Massachusetts business
trust, at which time its name was changed from Fidelity Equity-Income Fund,
Inc. to Fidelity Equity-Income Fund. On December 19, 1986, the Board of
Trustees voted to change the name of the trust from Fidelity Equity-Income
Fund to Fidelity Devonshire Trust. Currently, there are six funds of
the trust: Fidelity Equity-Income Fund, Fidelity Real Estate Investment
Portfolio, Fidelity Utilities Income Fund, Spartan Long-Term Government
Bond Fund, Fidelity Mid-Cap Stock Fund, and Fidelity Adjustable Rate
Government Fund. The Declaration of Trust permits the Trustees to create
additional funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of the shares of
each fund and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to be
allocated in proportion to the asset value of the respective funds, except
where allocations of direct expense can otherwise be fairly made. The
officers of the trust, subject to the general supervision of the Board of
Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations created
thereby to the trust and its assets. The Declaration of T rust
provides for indemnification out of each fund's property of any shareholder
held personally liable for the obligations of the fund. The Declaration of
Trust also provides that each fund shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects a Trustee
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar of net
asset value per share you own. The shares have no preemptive or conversion
rights; the voting and dividend rights, the right of redemption and the
privilege of exchange are described in the Prospectus. Shares are fully
paid and nonassessable, except as set forth under the heading "Shareholder
and Trustee Liability" above. Shareholders representing 10% or more of the
trust or a fund may, as set forth in the Declaration of Trust, call
meetings of the trust or a fund for any purpose related to the trust or
fund, as the case may be, including, in the case of a meeting of the entire
trust, the purpose of voting on removal of one or more Trustees. The trust
or any fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by the vote of the holders of a
majority of the trust or the fund, as determined by the current value of
each shareholder's investment in the fund or trust. If not so terminated,
the trust and its funds will continue indefinitely.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of the fund's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part in
determining the investment policies of the fund or in deciding which
securities are purchased or sold by the fund. The fund may, however, invest
in obligations of the custodian and may purchase or sell securities from or
to the custodian.
FMR, its officers and directors, its affiliated companies, and the trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the funds advised by
FMR. The Boston branch of the fund's custodian leases its office space from
an affiliate of FMR at a lease payment which, when entered into, was
consistent with prevailing market rates. Transactions that have occurred to
date include mortgages and personal and general business loans. In the
judgment of FMR, the terms and conditions of those transactions were not
influenced by existing or potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand , One Post Office Square, Boston,
Massachusetts, serves as the trust's independent accountant. The auditor
examines financial statements for the fund s and provides other
audit, tax, and related services.
29.FINANCIAL STATEMENTS
The fund's Annual Report for the fiscal year ended January 31, 1994 is a
separate report supplied with this Statement of Additional Information and
is incorporated herein by reference.
30.APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protections may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
C - Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal
is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated debt issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
The C rating may be used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The D rating will
also be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
FIDELITY DEVONSHIRE TRUST
SPARTAN LONG-TERM GOVERNMENT BOND FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 .............................. Cover Page
2 a .............................. Expenses
b, c .............................. Contents; The Fund at a Glance;
Who May Want to Invest
3 a, b .............................. Financial Highlights
c .............................. Performance
4 a i............................. Charter
ii........................... The Fund at a Glance; Investment
Principles and Risks
b .............................. Investment Practices and Risks
c .............................. Who May Want to Invest; Investment
Principles and Risks
5 a .............................. Charter
b i............................. Doing Business with Fidelity;
Charter
ii........................... Charter; Breakdown of Expenses
iii.......................... Expenses; Breakdown of Expenses
c, d .............................. Charter; Breakdown of Expenses;
Cover Page; FMR and Its Affiliates
e .............................. FMR and its Affiliates
f .............................. Expenses
g i............................. FMR and its Affiliates
.
ii............................ *
..
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell
Shares; Transaction Details;
Exchange Restrictions
iii.......................... *
b ............................. *
c .............................. Exchange Restrictions
d .............................. *
e .............................. Doing Business with Fidelity; How
to Buy Shares; How to Sell Shares;
Investor Services
f, g .............................. Dividends, Capital Gains, and Taxes
7 a .............................. Charter; Cover Page
b .............................. How to Buy Shares; Transaction
Details
c .............................. *
d .............................. How to Buy Shares
e .............................. *
f .............................. Breakdown of Expenses
8 .............................. How to Sell Shares; Investor
Services; Transaction Details;
Exchange Restrictions
9 .............................. *
</TABLE>
Not applicable
FIDELITY DEVONSHIRE TRUST
SPARTAN LONG-TERM GOVERNMENT BOND FUND
CROSS REFERENCE SHEET
(CONTINUED)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10, 11 ............................ Cover Page
12 ............................ *
13 a - c ............................ Investment Policies and Limitations
d ............................ *
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Contracts with Companies Affiliated
with FMR
e ............................ *
f ............................ Distribution and Service Plan
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with Companies Affiliated
with FMR
17 a ............................ Portfolio Transactions
b ............................ *
c ............................ Portfolio Transactions
d, e ............................ *
18 a ............................ Description of the Trust
b ............................ *
19 a ............................ Additional Purchase and Redemption
Information
b ............................ Additional Purchase and Redemption
Information; Valuation of Portfolio
Securities
c ............................ *
20 ............................ Distributions and Taxes
21 a, b ............................ Contracts with Companies Affiliated
with FMR
c ............................ *
22 ............................ Performance
23 ............................ Financial Statements for the fiscal
year ended January 31, 1994 are
incorporated by reference into the
Statement of Additional Information
and are filed herein.
</TABLE>
* Not Applicable
Please read this prospectus before investing, and keep it on file for
future reference. It contains important information, including how the fund
invests and the services available to shareholders.
A Statement of Additional Information dated has been filed with the
Securities and Exchange Commission, and is incorporated herein by reference
(is legally considered a part of this prospectus). The Statement of
Additional Information is available free upon request by calling Fidelity
at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or endorsed or
guaranteed by, any bank, savings association, insured depositary
institution, or government agency, nor are they federally insured or
otherwise protected by the FDIC, the Federal Reserve Board, or any other
agency. Investments in the fund involve investment risk, including possible
loss of principal. The value of the investment and its return will
fluctuate and are not guaranteed. When sold, the value of the investment
may be higher or lower than the amount originally invested.
Spartan Long-Term Government Bond seeks income and growth of capital by
investing mainly in long-term U.S. government securities.
SPARTAN(Registered trademark)
LONG-TERM
GOVERNMENT
BOND
FUND
PROSPECTUS
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
LIKE ALL MUTUAL
FUNDS, THESE
SECURITIES HAVE NOT
BEEN APPROVED OR
DISAPPROVED BY THE
SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION, NOR HAS
THE SECURITIES AND
EXCHANGE
COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTENTS
KEY FACTS THE FUND AT A GLANCE
WHO MAY WANT TO INVEST
EXPENSES The fund's yearly
operating expenses.
FINANCIAL HIGHLIGHTS A summary
of the fund's financial data.
PERFORMANCE How the fund has
done over time.
THE FUND IN DETAIL CHARTER How the fund is
organized.
INVESTMENT PRINCIPLES AND RISKS
The fund's overall approach to
investing.
BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
YOUR ACCOUNT DOING BUSINESS WITH FIDELITY
TYPES OF ACCOUNTS Different
ways to set up your account,
including tax-sheltered retirement
plans.
HOW TO BUY SHARES Opening an
account and making additional
investments.
HOW TO SELL SHARES Taking money
out and closing your account.
INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER AND DIVIDENDS, CAPITAL GAINS, AND
ACCOUNT POLICIES TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: Income and growth of capital. As with any mutual fund, there is no
assurance that the fund will achieve its goal.
STRATEGY: Invests mainly in U.S. government securities while
maintaining an average maturity of at least ten years.
MANAGEMENT: Fidelity Management & Research Company (FMR) is the
management arm of Fidelity Investments, which was established in 1946 and
is now America's largest mutual fund manager.
SIZE: As of January 31, 1994, the fund had over $67 million in
assets.
WHO MAY WANT TO INVEST
This non-diversified fund may be appropriate for investors who want to
participate in the income and growth potential of the long-term U.S.
government bond market. The fund is not designed for those who are looking
for income and stability of principal, since it pursues growth as well as
income from a portfolio of U.S. government bonds and other domestic and
foreign high-quality debt instruments. The fund pays dividends quarterly
rather than monthly.
The fund is not in itself a balanced investment plan. The value of the
fund's investments and the income they generate will vary from day to day,
generally reflecting changes in interest rates, market conditions, and
other political and economic news. When you sell your shares, they may be
worth more or less than what you paid for them.
The Spartan family of funds is designed for cost-conscious investors
looking for higher yields through lower costs. The Spartan
Approach(Registered trademark) requires investors to make high minimum
investments and, in some cases, to pay for individual transactions.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a fund. See page for more information.
Maximum sales charge on purchases and
reinvested dividends None
Deferred sales charge on redemptions None
Exchange and wire transaction fees $5.00
Checkwriting fee, per check written $2.00
Account closeout fee $5.00
THESE FEES ARE WAIVED if your account balance at the time of the
transaction is $50,000 or more.
ANNUAL FUND OPERATING EXPENSES are paid out of the fund's assets. The fund
pays a management fee to FMR. Expenses are factored into the fund's share
price or dividends and are not charged directly to shareholder accounts
(see page ).
The following are projections based on historical expenses, and are
calculated as a percentage of average net assets.
Management fee .65%
12b-1 fee None
Other expenses .00%
Total fund operating expenses .65%
EXAMPLES: Let's say, hypothetically, that the fund's annual return is 5%
and that its operating expenses are exactly as just described. For every
$1,000 you invested, here's how much you would pay in total expenses after
the number of years indicated, first assuming that you leave your account
open, and then assuming that you close your account at the end of the
period:
Account open Account closed
After 1 year $ 7 $ 12
After 3 years $ 21 $ 26
After 5 years $ 36 $ 41
After 10 years $ 81 $ 86
These examples illustrate the effect of expenses, but are not meant to
suggest actual or expected costs or returns, all of which may vary.
UNDERSTANDING
EXPENSES
Operating a mutual fund
involves a variety of
expenses for portfolio
management, shareholder
statements, tax reporting, and
other services. These costs
are paid from the fund's
assets; their effect is already
factored into any quoted
share price or return.
(checkmark)
FINANCIAL HIGHLIGHTS
The table that follows has been audited by Coopers & Lybrand,
independent accountants. Their unqualified report is included in the fund's
Annual Report. The Annual Report is incorporated by reference into (is
legally a part of) the Statement of Additional Information.
SPARTAN LONG-TERM GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
84.Selected Per-Share Data
85.Year ended January 31 1991C 1992 1993 1994
86.Net asset value, beginning of period $ 10.000 $ 11.040 $ 11.600 $ 12.130
87.Income from Investment Operations .144 .776 .847 .847
Net investment income
88. Net realized and unrealized gain (loss) on .996 .604 .703 1.123
investments
89. Total from investment operations 1.140 1.380 1.550 1.970
90.Less Distributions (.100) (.740) (.840) (.840)
From net investment income
91. From net realized gain on investments -- (.080) (.180) (.520)
92. Total distributions (.100) (.820) (1.020) (1.360)
93.Net asset value, end of period $ 11.040 $ 11.600 $ 12.130 $ 12.740
94.Total returnB 11.41% 12.98 13.95 16.79
% % %
95.RATIOS AND SUPPLEMENTAL DATA
96.Net assets, end of period (000 omitted) $ 33,833 $ 62,992 $ 83,009 $ 67,304
97.Ratio of expenses to average net assets .65% .65 .65 .65
% % %
98.Ratio of net interest income to average net 7.26% 7.30 7.35 6.41
assets A % % %
99.Portfolio turnover rate 256% 335 135 153
A % % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE ACCOUNT FEES AND FOR PERIODS OF LESS THAN
ONE YEAR ARE NOT ANNUALIZED.
C FROM SEPTEMBER 28, 1990 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31, 1991
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns and yields that follow are based on historical fund results and do
not reflect the effect of taxes or any transaction fees you may have paid.
The figures would be lower if fees were taken into account.
The fund's fiscal year runs from February 1 through January 31. The tables
below show the fund's performance over past fiscal years compared to a
measure of inflation. The chart on page 8 helps you compare the yields of
this fund to those of its competitors.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods ended Past 1 Life of
January 31, 1994 year fundA
Utilities IncomeSpartan Long-Term
Government Bond 16.79% 16.66%
Consumer Price
Index 2.52 2.94
CUMULATIVE TOTAL RETURNS
Fiscal periods ended Past 1 Life of
January 31, 1994 year fundA
Utilities IncomeSpartan Long-Term
Government Bond 16.79% 67.51%
Consumer Price
Index 2.52 10.17
A FROM NOVEMBER 27, 1987
EXPLANATION OF TERMS
UNDERSTANDING
PERFORMANCE
Because this fund invests in
fixed-income securities, its
performance is related to
changes in interest rates.
Funds that hold short-term
bonds are usually less
affected by changes in
interest rates than long-term
bond funds. For that reason,
long-term bond funds typically
offer higher returns and carry
more risk than short-term
bond funds.
(checkmark)
TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gains. A
CUMULATIVE TOTAL RETURN reflects actual performance over a stated period of
time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return
if performance had been constant over the entire period. Average annual
total returns smooth out variations in performance; they are not the same
as actual year-by-year results.
YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
funds. Because this differs from other accounting methods, the quoted yield
may not equal the income actually paid to shareholders.
THE CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
THE COMPETITIVE FUNDS AVERAGE is the Lipper General U.S. Government Funds
AverageLipper Utility Funds Average, which currently reflects the
performance of over 140 mutual funds with similar objectives. This
average, which assumes reinvestment of distributions, is published by
Lipper Analytical Services, Inc.
The fund's recent strategies, performance, and holdings are detailed twice
a year in financial reports, which are sent to all shareholders. For
current performance or a free annual report, call 1-800-544-8888.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN
INDICATION OF FUTURE PERFORMANCE.
30-DAY YIELDS
Percentage (%)
Row: 1, Col: 1, Value: 7.28
Row: 1, Col: 2, Value: 6.359999999999999
Row: 2, Col: 1, Value: 7.42
Row: 2, Col: 2, Value: 6.5
Row: 3, Col: 1, Value: 7.56
Row: 3, Col: 2, Value: 6.58
Row: 4, Col: 1, Value: 7.87
Row: 4, Col: 2, Value: 6.49
Row: 5, Col: 1, Value: 7.859999999999999
Row: 5, Col: 2, Value: 6.4
Row: 6, Col: 1, Value: 7.99
Row: 6, Col: 2, Value: 6.01
Row: 7, Col: 1, Value: 7.02
Row: 7, Col: 2, Value: 5.91
Row: 8, Col: 1, Value: 6.99
Row: 8, Col: 2, Value: 5.77
Row: 9, Col: 1, Value: 7.51
Row: 9, Col: 2, Value: 5.78
Row: 10, Col: 1, Value: 8.41
Row: 10, Col: 2, Value: 5.79
Row: 11, Col: 1, Value: 7.7
Row: 11, Col: 2, Value: 5.819999999999999
Row: 12, Col: 1, Value: 7.88
Row: 12, Col: 2, Value: 5.87
Row: 13, Col: 1, Value: 7.9
Row: 13, Col: 2, Value: 5.609999999999999
Row: 14, Col: 1, Value: 7.09
Row: 14, Col: 2, Value: 5.55
Row: 15, Col: 1, Value: 7.08
Row: 15, Col: 2, Value: 5.45
Row: 16, Col: 1, Value: 7.73
Row: 16, Col: 2, Value: 5.39
Row: 17, Col: 1, Value: 7.25
Row: 17, Col: 2, Value: 5.28
Row: 18, Col: 1, Value: 6.48
Row: 18, Col: 2, Value: 5.149999999999999
Row: 19, Col: 1, Value: 6.35
Row: 19, Col: 2, Value: 5.07
Row: 20, Col: 1, Value: 5.92
Row: 20, Col: 2, Value: 5.0
Row: 21, Col: 1, Value: 5.95
Row: 21, Col: 2, Value: 4.9
Row: 22, Col: 1, Value: 5.46
Row: 22, Col: 2, Value: 4.76
Row: 23, Col: 1, Value: 6.06
Row: 23, Col: 2, Value: 4.819999999999999
Row: 24, Col: 1, Value: 6.3
Row: 24, Col: 2, Value: 4.81
Fidelity
Utilities
Income
Fund
Competitiv
e
funds
average
1992
1993
THE CHART SHOWS THE 30-DAY ANNUALIZED NET YIELDS FOR THE FUND AND ITS
COMPETITIVE FUNDS AVERAGE AS OF THE LAST DAY OF EACH MONTH FROM
JANUARY 1992 THROUGH JANUARY 1994.
THE FUND IN DETAIL
CHARTER
FIDELITY UTILITIES INCOME FUND IS A MUTUAL FUND: an investment that pools
shareholders' money and invests it toward a specified goal. In technical
terms, the fund is currently a non-diversified fund of Fidelity Devonshire
Trust, an open-end management investment company organized as a
Massachusetts business trust on May 31, 1985.
THE FUND IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced
executives who meet throughout the year to oversee the fund's activities,
review contractual arrangements with companies that provide services to the
fund, and review performance. The majority of trustees are not otherwise
affiliated with Fidelity.
THE FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings
may be called to elect or remove trustees, change fundamental policies,
approve a management contract, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. Fidelity will
mail proxy materials in advance, including a voting card and information
about the proposals to be voted on. The number of votes you are entitled to
is based upon the dollar value of your investment.
FMR AND ITS AFFILIATES
The fund is managed by FMR, which chooses the fund's investments and
handles its business affairs.
Curtis Hollingsworth has managed Spartan Long-Term Government Bond since
September 1993. Mr. Hollingsworth also manages Advisor Government Income,
Fidelity Short-Intermediate Government, Government Securities,
Institutional Short-Intermediate Government, Spartan Limited Maturity
Government, and Spartan Short-Intermediate Government. He joined Fidelity
in 1983.
FDC distributes and markets Fidelity's funds and services. Fidelity Service
Co. (FSC) performs transfer agent servicing functions for the fund.
FMR Corp. is the parent company of these organizations. Through ownership
of voting common stock, Edward C. Johnson 3d (President and a trustee of
the trust), Johnson family members, and various trusts for the benefit of
the Johnson family form a controlling group with respect to FMR Corp.
To carry out the fund's transactions, FMR may use its broker-dealer
affiliates and other firms that sell fund shares, provided that the fund
receives services and commission rates comparable to those of other
broker-dealers.
INVESTMENT PRINCIPLES AND RISKS
THE FUND SEEKS INCOME AND GROWTH OF CAPITAL by investing primarily in U.S.
government securities. FMR normally invests at least 65% of the fund's
total assets in U.S. government securities and repurchase agreements
secured by U.S. government securities. This includes interests in both U.S.
government securities and mortgages backed by the government. The fund
invests primarily in long-term bonds, and normally maintains a
dollar-weighted average maturity of 10 years or longer.
Most bond funds seek income, but this fund pursues both income and growth
of capital. FMR expects that growth opportunities will come mainly from
decreases in interest rates. As interest rates decline, bond prices
increase. The fund actively adjusts its exposure to interest rates using a
variety of techniques.
Although the fund focuses on U.S. government securities, it may also pursue
growth by investing in other types of securities. For example, the fund
may pursue growth by investing in securities issued by foreign
governments or corporations, which carry more risk than U.S. government
securities.
The fund's yield and share price will change based on changes in interest
rates. In general, bond prices rise when interest rates fall, and vice
versa. FMR may use various investment techniques to hedge the fund's risks,
but there is no guarantee that these strategies will work as intended. When
you sell your shares, they may be worth more or less than what you paid for
them.
FMR normally invests the fund's assets according to its investment
strategy. When FMR considers it appropriate for defensive purposes ,
however, it may temporarily invest substantially in instruments with
remaining maturities of one year or less, including U.S. Treasury bills and
repurchase agreements.
SECURITIES AND
INVESTMENT PRACTICES
The following pages contain more detailed information about types of
instruments in which the fund may invest, and strategies FMR may employ in
pursuit of the fund's investment objective. A summary of risks and
restrictions associated with these instrument types and investment
practices is included as well. Policies and limitations are considered at
the time of purchase; the sale of instruments is not required in the event
of a subsequent change in circumstances.
FMR may not buy all of these instruments or use all of these techniques to
the full extent permitted unless it believes that doing so will help the
fund achieve its goal. As a shareholder, you will receive financial reports
every six months detailing fund holdings and describing recent investment
activities.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally
more sensitive to interest rate changes than short-term bonds.
RESTRICTIONS: The fund does not currently intend to invest in securities
rated below
A by Moody's Investors Service, Inc. or equivalently ranked by another
rating service, or in unrated securities judged by FMR to be of equivalent
quality.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government. Not all U.S. government securities are backed by
the full faith and credit of the United States. For example, securities
issued by the Federal Farm Credit Bank or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money
from the U.S. Treasury under certain circumstances. However, securities
issued by the Financing Corporation are supported only by the credit of the
entity that issued them.
FOREIGN SECURITIES and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or
economic conditions in the foreign country, and the potentially less
stringent investor protection and disclosure standards of foreign markets.
In addition to the political and economic factors that can affect foreign
securities, a governmental issuer may be unwilling to repay principal and
interest when due, and may require that the conditions for payment be
renegotiated. These factors could make foreign investments, especially
those in developing countries, more volatile.
ASSET-BACKED AND MORTGAGE SECURITIES may include pools of consumer loans or
mortgages, such as collateralized mortgage obligations and stripped
mortgage-backed securities. The value of these securities may be
significantly affected by changes in interest rates, the market's
perception of the issuers, and the creditworthiness of the parties
involved. These securities may also be subject to prepayment risk.
STRIPPED SECURITIES are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other
debt securities, although they may be more volatile.
ADJUSTING INVESTMENT EXPOSURE. The fund can use various techniques to
increase or decrease its exposure to changing security prices, interest
rates, currency exchange rates, commodity prices, or other factors that
affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts,
entering into currency exchange contracts or swap agreements, and
purchasing indexed securities.
FMR can use these practices to adjust the risk and return characteristics
of the fund's portfolio of investments. If FMR judges market conditions
incorrectly or employs a strategy that does not correlate well with the
fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques
may increase the volatility of the fund and may involve a small investment
of cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
DIRECT DEBT. Loans and other direct debt instruments are interests in
amounts owed to another party by a company, government, or other borrower.
They have additional risks beyond conventional debt securities because they
may entail less legal protection for the fund, or there may be a
requirement that the fund supply additional cash to a borrower on demand.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS are trading practices in
which payment and delivery for the securities take place at a future date.
The market value of a security could change during this period, which could
affect the fund's yield.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined by
FMR, under the supervision of the Board of Trustees, to be illiquid, which
means that they may be difficult to sell promptly at an acceptable price.
The sale of other securities may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to
the fund.
RESTRICTIONS: The fund may not purchase a security if, as a result, more
than 10% of its assets would be invested in illiquid securities.
DIVERSIFICATION. Diversifying a fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested
in any one issuer or, on a broader scale, in any one industry. A fund that
is not diversified may be more sensitive to changes in the market value of
a single issuer or industry.
RESTRICTIONS: The fund is considered non-diversified. Generally, to
meet federal tax requirements at the close of each quarter,
the fund does not invest more than 25% of its total assets in any
one issuer and , with respect to 50% of total assets, does not invest
more than 5% of its total assets in any one issuer. The fund may not
invest more than 25% of its total assets in any one industry. These
limitations do not apply to U.S. government securities.
BORROWING. The fund may borrow from banks or from other funds advised by
FMR, or through reverse repurchase agreements. If the fund borrows money,
its share price may be subject to greater fluctuation until the borrowing
is paid off. If the fund makes additional investments while borrowings are
outstanding, this may be considered a form of leverage.
RESTRICTIONS: The fund may borrow only for temporary or emergency purposes,
but not in an amount exceeding 33% of its total assets.
LENDING. Lending securities to broker-dealers and institutions, including
FBSI, an affiliate of FMR, is a means of earning income. This practice
could result in a loss or a delay in recovering the fund's securities. The
fund may also lend money to other funds advised by FMR.
RESTRICTIONS: Loans, in the aggregate, may not exceed 33% of the fund's
total assets.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on the preceding pages are
fundamental, that is, subject to change only by shareholder approval. The
following paragraph restates all those that are fundamental. All policies
stated throughout this prospectus, other than those identified in the
following paragraph, can be changed without shareholder approval.
The fund seeks income and growth of capital by investing primarily in U.S.
government securities. The fund may not invest more than 25% of its total
assets in any one industry. The fund may borrow only for temporary or
emergency purposes, but not in an amount exceeding 33% of its total assets.
Loans in the aggregate, may not exceed 33% of the fund's total assets.
BREAKDOWN OF EXPENSES
Like all mutual funds, the fund pays fees related to its daily operations.
Expenses paid out of the fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted
from shareholder accounts.
The fund pays a MANAGEMENT FEE to FMR for managing its investments and
business affairs.
FMR may, from time to time, agree to reimburse the fund for management fees
and other expenses above a specified limit. FMR retains the ability to be
repaid by the fund if expenses fall below the specified limit prior to the
end of the fiscal year. Reimbursement arrangements, which may be terminated
at any time without notice, can decrease the fund's expenses and boost its
performance.
MANAGEMENT FEE
The management fee is calculated and paid to FMR every month. The fund pays
the fee at the annual rate of .20% of its average net assets.
FSC performs many transaction and accounting functions for the fund. These
services include processing shareholder transactions and calculating the
fund's share price. FMR, and not the fund, pays for these services.
To offset shareholder service costs, FMR or its affiliates also collect the
fund's $5.00 exchange fee, $5.00 account closeout fee, $5.00 fee for wire
purchases and redemptions, and the $2.00 checkwriting charge. For fiscal
1994, these fees amounted to $10,505, $180, $175, and $96 ,
respectively.
The fund has adopted a Distribution and Service Plan. This plan recognizes
that FMR may use its resources, including management fees, to pay expenses
associated with the sale of fund shares. This may include payments to third
parties, such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the fund's shares. It is important to
note, however, that the fund does not pay FMR any separate fees for this
service.
The fund's portfolio turnover rate for fiscal 1994 was 153 %. This
rate varies from year to year. High turnover rates increase transaction
costs and may increase taxable capital gains. FMR considers these effects
when evaluating the anticipated benefits of short-term investing.
YOUR ACCOUNT
DOING BUSINESS WITH FIDELITY
Fidelity Investments was established in 1946 to manage one of America's
first mutual funds. Today, Fidelity is the largest mutual fund company in
the country, and is known as an innovative provider of high-quality
financial services to individuals and institutions.
In addition to its mutual fund business, the company operates one of
America's leading discount brokerage firms, Fidelity Brokerage Services,
Inc. (FBSI). Fidelity is also a leader in providing tax-sheltered
retirement plans for individuals investing on their own or through their
employer.
Fidelity is committed to providing investors with practical information to
make investment decisions. Based in Boston, Fidelity provides customers
with complete service 24 hours a day, 365 days a year, through a network of
telephone service centers around the country.
To reach Fidelity for general information, call these numbers:
(bullet) For mutual funds, 1-800-544-8888
(bullet) For brokerage, 1-800-544-7272
If you would prefer to speak with a representative in person, Fidelity has
over 75 walk-in Investor Centers across the country.
TYPES OF ACCOUNTS
You may set up an account directly in the fund or, if you own or intend to
purchase individual securities as part of your total investment portfolio,
you may consider investing in the fund through a brokerage account.
If you are investing through FBSI or another financial institution or
investment professional, refer to its program materials for any special
provisions regarding your investment in the fund.
The different ways to set up (register) your account with Fidelity are
listed at right.
The account guidelines that follow may not apply to certain retirement
accounts. If your employer offers the fund through a retirement program,
contact your employer for more information. Otherwise, call Fidelity
directly.
FIDELITY FACTS
Fidelity offers the broadest
selection of mutual funds
in the world.
(bullet) Number of Fidelity mutual
funds: over 200
(bullet) Assets in Fidelity mutual
funds: over $ 225 billion
(bullet) Number of shareholder
accounts: over 15 million
(bullet) Number of investment
analysts and portfolio
managers: over 200
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WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and
capital gains from current taxes. In addition, contributions to these
accounts may be tax deductible. Retirement accounts require special
applications and typically have lower minimums.
(bullet) INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age
and under 70 with earned income to invest up to $2,000 per tax year.
Individuals can also invest in a spouse's IRA if the spouse has earned
income of less than $250.
(bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(bullet) KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS
allow self-employed individuals or small business owners (and their
employees) to make tax-deductible contributions for themselves and any
eligible employees up to $30,000 per year.
(bullet) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small
business owners or those with self-employed income (and their eligible
employees) with many of the same advantages as a Keogh, but with fewer
administrative requirements.
(bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child without
paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the
Uniform Transfers to Minors Act (UTMA).
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS
Requires a special application.
HOW TO BUY SHARES
THE FUND'S SHARE PRICE, called net asset value (NAV), is calculated every
business day. The fund's shares are sold without a sales charge.
Shares are purchased at the next share price calculated after your
investment is received and accepted. Share price is normally calculated at
4 p.m. Eastern time.
IF YOU ARE NEW TO FIDELITY, complete and sign an account application and
mail it along with your check. You may also open your account in person or
by wire as described on page . If there is no application accompanying this
prospectus, call 1-800-544-8888.
IF YOU ALREADY HAVE MONEY INVESTED IN A FIDELITY FUND, you can:
(bullet) Mail in an application with a check, or
(bullet) Open your account by exchanging from another Fidelity fund.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an
IRA, for the first time, you will need a special application. Retirement
investing also involves its own investment procedures. Call 1-800-544-8888
for more information and a retirement application.
If you buy shares by check or Fidelity Money Line(Registered trademark),
and then sell those shares by any method other than by exchange to another
Fidelity fund, the payment may be delayed for up to seven business days to
ensure that your previous investment has cleared.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $10,000
For Fidelity retirement accounts $10,000
TO ADD TO AN ACCOUNT $1,000
For Fidelity retirement accounts $1,000
Through automatic investment plans $500
MINIMUM BALANCE $5,000
For Fidelity retirement accounts $5,000
UNDERSTANDING THE
SPARTAN APPROACH(Registered trademark)
Fidelity's Spartan Approach is
based on the principle that
lower fund expenses can
increase returns. The Spartan
funds keep expenses low in
two ways. First, higher
investment minimums reduce
the effect of a fund's fixed
costs, many of which are paid
on a per-account basis.
Second, unlike most mutual
funds that include transaction
costs as part of overall fund
expenses, Spartan
shareholders pay directly for
the transactions they make.
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (bullet) Exchange from another (bullet) Exchange from another
Fidelity fund account Fidelity fund account
with the same with the same
registration, including registration, including
name, address, and name, address, and
taxpayer ID number. taxpayer ID number.
(bullet) Use Fidelity Money
Line to transfer from
your bank account. Call
before your first use to
verify that this service
is in place on your
account. Maximum
Money Line: $50,000.
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Mail (mail_graphic) (bullet) Complete and sign the (bullet) Make your check
application. Make your payable to "Spartan
check payable to Long-Term Government
"Spartan Long-Term Bond Fund." Indicate
Government Bond your fund account
Fund." Mail to the number on your check
address indicated on and Mail to the address
the application. printed on your account
statement.
(bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
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In Person (hand_graphic) (bullet) Bring your application (bullet) Bring your check to a
and check to a Fidelity Fidelity Investor Center.
Investor Center. Call Call 1-800-544-9797 for
1-800-544-9797 for the the center nearest you.
center nearest you.
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Wire (wire_graphic) (bullet) There may be a $5.00 (bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(bullet) Call 1-800-544-7777 to (bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Spartan
Bank Routing Long-Term Government
#021001033, Bond Fund"and include
Account #00163053. your account number
Specify "Spartan and your name.
Long-Term
Government Bond
Fund" and include your
new account number
and your name.
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Automatically (automatic_graphic) (bullet) Not available. (bullet) Use Fidelity Automatic
Account Builder. Sign
up for this service
when opening your
account, or call
1-800-544-6666 to add
it.
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
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HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by
selling (redeeming) some or all of your shares. Your shares will be sold at
the next share price calculated after your order is received and accepted.
Share price is normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
TO SELL SHARES IN A FIDELITY RETIREMENT ACCOUNT, your request must be made
in writing, except for exchanges to other Fidelity funds, which can be
requested by phone or in writing. Call 1-800-544-6666 for a retirement
distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $5,000
worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE OR FIDELITY MONEY LINE, you will need to sign
up for these services in advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to
protect you and Fidelity from fraud. Your request must be made in writing
and include a signature guarantee if any of the following situations apply:
(bullet) You wish to redeem more than $100,000 worth of shares,
(bullet) Your account registration has changed within the last 30 days,
(bullet) The check is being mailed to a different address than the one on
your account (record address),
(bullet) The check is being made payable to someone other than the account
owner, or
(bullet) The redemption proceeds are being transferred to a Fidelity
account with a different registration.
You should be able to obtain a signature guarantee from a bank, broker
(including Fidelity Investor Centers), dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency, or
savings association. A notary public cannot provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
(bullet) Your name,
(bullet) The fund's name,
(bullet) Your fund account number,
(bullet) The dollar amount or number of shares to be redeemed, and
(bullet) Any other applicable requirements listed in the table at right.
Unless otherwise instructed, Fidelity will send a check to the record
address. Deliver your letter to a Fidelity Investor Center, or mail it to:
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
CHECKWRITING
If you have a checkbook for your account, you may write an unlimited number
of checks. Do not, however, try to close out your account by check.
ACCOUNT TYPE SPECIAL REQUIREMENTS
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IF YOUR ACCOUNT BALANCE IS LESS THAN $50,000, THERE ARE FEES FOR INDIVIDUAL REDEMPTION
TRANSACTIONS: $2.00 FOR EACH CHECK YOU WRITE AND $5.00 FOR EACH EXCHANGE, BANK WIRE,
AND ACCOUNT CLOSEOUT.
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Phone 1-800-544-777 (phone_graphic) All account types (bullet) Maximum check request:
except retirement $100,000.
(bullet) For Money Line transfers to
All account types your bank account; minimum:
$10 ; maximum: $100,000.
(bullet) You may exchange to other
Fidelity funds if both
accounts are registered with
the same name(s), address,
and taxpayer ID number.
Mail or in Person (mail_graphic)(hand_graphic) Individual, Joint (bullet) The letter of instruction must
Tenant, be signed by all persons
Sole Proprietorship required to sign for
, UGMA, UTMA transactions, exactly as their
Retirement account names appear on the
account.
(bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (bullet) The trustee must sign the
Organization letter indicating capacity as
trustee. If the trustee's name
is not in the account
registration, provide a copy of
the trust document certified
Executor, within the last 60 days.
Administrator, (bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (bullet) You must sign up for the wire
except retirement feature before using it. To
verify that it is in place, call
1-800-544-6666. Minimum
wire: $5,000.
(bullet) Your wire redemption request
must be received by Fidelity
before 4 p.m. Eastern time
for money to be wired on the
next business day.
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Check (check_graphic) All account types (bullet) Minimum check: $1,000.
except retirement (bullet) All account owners must sign
a signature card to receive a
checkbook.
</TABLE>
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(tdd_graphic) TDD - Service for the Deaf and Hearing Impaired: 1-800-544-0118
</TABLE>
INVESTOR SERVICES
Fidelity provides a variety of services to help you manage your account.
INFORMATION SERVICES
FIDELITY'S TELEPHONE REPRESENTATIVES are available 24 hours a day, 365 days
a year. Whenever you call, you can speak with someone equipped to provide
the information or service you need.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(bullet) Confirmation statements (after every transaction, except
reinvestments, that affects your account balance or your account
registration)
(bullet) Account statements (quarterly)
(bullet) Financial reports (every six months)
24-HOUR SERVICE
ACCOUNT ASSISTANCE
1-800-544-6666
ACCOUNT BALANCES
1-800-544-7544
ACCOUNT TRANSACTIONS
1-800-544-7777
PRODUCT INFORMATION
1-800-544-8888
QUOTES
1-800-544-8544
RETIREMENT ACCOUNT
ASSISTANCE
1-800-544-4774
AUTOMATED SERVICE
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To reduce expenses, only one copy of most financial reports will be mailed
to your household, even if you have more than one account in the fund. Call
1-800-544-6666 if you need copies of financial reports or historical
account information.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your fund shares and buy shares of other
Fidelity funds by telephone or in writing. There may be a $5.00 fee for
each exchange out of the fund, unless you place your transaction on
Fidelity's automated exchange services.
Note that exchanges out of the fund are limited to four per calendar year,
and that they may have tax consequences for you. For complete policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page .
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly or quarterly redemptions
from your account.
FIDELITY MONEY LINE(Registered trademark) enables you to transfer money by
phone between your bank account and your fund account. Most transfers are
complete within three business days of your call.
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly.
Fidelity offers convenient services that let you transfer money into your
fund account, or between fund accounts, automatically. While regular
investment plans do not guarantee a profit and will not protect you against
loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call
1-800-544-6666 for more information.
REGULAR INVESTMENT PLANS
FIDELITY AUTOMATIC ACCOUNT BUILDERSM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A FIDELITY FUND
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(bullet) For existing accounts, call
1-800-544-6666 for an application.
(bullet) To change the amount or frequency of
your investment, call 1-800-544-6666 at
least three business days prior to your
next scheduled investment date.
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DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(bullet) Changes require a new authorization
form.
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FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
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MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (bullet) To change the amount or frequency of
annually your investment, call 1-800-544-6666.
</TABLE>
A BECAUSE ITS SHARE PRICE FLUCTUATES, THE FUND MAY NOT BE AN APPROPRIATE
CHOICE FOR DIRECT DEPOSIT OF YOUR ENTIRE CHECK.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The fund distributes substantially all of its net investment income and
capital gains to shareholders each year. Income dividends are declared and
paid in March, June, September, and December. Capital gains are normally
distributed in December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to
receive your distributions. If the option you prefer is not listed on the
application, call 1-800-544-6666 for instructions. The fund offers four
options:
13. REINVESTMENT OPTION. Your dividend and capital gain distributions will
be automatically reinvested in additional shares of the fund. If you do not
indicate a choice on your application, you will be assigned this option.
14. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
15. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
16. DIRECTED DIVIDENDS(Registered trademark) OPTION. Your dividend and
capital gain distributions will be automatically invested in another
identically registered Fidelity fund.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested.
When you are over 59 years old, you can receive distributions in cash.
Dividends will be reinvested at the fund's NAV on the last day of the
month. Capital gain distributions will be reinvested at the NAV as of the
date the fund deducts the distribution from its NAV. The mailing of
distribution checks will begin within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a fund shareholder, you
are entitled to your share of
the fund's net income and
gains on its investments. The
fund passes its earnings
along to its investors as
DISTRIBUTIONS.
Each fund earns interest from
its investments. These are
passed along as DIVIDEND
DISTRIBUTIONS. The fund may
realize capital gains if it sells
securities for a higher price
than it paid for them. These
are passed along as CAPITAL
GAIN DISTRIBUTIONS.
(checkmark)
TAXES
As with any investment, you should consider how your investment in the fund
will be taxed. If your account is not a tax-deferred retirement account,
you should be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax,
and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in
which you reside. Your distributions are taxable when they are paid,
whether you take
them in cash or reinvest them. However, distributions declared in December
and paid in January are taxable as if they were paid on December 31.
For federal tax purposes, the fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains. Every January, Fidelity will send you
and the IRS a statement showing the taxable distributions paid to you in
the previous year.
Mutual fund dividends from U.S. government securities generally are free
from state and local income taxes. However, particular states may limit
this benefit and certain types of securities, such as repurchase agreements
and some agency backed securities, may not qualify for the benefit. In
addition, some states may impose intangible property taxes. You should
consult your own tax adviser for details and up-to-date information on the
tax laws in your state.
During fiscal 1994 , 59% of Spartan Long-Term Government's
income distributions were from U.S. government securities.
TAXES ON TRANSACTIONS. Your redemptions - including exchanges to other
Fidelity funds - are subject to capital gains tax. A capital gain or loss
is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of the fund, Fidelity will send you a confirmation
statement showing how many shares you sold and at what price. You will also
receive a consolidated transaction statement every January. However, it is
up to you or your tax preparer to determine whether this sale resulted in a
capital gain and, if so, the amount of tax to be paid. Be sure to keep your
regular account statements; the information they contain will be essential
in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before the fund deducts a
distribution from its NAV, you will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable
distribution.
There are tax requirements that all funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, the fund
may have to limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE)
is open. Fidelity normally calculates the fund's NAV as of the close
of business of the NYSE, normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by
adding the value of the fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
The fund's assets are valued primarily on the basis of market quotations.
If quotations are not readily available, assets are valued by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates.
THE FUND'S OFFERING PRICE (price to buy one share) and REDEMPTION PRICE
(price to sell one share) are its NAV.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report income
to the IRS. If you violate IRS regulations, the IRS can require the fund to
withhold 31% of your taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Note that Fidelity will
not be responsible for any losses resulting from unauthorized transactions
if it follows reasonable procedures designed to verify the identity of the
caller. Fidelity will request personalized security codes or other
information, and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them. If you do
not want the ability to redeem and exchange by telephone, call Fidelity for
instructions.
IF YOU ARE UNABLE TO REACH FIDELITY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or by
visiting a Fidelity Investor Center.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period
of time. The fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. See "Exchange Restrictions"
on page 25 . Purchase orders may be refused if, in FMR's opinion,
they are of a size that would disrupt management of the fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted.
Note the following:
(bullet) All of your purchases must be made in U.S. dollars and checks
must be drawn on U.S. banks.
(bullet) Fidelity does not accept cash.
(bullet) When making a purchase with more than one check, each check must
have a value of at least $50.
(bullet) The fund reserves the right to limit the number of checks
processed at one time.
(bullet) If your check does not clear, your purchase will be cancelled and
you could be liable for any losses or fees the fund or its transfer agent
has incurred.
TO AVOID THE COLLECTION PERIOD associated with check and Money Line
purchases, consider buying shares by bank wire, U.S. Postal money order,
U.S. Treasury check, Federal Reserve check, or direct deposit instead.
YOU MAY BUY OR SELL SHARES OF THE FUND THROUGH A BROKER, who may charge you
a fee for this service. If you invest through a broker or other
institution, read its program materials for any additional service features
or fees that may apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with
Fidelity Distributors Corporation (FDC) may enter confirmed purchase orders
on behalf of customers by phone, with payment to follow no later than the
time when the fund is priced on the following business day. If payment is
not received by that time, the financial institution could be held liable
for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the
next NAV calculated after your request is received and accepted. Note the
following:
(bullet) Normally, redemption proceeds will be mailed to you on the next
business day, but if making immediate payment could adversely affect the
fund, it may take up to seven days to pay you.
(bullet) Fidelity Money Line redemptions generally will be credited to
your bank account on the second or third business day after your phone
call.
(bullet) The fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check or Fidelity Money Line have been
collected, which can take up to seven business days.
(bullet) Redemptions may be suspended or payment dates postponed when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
(bullet) If you sell shares by writing a check and the amount of the check
is greater than the value of your account, your check will be returned to
you and you may be subject to additional charges.
THE FEES FOR INDIVIDUAL TRANSACTIONS are waived if your account balance at
the time of the transaction is $50,000 or more. Otherwise, you should note
the following:
(bullet) The $2.00 checkwriting charge will be deducted from your account.
(bullet) The $5.00 exchange fee will be deducted from the amount of your
exchange.
(bullet) The $5.00 wire fee will be deducted from the amount of your wire.
(bullet) The $5.00 account closeout fee does not apply to exchanges or
wires, but it will apply to checkwriting.
IF YOUR ACCOUNT BALANCE FALLS BELOW $5,000, you will be given 30 days'
notice to reestablish the minimum balance. If you do not increase your
balance, Fidelity reserves the right to close your account and send the
proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed and the $5.00 account closeout fee will be charged.
FIDELITY MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its
services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of the fund
for shares of other Fidelity funds. However, you should note the following:
(bullet) The fund you are exchanging into must be registered for sale in
your state.
(bullet) You may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
(bullet) Before exchanging into a fund, read its prospectus.
(bullet) If you exchange into a fund with a sales charge, you pay the
percentage-point difference between that fund's sales charge and any sales
charge you have previously paid in connection with the shares you are
exchanging. For example, if you had already paid a sales charge of 2% on
your shares and you exchange them into a fund with a 3% sales charge, you
would pay an additional 1% sales charge.
(bullet) Exchanges may have tax consequences for you.
(bullet) Because excessive trading can hurt fund performance and
shareholders, the fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes more than four
exchanges out of the fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer
identification number, will be counted together for purposes of the four
exchange limit.
(bullet) The exchange limit may be modified for accounts in certain
institutional retirement plans to conform to plan exchange limits and
Department of Labor regulations. See your plan materials for further
information.
(bullet) The fund reserves the right to refuse exchange purchases by any
person or group if, in FMR's judgment, the fund would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
(bullet) Your exchanges may be restricted or refused if the fund receives
or anticipates simultaneous orders affecting significant portions of the
fund's assets. In particular, a pattern of exchanges that coincide s
with a "market timing" strategy may be disruptive to the fund.
Although the fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
fund reserves the right to terminate or modify the exchange privilege in
the future.
OTHER FUNDS MAY HAVE DIFFERENT EXCHANGE RESTRICTIONS, and may impose
administrative fees of up to $7.50 and redemption fees of up to 1.50% on
exchanges. Check each fund's prospectus for details.
This prospectus is printed on recycled paper using soy-based inks.
SPARTAN(registered trademark) LONG-TERM GOVERNMENT BOND FUND
A FUND OF FIDELITY DEVONSHIRE TRUST
STATEMENT OF ADDITIONAL INFORMATION
MARCH 21, 1994
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 21, 1994 ). Please retain
this document for future reference. The Annual Report for the fiscal year
ended January 31, 1994 is incorporated herein by reference. To
obtain an additional copy of the Prospectus or the Annual Report, please
call Fidelity Distributors Corporation at 1-800-544-8888.
TABLE OF CONTENTS PAGE
Investment Policies and Limitations
Portfolio Transactions
Valuation of Portfolio Securities
Performance
Additional Purchase and Redemption Information
Distributions and Taxes
FMR
Trustees and Officers
Management Contract
Distribution and Service Plan
Contracts with Companies Affiliated with FMR
Description of the Trust
Financial Statements
Appendix
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
LTG-ptB-39 4
31.INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the fund's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be
determined immediately after and as a result of the fund's acquisition of
such security or other asset. Accordingly, any subsequent change in
values, net assets, or other circumstances will not be considered when
determining whether the investment complies with the fund's investment
policies and limitations.
The fund's fundamental investment policies and limitations cannot be
changed without approval by a "majority of the outstanding voting
securities" (as defined in the Investment Company Act of 1940) of the fund.
However, except for the fundamental investment limitations set forth below,
the investment policies and limitations described in this Statement of
Additional Information are not fundamental and may be changed without
shareholder approval. THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATIONS SET FORTH IN THEIR ENTIRETY. THE FUND MAY NOT:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation;
(3) underwrite securities issued by others (except to the extent that the
fund may be considered to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(4) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the fund's total
assets would be invested in the securities of companies whose
principal business activities are in the same industry;
(5) purchase or sell real estate, unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business;
(6) purchase or sell physical commodities, unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical
commodities); or
(7) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.
THE FOLLOWING LIMITATIONS ARE NOT FUNDAMENTAL AND MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL.
(i) To meet federal tax requirements for qualification as a "regulated
investment company," the fund limits its investments so that at the close
of each quarter of its taxable year: (a) with regard to at least 50% of
total assets, no more than 5% of total assets are invested in the
securities of a single issuer, and (b) no more than 25% of total assets are
invested in the securities of a single issuer. Limitations (a) and (b) do
not apply to "Government securities" as defined for federal tax purposes.
(ii) The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short.
(iii) The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments
in connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
(iv) The fund may borrow money only (a) from a bank or from a registered
investment company or portfolio for which FMR or an affiliate serves as
investment adviser or (b) by engaging in reverse repurchase agreements with
any party (reverse repurchase agreements are treated as borrowings for
purposes of fundamental investment limitation (2)). The fund will not
purchase any security while borrowings representing more than 5% of its
total assets are outstanding. The fund will not borrow from other funds
advised by FMR or its affiliates if total outstanding borrowings
immediately after such borrowing would exceed 15% of the fund's total
assets.
(v) The fund does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 7.5% of the
fund's net assets) to a registered investment company or portfolio for
which FMR or an affiliate serves as investment adviser or (b) acquiring
loans, loan participations, or other forms of direct debt instruments and,
in connection therewith, assuming any associated unfunded commitments of
the sellers. (This limitation does not apply to purchases of debt
securities or to repurchase agreements.)
(vii) The fund does not currently intend to (a) purchase securities of
other investment companies, except in the open market where no commission
except the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
(viii) The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation.
(ix) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page .
It is the fund's position that proprietary strips, such as CATS and TIGRs,
and privately sponsored CMOs are government securities. However, the fund
has been advised that the Staff of the Division of Investment Management of
the Securities and Exchange Commission (SEC) does not consider these to be
government securities as defined under the 1940 Act. Accordingly, for
purposes of investment limitation (4 ), the fund has established the
following four industry groups: (1) custodian banks for proprietary strips
that are direct obligations, backed by the full faith and credit of the
U.S. government; (2) custodian banks for proprietary strips that are
indirect obligations, not backed by the full faith and credit of the U.S.
government; (3) custodian banks for CMOs that are direct obligations,
backed by the full faith and credit of the U.S. government; and (4)
custodian banks for CMOs that are indirect obligations, not backed by the
full faith and credit of the U.S. government. The fund will continue its
efforts to secure a favorable opinion of the Staff of the SEC that
proprietary strips and privately sponsored CMOs are government securities.
If the fund concludes that, under applicable legal principles, any of these
securities are government securities, it will exclude these securities from
investment limitation ( 4 ). Proprietary strips and privately
sponsored CMOs are considered government securities for the purposes of
investment limitations (i) and (viii) above relating to its status
as a "regulated investment company" pursuant to the federal tax
requirements under the Internal Revenue Code.
AFFILIATED BANK TRANSACTIONS. Pursuant to exemptive orders issued by the
Securities and Exchange Commission (SEC), the fund may engage in
transactions with financial institutions that are, or may be considered
to be, "affiliated persons" of the fund under the 1940 Act. Such
transactions may be entered into only pursuant to procedures established
and periodically reviewed by the Board of Trustees. These transactions
may include repurchase agreements with custodian banks; purchases, as
principal, of short-term obligations of, and repurchase agreements with,
the 50 largest U.S. banks (measured by deposits); transactions in municipal
securities; transactions in U.S. government securities with affiliated
banks that are primary dealers in these securities; short-term currency
transactions; and short-term secured borrowing.
DELAYED-DELIVERY TRANSACTIONS. A fund may buy and sell securities
on a delayed-delivery or when-issued basis. These transactions involve a
commitment by a fund to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after
the customary settlement period for that type of security (and more than
seven days in the future). Typically, no interest accrues to the purchaser
until the security is delivered. The fund may receive fees for entering
into delayed-delivery transactions.
When purchasing securities on a delayed-delivery basis, the fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. Because a fund is not required to pay for securities
until the delivery date, these risks are in addition to the risks
associated with the fund's other investments. If a fund remains
substantially fully invested at a time when delayed-delivery purchases are
outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, the fund will
set aside appropriate liquid assets in a segregated custodial account
t o cover its purchase obligations. When a fund has sold a
security on a delayed-delivery basis, the fund does not participate in
further gains or losses with respect to the security. If the other party
to a delayed-delivery transaction fails to deliver or pay for the
securities, the fund could miss a favorable price or yield opportunity, or
could suffer a loss.
The fund may renegotiate delayed-delivery transactions after they are
entered into, and may sell underlying securities before they are delivered,
which may result in capital gains or losses.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, FMR determines
the liquidity of the fund's investments and, through reports from FMR, the
Board monitors investments in illiquid instruments. In determining the
liquidity of the fund's investments, FMR may consider various factors,
including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the fund's rights and
obligations relating to the investment). Investments currently considered
by the fund to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days, loans and
other direct debt instruments, non-government stripped fixed-rate
mortgage-backed securities, and over-the-counter options. Also, FMR may
determine some restricted securities, government-stripped fixed-rate
mortgage-backed securities, loans and other direct debt instruments and
swap agreements to be illiquid. However, with respect to over-the-counter
options the fund writes, all or a portion of the value of the underlying
instrument may be illiquid depending on the assets held to cover the option
and the nature and terms of any agreement the fund may have to close out
the option before expiration. In the absence of market quotations,
illiquid investments are priced at fair value as determined in good faith
by a committee appointed by the Board of Trustees. If through a change in
values, net assets, or other circumstances, the fund were in a position
where more than 10% of its net assets were invested in illiquid securities,
it would seek to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where
registration is required, the fund may be obligated to pay all or part of
the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time the fund may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the fund might
obtain a less favorable price than prevailed when it decided to seek
registration of the security.
VARIABLE OR FLOATING RATE OBLIGATIONS bear variable or floating interest
rates and carry rights that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain
financial intermediaries. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while
variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value
for the instrument that approximates its par value.
ZERO COUPON BONDS do not make regular interest payments. Instead, they
are sold at a deep discount from their face value and are redeemed at face
value when they mature. Because zero coupon bonds do not pay current
income, their prices can be very volatile when interest rates change. In
calculating its daily dividend, the fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and
its face value.
SECURITIES LENDING. The fund may lend securities to parties such as
broker-dealers or institutional investors, including Fidelity Brokerage
Services, Inc. (FBSI). FBSI is a member of the New York Stock Exchange and
a subsidiary of FMR Corp.
Securities lending allows the fund to retain ownership of the securities
loaned and, at the same time, to earn additional income. Since there may
be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be
made only to parties deemed by FMR to be of good standing. Furthermore,
they will only be made if, in FMR's judgment, the consideration to be
earned from such loans would justify the risk.
FMR understands that it is the current view of the SEC Staff that the fund
may engage in loan transactions only under the following conditions: (1)
the fund must receive 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of
the collateral; (3) after giving notice, the fund must be able to terminate
the loan at any time; (4) the fund must receive reasonable interest on the
loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest, or other distributions on the securities loaned and to
any increase in market value; (5) the fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Board of Trustees
must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with
the borrower.
Cash received through loan transactions may be invested in any security in
which the fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund purchases a
security and simultaneously commits to resell that security to the seller
at an agreed upon price on an agreed upon date within a number of days from
the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value (at least equal to the amount of the agreed
upon resale price and marked to market daily) of the underlying security.
The fund may engage in re purchase agreement s with respect to
any security in which it is authorized to invest. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the
underlying securities, as well as delays and costs to the fund in
connection with bankruptcy proceedings), it is the fund's current policy to
limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
fund sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument
at a particular price and time. While a reverse repurchase agreement is
outstanding, the fund will maintain appropriate liquid assets in a
segregated custodial account to cover its obligation under the agreement.
The fund will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by FMR. Such
transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of
securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar.
Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be
highly volatile. Many foreign countries lack uniform accounting and
disclosure standards comparable to those applicable to U.S. companies and
it may be more difficult to obtain reliable information regarding an
issuer's financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage commissions, and
custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be
difficult to enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments
adverse to the interests of U.S. investors, including the possibility of
expropriation or nationalization of assets, confiscatory taxation,
restrictions on U.S. investment or on the ability to repatriate assets or
convert currency into U.S. dollars, or other government intervention.
There may be a greater possibility of default by foreign governments or
foreign government-sponsored enterprises. Investments in foreign countries
also involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that FMR will be able to anticipate or counter these potential
events.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject
to transfer restrictions may be marketable abroad, they may be less liquid
than foreign securities of the same class that are not subject to such
restrictions.
The fund may also invest in American Depositary Receipts and European
Depositary Receipts (ADRs and EDRs) which are certificates evidencing
ownership of shares of a foreign-based issuer held in trust by a bank or
similar financial institution. Designed for use in U.S. and European
securities markets, respectively, ADRs and EDRs are alternatives to the
purchase of the underlying securities in their national markets and
currencies.
FOREIGN CURRENCY TRANSACTIONS. The fund may hold foreign currency deposits
from time to time, and may convert dollars and foreign currencies in the
foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may
be exchanged on a spot (i.e., cash) basis, or by entering into forward
contracts to purchase or sell foreign currencies at a future date and
price. Forward contracts generally are traded in an interbank market
conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the
contract to maturity and complete the contemplated currency exchange.
The fund may use currency forward contracts to manage currency risks and to
facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the fund.
In connection with purchases and sales of securities denominated in foreign
currencies, the fund may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge." FMR expects to enter into settlement hedges
in the normal course of managing the fund's foreign investments. The fund
could also enter into forward contracts to purchase or sell a foreign
currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not
yet been selected by FMR.
The fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For
example, if the fund owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such
a hedge (sometimes referred to as a "position hedge") would tend to offset
both positive and negative currency fluctuations, but would not offset
changes in security values caused by other factors. The fund could also
hedge the position by selling another currency expected to perform
similarly to the pound sterling - for example, by entering into a forward
contract to sell Deutschemarks or European Currency Units in return for
U.S. dollars. This type of hedge, sometimes referred to as a "proxy
hedge," could offer advantages in terms of cost, yield, or efficiency, but
generally would not hedge currency exposure as effectively as a simple
hedge into U.S. dollars. Proxy hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the fund will
segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The fund will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on FMR's skill in
analyzing and predicting currency values. Forward contracts may
substantially change the fund's investment exposure to changes in currency
exchange rates, and could result in losses to the fund if currencies do not
perform as FMR anticipates. For example, if a currency's value rose at a
time when FMR had hedged the fund by selling that currency in exchange for
dollars, the fund would be unable to participate in the currency's
appreciation. If FMR hedges currency exposure through proxy hedges, the
fund could realize currency losses from the hedge and the security position
at the same time if the two currencies do not move in tandem. Similarly,
if FMR increases the fund's exposure to a foreign currency, and that
currency's value declines, the fund will realize a loss. There is no
assurance that FMR's use of forward currency contracts will be advantageous
to the fund or that it will hedge at an appropriate time. The policies
described in this section are non-fundamental policies of the fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The fund has filed a
notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the Commodity Futures Trading Commission
(CFTC) and the National Futures Association, which regulate trading in the
futures markets. The fund intends to comply with Section 4.5 of the
regulations under the Commodity Exchange Act, which limits the extent to
which the fund can commit assets to initial margin deposits and options
premiums.
In addition, the fund will not (a) sell futures contracts, purchase put
options or write call options if, as a result, more than 25% of the fund's
total assets would be hedged with futures and options under normal
conditions; (b) purchase futures contracts or write put options if, as a
result, the fund's total obligations upon settlement or exercise of
purchased futures contracts and written put options would exceed 25% of its
total assets; or (c) purchase call options if, as a result, the current
value of option premiums for call options purchased by the fund would
exceed 5% of the fund's total assets. These limitations do not apply to
options attached to, or acquired or traded together with their
underlying securities , and do not apply to securities that
incorporate features similar to options.
The above limitations on the fund's investments in futures contracts and
options, and the fund's policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, may be
changed as regulatory agencies permit.
FUTURES CONTRACTS. When the fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date.
When the fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and
sale will take place is fixed when the fund enters into the contract. Some
currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Bond Buyer Municipal Bond Index. Futures
can be held until their delivery dates or can be closed out before then if
a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if
it had purchased the underlying instrument directly. When the fund
sells a futures contract, by contrast, the value of its futures position
will tend to move in a direction contrary to the market. Selling futures
contracts, therefore, will tend to offset both positive and negative market
price changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker,
known as a futures commission merchant (FCM), when the contract is entered
into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments to
settle the change in value on a daily basis. The party that has a gain may
be entitled to receive all or a portion of this amount. Initial and
variation margin payments do not constitute purchasing securities on margin
for purposes of the fund's investment limitations. In the event of the
bankruptcy of an FCM that holds margin on behalf of the fund, the fund may
be entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to
the fund.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the fund
pays the current market price for the option (known as the option premium).
Options have various types of underlying instruments, including specific
securities, indices of securities prices, and futures contracts. The fund
may terminate its position in a put option it has purchased by allowing it
to expire or by exercising the option. If the option is allowed to expire,
the fund will lose the entire premium it paid. If the fund exercises the
option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out
in the secondary market at its current price, if a liquid secondary market
exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price
does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium
paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's
strike price. A call buyer typically attempts to participate in potential
price increases of the underlying instrument with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can
expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the fund assumes the obligation to pay
the strike price for the option's underlying instrument if the other party
to the option chooses to exercise it. When writing an option on a futures
contract, the fund will be required to make margin payments to an FCM as
described above for futures contracts. The fund may seek to terminate its
position in a put option it writes before exercise by closing out the
option in the secondary market at its current price. If the secondary
market is not liquid for a put option the fund has written, however, the
fund must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to set aside
assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that
the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from
purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those
of writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security
price increases.
COMBINED POSITIONS. The fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the fund may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a
futures contract. Another possible combined position would involve writing
a call option at one strike price and buying a call option at a lower
price, in order to reduce the risk of the written call option in the event
of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may be
more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the fund's current or
anticipated investments exactly. The fund may invest in options and
futures contracts based on securities with different issuers, maturities,
or other characteristics from the securities in which it typically invests,
which involves a risk that the options or futures position will not track
the performance of the fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the fund's
investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility
of the underlying instrument, and the time remaining until expiration of
the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options
and futures markets and the securities markets, from structural differences
in how options and futures and securities are traded, or from imposition of
daily price fluctuation limits or trading halts. The fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price
changes in the fund's options or futures positions are poorly correlated
with its other investments, the positions may fail to produce anticipated
gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading
volume and liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily
price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit
in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require the fund to continue to hold a
position until delivery or expiration regardless of changes in its value.
As a result, the fund's access to other assets held to cover its options or
futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows the
fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which
are guaranteed by the clearing organization of the exchanges where they are
traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that
they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally
is purchased or delivered in exchange for U.S. dollars, or may be a futures
contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the
right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The
fund may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The fund may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of
the fund's investments. A currency hedge, for example, should protect a
Yen-denominated security from a decline in the Yen, but will not protect
the fund against a price decline resulting from deterioration in the
issuer's creditworthiness. Because the value of the fund's
foreign-denominated investments changes in response to many factors other
than exchange rates, it may not be possible to match the amount of currency
options and futures to the value of the fund's investments exactly over
time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The fund will comply
with guidelines established by the SEC with respect to coverage of options
and futures strategies by mutual funds, and if the guidelines so
require will set aside appropriate liquid assets in a segregated
custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that segregation of a large percentage of
the fund's assets could impede portfolio management or the fund's ability
to meet redemption requests or other current obligations.
SWAP AGREEMENTS. Swap agreements can be individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap
agreements may increase or decrease the fund's exposure to long- or
short-term interest rates (in the U.S. or abroad), foreign currency values,
mortgage securities, corporate borrowing rates, or other factors such as
security prices or inflation rates. Swap agreements can take many
different forms and are known by a variety of names. The fund is not
limited to any particular form of swap agreement if FMR determines it is
consistent with the fund's investment objective and policies.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specified interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate
falls below an agreed-upon level. An interest rate collar combines
elements of buying a cap and selling a floor.
Swap agreements will tend to shift the fund's investment exposure from one
type of investment to another. For example, if the fund agreed to exchange
payments in dollars for payments in foreign currency, the swap agreement
would tend to decrease the fund's exposure to U.S. interest rates and
increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the fund's investments and its share price and yield.
The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that
determine the amounts of payments due to and from the fund. If a swap
agreement calls for payments by the fund, the fund must be prepared to make
such payments when due. In addition, if the counterparty's
creditworthiness declined, the value of a swap agreement would be likely to
decline, potentially resulting in losses. The fund expects to be able to
eliminate its exposure under swap agreements either by assignment or other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party.
The fund will maintain appropriate liquid assets in a segregated custodial
account to cover its current obligations under swap agreements. If the
fund enters into a swap agreement on a net basis, it will segregate assets
with a daily value at least equal to the excess, if any, of the fund's
accrued obligations under the swap agreement over the accrued amount the
fund is entitled to receive under the agreement. If the fund enters into a
swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the fund's accrued obligations under the
agreement.
INDEXED SECURITIES. The fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators.
Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price
of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed
securities may be positively or negatively indexed; that is, their maturity
value may increase when the specified currency value increases, resulting
in a security that performs similarly to a foreign-denominated instrument,
or their maturity value may decline when foreign currencies increase,
resulting in a security whose price characteristics are similar to a put on
the underlying currency. Currency-indexed securities may also have prices
that depend on the values of a number of different foreign currencies
relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they
are indexed, and may also be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values
may decline substantially if the issuer's creditworthiness deteriorates.
Recent issuers of indexed securities have included banks, corporations, and
certain U.S. government agencies. Indexed securities may be more volatile
than the underlying instruments.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS are interests in amounts owed by a
corporate, governmental, or other borrower to another party. They may
represent amounts owed to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments involve a risk
of loss in case of default or insolvency of the borrower and may offer less
legal protection to the fund in the event of fraud or misrepresentation.
In addition, loan participations involve a risk of insolvency of the
lending bank or other financial intermediary. Direct debt instruments may
also include standby financing commitments that obligate the fund to supply
additional cash to the borrower on demand.
32.PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in the management
contract. FMR is also responsible for the placement of transaction orders
for other investment companies and accounts for which it or its affiliates
act as investment adviser. In selecting broker-dealers, subject to
applicable limitations of the federal securities laws, FMR considers
various relevant factors, including, but not limited to, the size and type
of the transaction; the nature and character of the markets for the
security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions. Commissions for foreign investments
traded on foreign exchanges will generally be higher than for U.S.
investments and may not be subject to negotiation.
The fund may execute portfolio transactions with broker-dealers who provide
research and execution services to the fund or other accounts over which
FMR or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such
as clearance and settlement). The selection of such broker-dealers is
generally made by FMR (to the extent possible consistent with execution
considerations), based upon the quality of research and execution services
provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and con versely, such
research provided by broker-dealers who have executed transaction orders on
behalf of other FMR clients may be useful to FMR in carrying out its
obligations to the fund. The receipt of such research has not reduced
FMR's normal independent research activities; however, it enables FMR to
avoid the additional expenses that could be incurred if FMR tried to
develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause
the fund to pay such higher commissions, FMR must determine in good faith
that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or FMR's overall
responsibilities to the fund and its other clients. In reaching this
determination, FMR will not attempt to place a specific dollar value on the
brokerage and research services provided, or to determine what portion of
the compensation should be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other Fidelity
funds, to the extent permitted by law. FMR may use research services
provided by and place agency transactions with Fidelity Brokerage Services,
Inc. (FBSI), and Fidelity Brokerage Services, Ltd. (FBSL), subsidiaries of
FMR Corp. if the commissions are fair, reasonable and comparable to
commissions charged by non-affiliated, qualified brokerage firms for
similar services. Prior to September 4, 1992, FBSL operated under the name
Fidelity Portfolio Services, Ltd. (FPSL), as a wholly owned subsidiary of
Fidelity International Limited (FIL). Edward C. Johnson 3d is chairman of
FIL. Mr. Johnson 3d, Johnson family members, and various trusts for the
benefit of the Johnson family own, directly or indirectly, more than 25% of
the voting common stock of FIL.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except if certain
requirements are satisfied. Pursuant to such re quirements , the
Board of Trustees has a uthorized FBSI to effect fund Portfolio
transactions on national securities exchanges in accordance with
approved procedures and applicable SEC Rules. For the fiscal years
ended January 31, 1994 , 1993, and 1992 , the fund paid no
brokerage commissions.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over representative
periods of time to determine if they are reasonable in relation to
the benefits to the fund.
For the fiscal years ended January 31, 199 4 and 199 3 , the
fund's portfolio turnover rates were 153 % and 135%
respectively. The fund's turnover rate for these fiscal periods was high
due to short-term interest rate volatility, and other special market
conditions. FMR anticipates that the fund's turnover rate may be in excess
of 100% in future years, which is greater than that of most other
investment companies, including those that emphasize current income as a
basic policy. Because a higher turnover rate increases transactions costs
and may increase taxable capital gains, FMR carefully weighs the added
costs of short-term investing against anticipated gains.
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or similar
fees paid by the fund on portfolio transactions is legally permissible and
advisable. The fund seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture
arrangements are in effect. The Trustees intend to continue to review
whether recapture opportunities are available and are legally permissible
and, if so, to determine in the exercise of their business judgment whether
it would be advisable for the fund to seek such recapture.
Although the Trustees and officers of the fund are substantially the same
as those of other funds managed by FMR, investment decisions for the fund
are made independently from those of other funds managed by FMR or accounts
managed by FMR affiliates. It sometimes happens that the same security is
held in the portfolio of more than one of these funds or accounts.
Simultaneous transactions are inevitable when several funds are managed by
the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases, this system could have a
detrimental effect on the price or value of the security as far as the fund
is concerned. In other cases, however, the ability of the fund to
participate in volume transactions will produce better executions and
prices for the fund. It is the current opinion of the Trustees that the
desirability of retaining FMR as investment adviser to the fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
33.VALUATION OF PORTFOLIO SECURITIES
The fund's net asset value per share is determined by FSC, under procedures
established by the Board of Trustees. Portfolio securities are valued
primarily on the basis of valuations furnished by a pricing service which
uses both dealer-supplied valuations and electronic data processing
techniques that take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. Use of the pricing service
has been approved by the Board of Trustees. There are a number of pricing
services available, and the Trustees, or officers acting on behalf of the
Trustees, on the basis of ongoing evaluation of these services, may use
other pricing services or discontinue the use of any pricing service in
whole or in part.
Securities not valued by the pricing service and for which quotations are
readily available are valued at market values determined on the basis of
their latest available bid prices as furnished by recognized dealers in
such securities. Futures contracts and options are valued on the basis of
market quotations, if available. Securities and other assets for which
quotations or pricing service valuations 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.
34.PERFORMANCE
The fund may quote its performance in various ways. All performance
information supplied by the fund in advertising is historical and is not
intended to indicate future returns. The fund's share price, yield, and
total returns fluctuate in response to market conditions and other factors,
and the value of fund shares when redeemed may be more or less than their
original cost.
YIELD CALCULATIONS. Yields for the fund used in advertising are computed
by dividing the fund's interest income for a given 30-day or one-month
period, net of expenses, by the average number of shares entitled to
receive dividends during the period, dividing this figure by the fund's net
asset value per share (NAV) at the end of the period, and
annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock
and bond funds. In general, interest income is reduced with respect to
bonds trading at a premium over their par value by subtracting a portion of
the premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purposes of calculating the fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, the fund's yield may not equal its
distribution rate, the income paid to your account, or the income reported
in the fund's financial statements.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect all
aspects of the fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the fund's NAV
over a stated period. Average annual returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in
the fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of
growth or decline in value had been constant over the period. For example,
a cumulative total return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady annual rate of return that
would equal 100% growth on a compounded basis in ten years. While
average annual returns are a convenient means of comparing investment
alternatives, investors should realize that the fund's performance is not
constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the fund.
In addition to average annual returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments or a series of
redemptions, over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes
in share price) in order to illustrate the relationship of these factors
and their contributions to total return. Total returns, yields, and other
performance information may be quoted numerically or in a table, graph, or
similar illustration, and may omit or include the effect of the $5.00
account closeout fee.
NET ASSET VALUE. Charts and graphs using the fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted NAV includes any distributions paid by the fund
and reflects all elements of its return. Unless otherwise indicated, the
fund's adjusted NAVs are not adjusted for sales charges, if any.
HISTORICAL FUND RESULTS. The following table shows the fund's yield and
total returns, which include the effect of the $5.00 account closeout fee,
for periods ended January 31, 1994:
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS
30-Day Life Life
Yield One Year of Fund** One Year of Fund**
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
5.93% 16.77% 16.65% 16.77% 67.49%
</TABLE>
** From September 28, 1990 (commencement of operations).
The table below shows the income and capital elements of the fund's total
return from September 28, 1990 (commencement of operations) to January 31,
1994. The table compares the fund's return to the record of the Standard
& Poor's 500 Composite Stock Price Index (S&P 500), the Dow Jones
Industrial Average (DJIA), and the cost of living (measured by the Consumer
Price Index, or CPI) over the same period. The S&P 500 and DJIA
comparisons are provided to show how the fund's total return compared to
the record of a broad average of common stocks and a narrower set of stocks
of major industrial companies, respectively, over the same period. Of
course, since the fund invests in fixed-income securities, common stocks
represent a different type of investment from the fund. Common stocks
generally offer greater growth potential than the fund, but generally
experience greater price volatility, which means greater potential for
loss. In addition, common stocks generally provide lower income than a bond
investment such as the fund. The S&P 500 and DJIA are based on the
prices of unmanaged groups of stocks and, unlike the fund's returns, their
returns do not include the effect of paying brokerage commissions or other
costs of investing.
During the period from September 28, 1990 (commencement of operations) to
January 31, 1994, a hypothetical $10,000 investment in Spartan Long-Term
Government Bond Fund would have grown to $ 16,751 , assuming all
distributions were reinvested. This was a period of fluctuating interest
rates and bond prices and the following table should not be considered
representative of the dividend income or capital gain or loss that could be
realized from an investment in the fund today.
SPARTAN LONG-TERM GOVERNMENT BOND FUND INDICES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Value of Value of Value of
Initial Reinvested Reinvested Cost
Period $10,000 Income Capital Gain Total S&P of
Ended 1/31 Investment Distributions Distributions Value 500 DJIA Living**
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1991* $11,040 $ 101 $ 0 $11,141 $11,566 $11,421 $10,143
1992 11,600 902 85 12,588 14,192 13,897 10,407
1993 12,130 1,912 301 14,343 15,697 14,700 10,746
1994 12,740 3,033 979 16,75 2 17,718 18,170 11,017
</TABLE>
* From September 28, 1990 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on September
28, 1990, the net amount invested in fund shares was $10,000. The cost of
the initial investment ($10,000), together with the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(their cash value at the time they were reinvested), amounted to
$ 13,754 . If distributions had not been reinvested, the amount of
distributions earned from the fund over time would have been smaller, and
cash payments for the period would have amounted to $ 2,520 for
income dividends and $ 780 for capital gains distributions. Tax
consequences of different investments have not been factored into the above
figures. The figures in the table do not reflect the effect of the fund's
$5.00 account closeout fee.
The fund may be compared in advertising to Certificates of Deposit (CDs),
the Bank Rate Monitor National Index, an average of the quoted rates for
100 leading banks and thrifts in ten U.S. cities chosen to represent the
ten largest Consumer Metropolitan Statistical Areas, and other investments
issued by banks. The fund differs from bank investments in several
respects. The fund may offer greater liquidity and higher potential
returns than CDs; but, unlike CDs, the fund is not FDIC-insured and its
share price, yield, and return will fluctuate.
The fund may also compare its performance to the performance of individual
U.S. Treasury securities. Treasury securities are guaranteed by the U.S.
government as to the timely payment of principal and interest. The fund
may offer higher potential returns than Treasury securities, but shares of
the fund are not guaranteed by the U.S. government.
The fund may quote the unmanaged indices of bond prices and yields,
including the following:
MERRILL LYNCH GOVERNMENT MASTER INDEX is an index comprising publicly
placed, coupon-bearing U.S. Treasury notes and bonds and non-convertible
agency obligations with maturities of at least one year. Par amounts of the
bonds in the index must be no less than $10 million. The index excludes
flower bonds, collateralized mortgage obligations, and agency pass
throughs.
LEHMAN BROTHERS ALL GOVERNMENT BOND INDEX is an index comprising all public
obligations of the U.S. Treasury, U.S. government agencies, quasi-federal
corporations, and corporate debt guaranteed by the U.S. government. The
index excludes flower bonds, foreign-targeted issues, mortgage-backed
securities, and securities maturing in less than one year.
SALOMON BROTHERS BROAD INVESTMENT-GRADE BOND INDEX is composed of U.S.
Treasury and government agency obligations (except flower bonds),
investment-grade (rated BBB or better) corporate debt obligations, and
mortgage-related securities including GNMA, FHLMC, FNMA, and FHA issues.
Issues included in the index have a stated maturity of at least one year
and have at least $25 million outstanding. The fund may also compare its
performance to the Treasury/Agency component of the Salomon Brothers Index.
This component is composed of debt securities issued by the U.S. Treasury
and government agencies; however, because mortgage-related securities form
their own component of the broad index, they are excluded from the
Treasury/Agency sector. As noted above, the fund may invest in
mortgage-related securities such as GNMAs, FNMAs, and FHLMCs.
LEHMAN BROTHERS LONG-TERM TREASURY INDEX is an unmanaged index of long-term
U.S. Treasury bonds including all public obligations of the U.S. Treasury,
excluding zero-coupon bonds, with at least $25 million outstanding and with
maturities between 10 and 30 years. This index may be used to illustrate
the volatility of long-term Treasury securities.
Note that the fund may not purchase some of the securities included in
certain of the performance indicators discussed above.
The fund's performance may be compared to the performance of other mutual
funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings
prepared by Lipper Analytical Services, Inc. (Lipper), an independent
service located in Summit, New Jersey that monitors the performance of
mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. Lipper may also rank funds based on yield. In addition to
the mutual fund rankings, the fund's performance may be compared to mutual
fund performance indices prepared by Lipper.
From time to time, the fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals.
For example, the fund may quote Morningstar, Inc. in its advertising
materials. Morningstar, Inc. is a mutual fund rating service that rates
mutual funds on the basis of risk-adjusted performance. Rankings that
compare the performance of Fidelity funds to one another in appropriate
categories over specific periods of time may also be quoted in advertising.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For
example, Fidelity's FundMatchsm Program includes a workbook describing
general principles of investing, such as asset allocation, diversification,
risk tolerance, and goal setting; a questionnaire designed to help create a
personal financial profile; and an action plan offering investment
alternatives. Materials may also include discussions of Fidelity's three
asset allocation funds and other Fidelity funds, products, and services.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury
bills, the U.S. rate of inflation (based on the Consumer Price Index), and
combinations of various capital markets. The performance of these capital
markets is based on the returns of different indices.
Fidelity funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any
of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
funds. Ibbotson calculates total returns in the same method as the funds.
The funds may also compare performance to that of other compilations or
indices that may be developed and made available in the future.
The fund may compare its performance or the performance of securities in
which it may invest to averages published by IBC USA (Publications), Inc.
of Ashland, Massachusetts. These averages assume reinvestment of
distributions. The Bond Fund Report AverageS(trademark)/ Government
which is reported in the BOND FUND REPORT(trademark), covers over 182
government bond funds. When evaluating comparisons to money market
funds, investors should consider the relevant differences in investment
objectives and policies. Specifically, money market funds invest in
short-term, high-quality instruments and seek to maintain a stable $1.00
share price. The fund, however, invests in longer-term instruments and its
share price changes daily in response to a variety of factors.
In advertising materials, Fidelity may reference or discuss its products
and services, which may include: other Fidelity funds; retirement
investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; charitable
giving; and the Fidelity credit card. In addition, Fidelity may quote
financial or business publications and periodicals, including model
portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Fidelity may also reprint, and use
as advertising and sales literature, articles from Fidelity Focus, a
quarterly magazine provided free of charge to Fidelity fund shareholders.
The fund may present its fund number, Quotron(trademark) number, and CUSIP
number, and discuss or quote its current portfolio manager.
The fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more
shares when prices are low. While such a strategy does not assure a profit
or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the
same intervals. In evaluating such a plan, investors should consider their
ability to continue purchasing shares during periods of low price levels.
The fund may be available for purchase through retirement plans or other
programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000
investment earning a taxable return of 10% annually would have an after-tax
value of $1,949 after ten years, assuming tax was deducted from the return
each year at a 31% rate. An equivalent tax-deferred investment would have
an after-tax value of $2,100 after ten years, assuming tax was deducted at
a 31% rate from the tax-deferred earnings at the end of the ten-year
period.
As of January 31, 1994, FMR managed 33 Spartan funds with
approximately $ 20 billion in assets.
35.ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The fund is open for business and its net asset value per share (NAV) is
calculated each day the New York Stock Exchange (NYSE) is open for trading.
The NYSE has designated the following holiday closings for 1994:
Washington's Birthday (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day
(observed). Although FMR expects the same holiday schedule, with the
addition of New Year's Day, to be observed in the future, the NYSE may
modify its holiday schedule at any time.
FSC normally determines the fund's NAV as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier
if trading on the NYSE is restricted or as permitted by the SEC. To the
extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the fund's NAV may be affected on days when investors
do not have access to the fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payment
undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the fund's NAV. Shareholders receiving securities or other
property on redemption may realize either a gain or loss for tax purposes,
and will incur any costs of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the Investment Company Act of 1940 (the 1940
Act), the fund is required to give shareholders at least 60 days' notice
prior to terminating or modifying its exchange privilege. Under the Rule,
the 60-day notification requirement may be waived if (i) the only effect of
a modification would be to reduce or eliminate an administrative fee,
redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the fund suspends the redemption of shares to
be exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, the fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by
any person or group if, in FMR's judgment, the fund would be unable to
invest effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
36.DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, Fidelity may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested
until you provide Fidelity with alternate instructions.
DIVIDENDS. Because the fund's income is primarily derived from interest,
dividends from the fund normally will not qualify for the
dividends-received deduction available to corporations. The fund's
dividends derived from certain U.S. government obligations may be exempt
from state and local taxation. Gains (losses) attributable to foreign
currency fluctuations are generally taxable as ordinary income and
therefore will increase (decrease) dividend distributions.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the fund on
the sale of securities and distributed to shareholders are federally
taxable as long-term capital gains, regardless of the length of time
shareholders have held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the fund and such shares are held
six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by the fund are taxable to
shareholders as dividends, not as capital gains. Distributions from
short-term capital gains do not qualify for the dividends-received
deduction.
STATE AND LOCAL TAXES. For mutual funds organized as business trusts,
state law provides for a pass-through of the sate and local income tax
exemption afforded to direct owners of U.S. government securities. Some
states limit this pass through to mutual funds that invest a certain amount
in U.S. government securities, and some types of securities, such as
repurchase agreements and some agency backed securities, may not qualify
for this pass-through benefit. The tax treatment of your dividend
distributions from the fund will be the same as if you directly owned your
proportionate share of the U.S. government securities in the fund's
portfolio. Because the income earned on most U.S. government securities in
which the fund invests is exempt from state and local income taxes, the
portion of your dividends from the fund attributable to these securities
will also be free from income taxes. The exemption from state and local
income taxation does not preclude states from assessing other taxes on the
ownership of U.S. government securities.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends or
interest paid with respect to foreign securities. Because the fund does
not currently anticipate that securities of foreign issuers will constitute
more than 50% of its total assets at the end of its fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction
on their federal income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The fund has qualified and intends to continue to
qualify each year as a "regulated investment company" for tax purposes, so
that it will not be liable for federal tax at the fund level on income and
capital gains distributed to shareholders. In order to qualify as a
regulated investment company and avoid being subject to federal income or
excise taxes, the fund intends to distribute substantially all of its net
taxable investment income and net realized capital gains within each
calendar year as well as on a fiscal year basis. The fund also intends to
comply with other tax rules applicable to regulated investment companies,
including a requirement that capital gains from the sale of securities held
less than three months constitute less than 30% of the fund's gross income
for each fiscal year. Gains from some forward currency contracts ,
futures contracts and options are included in this 30%
calculation, which may limit the fund's investments in such instruments.
The fund is treated as a separate entity from the other funds of
Fidelity Devonshire Trust for tax purposes.
If a fund purchases shares of certain foreign investment entities,
defined as passive foreign investment companies (PFICs) in the Internal
Revenue Code, it may be subject to U.S. federal income tax on a portion of
any excess distribution or gain in the disposition of such shares. Interest
charges may also be imposed on a fund with respect to deferred taxes
arising from such distributions or gains.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the fund and its shareholders and
no attempt has been made to discuss individual tax consequences. In
addition to federal income taxes, shareholders may be subject to state and
local taxes on fund distributions. Investors should consult their tax
advisers to determine whether the fund is suitable to their particular tax
situation.
37.FMR
FMR is a wholly owned subsidiary of FMR Corp., a parent company organized
in 1972. At present, the principal operating activities of FMR Corp. are
those conducted by three of its divisions as follows: FSC, which is the
transfer and shareholder servicing agent for certain of the funds advised
by FMR; Fidelity Investments Institutional Operations Company, which
performs shareholder servicing functions for certain institutional
customers; and Fidelity Investments Retail Marketing Company, which
provides marketing services to various companies within the Fidelity
organization.
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.), Inc.
(FMR U.K.) and Fidelity Management & Research (Far East), Inc. (FMR Far
East), both wholly owned subsidiaries of FMR formed in 1986, supply
investment research, and may supply portfolio management services, to FMR
in connection with certain funds advised by FMR. Analysts employed by FMR,
FMR U.K., and FMR Far East research and visit thousands of domestic and
foreign companies each year. FMR Texas Inc., a wholly owned subsidiary of
FMR formed in 1989, supplies portfolio management and research services in
connection with certain money market funds advised by FMR.
38.TRUSTEES AND OFFICERS
The Trustees and executive officers of the trust are listed below. Except
as indicated, each individual has held the office shown or other offices in
the same company for the last five years. All persons named as Trustees
serve in similar capacities for other funds advised by FMR. Unless
otherwise noted, the business address of each Trustee and officer is 82
Devonshire Street, Boston, Massachusetts 02109, which is also the address
of FMR. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with either
the trust or FMR, are indicated by an asterisk (*).
*EDWARD C. JOHNSON 3d, Trustee and President, is Chairman, Chief Executive
Officer and a Director of FMR Corp.; a Director and Chairman of the Board
and of the Executive Committee of FMR; Chairman and a Director of FMR Texas
Inc. (1989), Fidelity Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
*J. GARY BURKHEAD, Trustee and Senior Vice President, is President of FMR;
and President and a Director of FMR Texas Inc. (1989), Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far
East) Inc.
RALPH F. COX, 200 Rivercrest Drive, Fort Worth, TX, Trustee (1991), is
President of Greenhill Petroleum Corporation (petroleum exploration and
production, 1990). Prior to his retirement in March 1990, Mr. Cox was
President and Chief Operating Officer of Union Pacific Resources Company
(exploration and production). He is a Director of Bonneville Pacific
Corporation (independent power, 1989) and CH2M Hill Companies
(engineering). In addition, he served on the Board of Directors of the
Norton Company (manufacturer of industrial devices, 1983-1990) and
continues to serve on the Board of Directors of the Texas State Chamber of
Commerce, and is a member of advisory boards of Texas A&M University
and the University of Texas at Austin.
PHYLLIS BURKE DAVIS, P.O. Box 264, Bridgehampton, NY, Trustee (1992).
Prior to her retirement in September 1991, Mrs. Davis was the Senior Vice
President of Corporate Affairs of Avon Products, Inc. She is currently a
Director of BellSouth Corporation (telecommunications), Eaton Corporation
(manufacturing, 1991), and the TJX Companies, Inc. (retail stores, 1990),
and previously served as a Director of Hallmark Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition, she serves as a Director of the New York
City Chapter of the National Multiple Sclerosis Society, and is a member of
the Advisory Council of the International Executive Service Corps. and the
President's Advisory Council of The University of Vermont School of
Business Administration.
RICHARD J. FLYNN, 77 Fiske Hill, Sturbridge, MA, Trustee, is a financial
consultant. Prior to September 1986, Mr. Flynn was Vice Chairman and a
Director of the Norton Company (manufacturer of industrial devices). He is
currently a Director of Mechanics Bank and a Trustee of College of the Holy
Cross and Old Sturbridge Village, Inc.
E. BRADLEY JONES, 3881-2 Lander Road, Chagrin Falls, OH, Trustee (1990).
Prior to his retirement in 1984, Mr. Jones was Chairman and Chief Executive
Officer of LTV Steel Company. Prior to May 1990, he was Director of
National City Corporation (a bank holding company) and National City Bank
of Cleveland. He is a Director of TRW Inc. (original equipment and
replacement products), Cleveland-Cliffs Inc (mining), NACCO Industries,
Inc. (mining and marketing), Consolidated Rail Corporation, Birmingham
Steel Corporation (1988), Hyster-Yale Materials Handling, Inc. (1989), and
RPM, Inc. (manufacturer of chemical products, 1990). In addition, he
serves as a Trustee of First Union Real Estate Investments, Chairman of the
Board of Trustees and a member of the Executive Committee of the Cleveland
Clinic Foundation, a Trustee and a member of the Executive Committee of
University School (Cleveland), and a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, 680 Steamboat Road, Apartment #1 - North, Greenwich, CT,
Trustee, is a Professor at Columbia University Graduate School of Business
and a financial consultant. Prior to 1987, he was Chairman of the
Financial Accounting Standards Board. Mr. Kirk is a Director of General Re
Corporation (reinsurance) and Valuation Research Corp. (appraisals and
valuations, 1993). In addition, he serves as Vice Chairman of the Board of
Directors of the National Arts Stabilization Fund and Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association.
*PETER S. LYNCH, Trustee (1990) is Vice Chairman of FMR (1992). Prior to
his retirement on May 31, 1990, he was a Director of FMR (1989) and
Executive Vice President of FMR (a position he held until March 31, 1991);
Vice President of Fidelity Magellan Fund and FMR Growth Group Leader; and
Managing Director of FMR Corp. Mr. Lynch was also Vice President of
Fidelity Investments Corporate Services (1991-1992). He is a Director of
W.R. Grace & Co. (chemicals, 1989) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield
(1989) and Society for the Preservation of New England Antiquities, and as
an Overseer of the Museum of Fine Arts of Boston (1990).
GERALD C. McDONOUGH, 135 Aspenwood Drive, Cleveland, OH, Trustee (1989), is
Chairman of G.M. Management Group (strategic advisory services). Prior to
his retirement in July 1988, he was Chairman and Chief Executive Officer of
Leaseway Transportation Corp. (physical distribution services). Mr.
McDonough is a Director of ACME-Cleveland Corp. (metal working,
telecommunications and electronic products), Brush-Wellman Inc. (metal
refining), York International Corp. (air conditioning and refrigeration,
1989), Commercial Intertech Corp. (water treatment equipment, 1992), and
Associated Estates Realty Corporation (a real estate investment trust,
1993).
EDWARD H. MALONE, 5601 Turtle Bay Drive #2104, Naples, FL, Trustee. Prior
to his retirement in 1985, Mr. Malone was Chairman, General Electric
Investment Corporation and a Vice President of General Electric Company.
He is a Director of Allegheny Power Systems, Inc. (electric utility),
General Re Corporation (reinsurance) and Mattel Inc. (toy manufacturer).
He is also a Trustee of Rensselaer Polytechnic Institute and of Corporate
Property Investors and a member of the Advisory Boards of Butler Capital
Corporation Funds and Warburg, Pincus Partnership Funds.
MARVIN L. MANN, 55 Railroad Avenue, Greenwich, CT, Trustee (1993) is
Chairman of the Board, President, and Chief Executive Officer of Lexmark
International, Inc. (office machines, 1991). Prior to 1991, he held the
positions of Vice President of International Business Machines Corporation
("IBM") and President and General Manager of various IBM divisions and
subsidiaries. Mr. Mann is a Director of M.A. Hanna Company (chemicals,
1993) and Infomart (marketing services, 1991), a Trammell Crow Co. In
addition, he serves as the Campaign Vice Chairman of the Tri-State United
Way (1993) and is a member of the University of Alabama President's Cabinet
(1990).
THOMAS R. WILLIAMS, 21st Floor, 191 Peachtree Street, N.E., Atlanta, GA,
Trustee, is President of The Wales Group, Inc. (management and financial
advisory services). Prior to retiring in 1987, Mr. Williams served as
Chairman of the Board of First Wachovia Corporation (bank holding company),
and Chairman and Chief Executive Officer of The First National Bank of
Atlanta and First Atlanta Corporation (bank holding company). He is
currently a Director of BellSouth Corporation (telecommunications),
ConAgra, Inc. (agricultural products), Fisher Business Systems, Inc.
(computer software), Georgia Power Company (electric utility), Gerber Alley
& Associates, Inc. (computer software), National Life Insurance Company
of Vermont, American Software, Inc. (1989), and AppleSouth, Inc.
(restaurants, 1992).
GARY L. FRENCH, Treasurer (1991). Prior to becoming Treasurer of the
Fidelity funds, Mr. French was Senior Vice President, Fund Accounting -
Fidelity Accounting & Custody Services Co. (1991); Vice President, Fund
Accounting - Fidelity Accounting & Custody Services Co. (1990); and
Senior Vice President, Chief Financial and Operations Officer - Huntington
Advisers, Inc. (1985-1990).
ARTHUR S. LORING, Secretary, is Senior Vice President and General Counsel
of FMR, Vice President - Legal of FMR Corp., and Vice President and Clerk
of FDC.
Under a retirement program that became effective on November 1, 1989,
Trustees, upon reaching age 72, become eligible to participate in a defined
benefit retirement program under which they receive payments during their
lifetime from the fund based on their basic trustee fees and length of
service. Currently, Messrs. Robert L. Johnson, William R. Spaulding,
Bertram H. Witham, and David L. Yunich participate in the program.
As of January 31, 199 4 , the Trustees and officers owned in the
aggregate less than 1% of the outstanding shares of the fund.
39.MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under FMR's management contract with the fund, FMR acts as investment
adviser and, subject to the supervision of the Board of Trustees, directs
the investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the Trust, all Trustees who are "interested
persons" of the Trust of FMR, and all personnel of the Trust or FMR
performing services relating to research, statistical, and investment
activities. In addition, FMR or its affiliates, subject to the supervision
of the Board of Trustees, provide the management and administrative
services necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with the fund; preparing all
general shareholder communications and conducting shareholder relations;
maintaining the fund's records and the registration of the fund's shares
under federal and state law; developing management and shareholder services
for the fund; and furnishing reports, evaluations, and analyses on a
variety of subjects to the Trust's Board of Trustees.
FMR is responsible for the payment of all expenses of the fund with certain
exceptions. Specific expenses payable by FMR include, without limitation,
the fees and expenses of registering and qualifying the Trust, the fund,
and its shares for distribution under federal and state securities laws;
expenses of typesetting for printing the Prospectus and Statement of
Additional Information; custodian charges; audit and legal expenses;
insurance expense; association membership dues; and the expenses of mailing
reports to shareholders, shareholder meetings, and proxy solicitations.
FMR also provides for transfer agent and dividend disbursing services and
portfolio and general accounting record maintenance through FSC.
FMR pays all other expenses of the fund with the following exceptions: fees
and expenses of all Trustees who are not "interested persons" of the trust
or of FMR (the non-interested Trustees); interest on borrowings; taxes;
brokerage commissions (if any); and such nonrecurring expenses as may
arise, including costs of any litigation to which the fund may be a party,
and any obligation it may have to indemnify the officers and Trustees with
respect to litigation.
FMR is the fund's manager pursuant to a management contract dated July 19,
1990, which was approved by shareholders on September 18, 1991. For the
services of FMR under the contract, the fund pays FMR a monthly management
fee at the annual rate of .65% of its average net assets throughout the
month. FMR will reduce its fee by an amount equal to the fees and expenses
of the non-interested Trustees. For the fiscal years ended January 31,
1994 , 1993, and 1992 , the management fee, after
reduction of fees and expenses of the non-interested Trustees, amounted to
$557,978 , $507,937, and $302,700 , respectively.
To defray shareholder service costs, FMR or its affiliates also collect the
fund's $5.00 exchange fee, $5.00 account closeout fee, and $5.00 fee for
wire purchases and redemptions. Shareholder transaction fees collected for
fiscal 1994, 1993, and 1992 are indicated in the table below.
Period Ended Exchange Account Wire
1/31 Fees Closeout Fees Fees Checkwriting
1992 $ 8,825 $ 90 $150 N/A
1993 $14,895 $210 $520 N/A
1994 $ 10,505 $ 180 $ 175 $96
40.DISTRIBUTION AND SERVICE PLAN
The fund has adopted a distribution and service plan (the Plan) under Rule
12b-1 under the Investment Company Act of 1940 (the Rule). The Rule
provides in substance that a mutual fund may not engage directly or
indirectly in financing any activity that is primarily intended to result
in the sale of shares of the fund except pursuant to a plan adopted by the
fund under the Rule. The Board of Trustees has adopted the Plan to allow
the fund and FMR to incur certain expenses that might be considered to
constitute indirect payment by the fund of distribution expenses. Under
the Plan, if payment by the fund to FMR of management fees should be deemed
to be indirect financing by the fund of the distribution of its shares,
such payment is authorized by the Plan.
The Plan specifically recognizes that FMR, either directly or through FDC,
may use its management fee revenue, past profits, or other resources,
without limitation, to pay promotional and administrative expenses in
connection with the offer and sale of shares of the fund. In addition, the
Plan provides that FMR may use its resources, including its management fee
revenue, to make payments to third parties that provide assistance in
selling shares of the fund, or to third parties, including banks, that
render shareholder support services.
The fund's Plan has been approved by the Trustees. As required by the
Rule, the Trustees carefully considered all pertinent factors relating to
the implementation of the Plan prior to its approval, and have determined
that there is a reasonable likelihood that the Plan will benefit the fund
and its shareholders. In particular, the Trustees noted that the Plan does
not authorize payments by the fund other than those made to FMR under its
management contract with the fund. To the extent that the Plan gives FMR
and FDC greater flexibility in connection with the distribution of shares
of the fund, additional sales of the fund's shares may result.
Additionally, certain shareholder support services may be provided more
effectively under the Plan by local entities with whom shareholders have
other relationships. The fund's Plan was approved by the shareholders on
September 18, 1991.
The Glass-Steagall Act generally prohibits federally and state chartered or
supervised banks from engaging in the business of underwriting, selling, or
distributing securities. Although the scope of this prohibition under the
Glass-Steagall Act has not been clearly defined by the courts or
appropriate regulatory agencies, FDC believes that the Glass-Steagall Act
should not preclude a bank from performing shareholder support services or
servicing and recordkeeping functions. FDC intends to engage banks only to
perform such functions. However, changes in federal or state statutes and
regulations pertaining to the permissible activities of banks and their
affiliates or subsidiaries, as well as further judicial or administrative
decisions or interpretations, could prevent a bank from continuing to
perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Trustees would consider what actions, if
any, would be necessary to continue to provide efficient and effective
shareholder services. In such event, changes in the operation of the fund
might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected
that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences. The fund may execute portfolio
transactions with and purchase securities issued by depository institutions
that receive payments under the Plan. No preference will be shown in the
selection of investments for the instruments of such depository
institutions. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein, and banks and
other financial institutions may be required to register as dealers
pursuant to state law.
41.CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
FSC performs transfer agency, dividend disbursing, and shareholder
servicing functions for the fund. The costs of these services are borne
by FMR pursuant to its management contract with the fund. FSC also
calculates the fund's NAV and dividends, maintains the fund's general
accounting records, and administers the fund's securities lending program.
The cost of these services are also borne by FMR pursuant to its management
contract with the fund.
The fund has a distribution agreement with FDC, a Massachusetts corporation
organized on July 18, 1960. FDC is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The distribution agreement calls for FDC to
use all reasonable efforts, consistent with its other business, to secure
purchasers for shares of the fund, which are continuously offered at NAV.
Promotional and administrative expenses in connection with the offer and
sale of shares are paid by FMR.
42.DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Spartan Long-Term Government Bond Fund is a fund of
Fidelity Devonshire Trust, which was originally organized as a
Massachusetts corporation on December 16, 1965. On May 31, 1985, the trust
was reorganized as a Massachusetts business trust, at which time its name
was changed from Fidelity Equity-Income Fund, Inc. to Fidelity
Equity-Income Fund. On December 19, 1986, the Board of Trustees voted to
change the name of the trust from Fidelity Equity-Income Fund to Fidelity
Devonshire Trust. Currently, there are six funds of the trust:
Fidelity Adjustable Rate Government Fund; Fidelity Equity-Income Fund;
Fidelity Real Estate Investment Portfolio; Fidelity Utilities Income Fund;
Fidelity Mid-Cap Stock Fund; and Spartan Long-Term Government Bond
Fund. The Declaration of Trust permits the Trustees to create additional
funds.
In the event that FMR ceases to be the investment adviser to the trust or a
fund, the right of the trust or fund to use the identifying names
"Fidelity" and "Spartan" may be withdrawn.
The assets of the trust received for the issue or sale of shares of each
fund and all income, earnings, profits, and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such fund, and
constitute the underlying assets of such fund. The underlying assets of
each fund are segregated on the books of account, and are to be charged
with the liabilities with respect to such fund and with a share of the
general expenses of the trust. Expenses with respect to the trust are to
be allocated in proportion to the asset value of the respective funds,
except where allocations of direct expense can otherwise be fairly made.
The officers of the trust, subject to the general supervision of the Board
of Trustees, have the power to determine which expenses are allocable to a
given fund, or which are general or allocable to all of the funds. In the
event of the dissolution or liquidation of the trust, shareholders of each
fund are entitled to receive as a class the underlying assets of such fund
available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of
Trust provides that the trust shall not have any claim against shareholders
except for the payment of the purchase price of shares and requires that
each agreement, obligation, or instrument entered into or executed by the
trust or the Trustees include a provision limiting the obligations created
thereby to the trust and its assets. The Declaration of Trust provides for
indemnification out of each fund's property of any shareholder held
personally liable for the obligations of the fund. The Declaration of
Trust also provides that each fund shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
fund and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which a fund itself would be unable to meet its
obligations. FMR believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects
Trustee s against any liability to which they would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct
of their office.
VOTING RIGHTS. Each fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each dollar of net
asset value per share you own. The shares have no preemptive or conversion
rights; the voting and dividend rights, the right of redemption, and the
privilege of exchange are described in the Prospectus. Shares are fully
paid and nonassessable, except as set forth under the heading "Shareholder
and Trustee Liability" above. Shareholders representing 10% or more of the
trust or a fund may, as set forth in the Declaration of Trust, call
meetings of the trust or a fund for any purpose related to the trust or
fund, as the case may be, including, in the case of a meeting of the entire
trust, the purpose of voting on removal of one or more Trustees. The trust
or any fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and
distribution of its assets, if approved by vote of the holders of a
majority of the trust or fund , as determined by the current value of
each shareholder's investment in the fund or trust. If not so terminated,
the trust and its funds will continue indefinitely.
CUSTODIAN. The Bank of New York, 110 Washington Street, New York, New
York, is custodian of the assets of the fund. The custodian is
responsible for the safekeeping of the fund's assets and the appointment of
subcustodian banks and clearing agencies. The custodian takes no part
in determining investment policies of the fund or in deciding which
securities are purchased or sold by the fund. The fund may, however,
invest in obligations of the custodian and may purchase securities from or
sell securities to the custodian.
FMR, its officers and directors, its affiliated companies, and the Trust's
Trustees may from time to time have transactions with various banks,
including banks serving as custodians for certain of the
funds advised by FMR. Transactions that have occurred to date include
mortgages and personal and general business loans. In the judgment of FMR,
the terms and conditions of those transactions were not influenced by
existing or potential custodial or other fund relationships.
AUDITOR. Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts serves as the trust's independent accountant. The auditor
examines financial statements for the fund and provides other audit, tax,
and related services.
43.FINANCIAL STATEMENTS
The Annual Report of the fund for the fiscal year ended January 31, 1994 is
a separate report supplied with this Statement of Additional Information
and is incorporated herein by reference.
44.APPENDIX
DOLLAR-WEIGHTED AVERAGE MATURITY is derived by multiplying the value
of each investment by the number of days remaining to its maturity, adding
these calculations, and then dividing the total by the value of the fund's
portfolio. An obligation's maturity is typically determined on a stated
final maturity basis, although there are some exceptions to this rule
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be
called, refunded, or redeemed may be considered to be its maturity date.
Also, the maturities of mortgage-backed securities and some asset-backed
securities, such as collateralized mortgage obligations, are determined on
a weighted average life basis, which is the average time for principal to
be repaid. For a mortgage security, this average time is calculated by
assuming a constant prepayment rate for the life of the mortgage. The
weighted average life of these securities is likely to be substantially
shorter than their stated final maturity.
Fidelity Devonshire Trust
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Statements for Fidelity Utilities Income Fund for the
fiscal year ended January 31, 1994 are filed herein as Exhibit 24 (a)(1).
(2) Financial Statements for Fidelity Equity-Income Fund for the fiscal
year ended January 31, 1994 are filed herein as Exhibit 24 (a)(2).
(3) Financial Statements for Fidelity Real Estate Investment Portfolio
for the fiscal year ended January 31, 1994 are filed herein as Exhibit 24
(a)(3).
(4) Financial Statements for Spartan Long-Term Government Bond Fund for
the fiscal year ended January 31, 1994 are filed herein as Exhibit 24
(a)(4).
(b) Exhibits:
1. (a) Form of Amended and Restated Declaration of Trust dated March 17,
1994 is filed herein as Exhibit 1(a).
2. (a) Bylaws of Registrant are incorporated herein by reference to Exhibit
2 to Post-Effective Amendment No. 44 (file number 2-24389).
(b) Supplement to the Bylaws of the Trust dated November 15, 1989 is
incorporated herein by reference to Exhibit 2(b) to Post-Effective
Amendment No. 64.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract dated December 1, 1993 between Fidelity
Utilities Income Fund and Fidelity Management & Research Company is
filed herein as Exhibit 5(a).
(b) Management Contract dated December 1, 1993 between Fidelity
Equity-Income Fund and Fidelity Management & Research Company is filed
herein as Exhibit 5(b).
(c) Management Contract dated April 1, 1993 between Fidelity Real Estate
Investment Portfolio and Fidelity Management & Research Company is
filed herein as Exhibit 5(c).
(d) Management Contract dated July 19, 1990 between Spartan Long-Term
Government Bond Fund and Fidelity Management & Research Company is
incorporated herein by reference to Exhibit 5(d) to Post-Effective
Amendment No. 67.
(e) Form of Management Contract between Fidelity Adjustable Rate
Government Fund and Fidelity Management & Research Company was filed as
Exhibit 5(e) to Post-Effective Amendment No. 70.
(f) Form of Management Contract between Fidelity Mid-Cap Stock Fund and
Fidelity Management & Research Company was filed as Exhibit 5(f) to
Post -Effective Amendment No. 79.
(g) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (U.K.) Inc., on behalf of
Fidelity Equity-Income Fund, is filed herein as Exhibit 5(g).
(h) Sub-Advisory Agreement between Fidelity Management & Research
Company and Fidelity Management & Research (Far East) Inc., on behalf
of Fidelity Equity-Income Fund, is filed herein as Exhibit 5(h).
(i) Sub-Advisory Agreement dated December 1, 1993 between Fidelity
Management & Research Company and Fidelity Management & Research
(U.K.) Inc., on behalf of Fidelity Real Estate Investment Portfolio is
filed herein as Exhibit 5(i).
(j) Sub-Advisory Agreement dated December 1, 1993 between Fidelity
Management & Research Company and Fidelity Management & Research
(Far East) Inc., on behalf of Fidelity Real Estate Investment Portfolio, is
filed herein as Exhibit 5(j).
(k) Sub-Advisory Agreement dated December 1, 1993 between Fidelity
Management & Research Company and Fidelity Management & Research
(U.K.) Inc., on behalf of Fidelity Utilities Income Fund, is filed herein
as Exhibit 5(k).
(l) Sub-Advisory Agreement dated December 1, 1993 between Fidelity
Management & Research Company and Fidelity Management & Research
(Far East) Inc., on behalf of Fidelity Utilities Income Fund, is filed
herein as Exhibit 5(l).
(m) Form of Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (U.K.) Inc., on
behalf of Fidelity Mid-Cap Stock Fund, was filed as Exhibit 5(m) to Post
- -Effective Amendment No. 79.
(n) Form of Sub-Advisory Agreement between Fidelity Management &
Research Company and Fidelity Management & Research (Far East) Inc., on
behalf of Fidelity Mid-Cap Stock Fund, was filed as Exhibit 5(n) to Post
- -Effective Amendment No. 79.
6. (a) General Distribution Agreement dated April 1, 1987 between Fidelity
Equity-Income Fund and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(a) to Post-Effective Amendment No. 56.
(b) General Distribution Agreement dated April 1, 1987 between Fidelity
Real Estate Investment Portfolio and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(b) to Post-Effective
Amendment No. 56.
(c) General Distribution Agreement dated April 1, 1987 between Fidelity
Utilities Income Fund and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(c) to Post-Effective Amendment No. 59.
(d) General Distribution Agreement dated July 19, 1990 between Spartan
Long-Term Government Bond Fund and Fidelity Distributors Corporation is
incorporated herein by reference to Exhibit 6(d) to Post-Effective
Amendment No. 67.
(e) Amendment to the General Distribution Agreement dated January 1, 1988
between Fidelity Utilities Income Fund and Fidelity Distributors
Corporation is incorporated herein by reference to Exhibit 6(d) to
Post-Effective Amendment No. 59.
(f) Amendment to the General Distribution Agreement dated January 1, 1988
between Fidelity Equity-Income Fund and Fidelity Real Estate Investment
Portfolio, and Fidelity Distributors Corporation is incorporated herein by
reference to Exhibit 6(e) to Post-Effective Amendment No. 63.
(g) Form of General Distribution Agreement between Fidelity Adjustable
Rate Government Fund and Fidelity Distributors Corporation was filed as
Exhibit 6(h) to Post-Effective Amendment No. 70.
(h) Form of General Distribution Agreement between Fidelity Mid-Cap Stock
Fund and Fidelity Distributors Corporation was filed as Exhibit 6(h) to
Post -Effective Amendment No. 79.
7. Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, effective November 11, 1989, is incorporated herein by
reference to Exhibit 7 to Post-Effective Amendment No. 71.
8. (a) Custodian Contract dated July 18, 1991 between Fidelity Devonshire
Trust and Chase Manhattan Bank, on behalf of Fidelity Equity-Income Fund,
as currently in effect, is incorporated herein by reference to Exhibit 8(a)
to Post-Effective Amendment No. 71.
(b) Custodian Contract dated July 23, 1987 between Fidelity Devonshire
Trust and Brown Brothers Harriman & Co., on behalf of Fidelity Real
Estate Investment Portfolio and Fidelity Utilities Income Fund, is
incorporated herein by reference to Exhibit 8(b) to Post-Effective
Amendment No. 59.
(c) Custodian Contract dated July 18, 1991 between Fidelity Devonshire
Trust and Bank of New York, on behalf of Spartan Long-Term Government Bond
Fund, is incorporated herein by reference to Exhibit 8(c) to Post-Effective
Amendment No. 71.
9. (a) Amended Master Service Agreement dated June 1, 1989 between Fidelity
Devonshire Trust, FMR Corp., and Fidelity Service Co., is incorporated
herein by reference to Exhibit 9(a) to Post-Effective Amendment No. 63.
(b) Schedules A (transfer, dividend disbursing and shareholders' service);
B (pricing and bookkeeping); and C (securities lending transactions) dated
June 1, 1989 (relating to Fidelity Equity-Income Fund) are incorporated
herein by reference to Exhibit 9(b) to Post-Effective Amendment No. 63.
(c) Schedules A (transfer, dividend disbursing and shareholders'
service); B (pricing and bookkeeping); and C (securities lending
transactions) dated June 1, 1989 (relating to Fidelity Real Estate
Investment Portfolio) are incorporated herein by reference to Exhibit 9(c)
to Post-Effective Amendment No. 63.
(d) Schedules A (transfer, dividend disbursing and shareholders'
service); B (pricing and bookkeeping); and C (securities lending
transactions) dated June 1, 1989 (relating to Fidelity Utilities Income
Fund) are incorporated herein by reference to Exhibit 9(d) to
Post-Effective Amendment No 63.
(e) Schedules A (transfer, dividend disbursing and shareholders'
service); B (pricing and bookkeeping); and C (securities lending
transactions) dated July 19, 1990 (relating to Spartan Long-Term Government
Bond Fund) are incorporated herein by reference to Exhibit 9(e) to
Post-Effective Amendment No. 67.
(f) Form of Schedules A (transfer, dividend disbursing and shareholders'
service); B (pricing and bookkeeping); and C (securities lending
transactions) (relating to Fidelity Adjustable Rate Government Fund) were
filed as Exhibit 9(f) to Post-Effective Amendment No. 70.
(g) Form of Schedules A (transfer, dividend disbursing and shareholders'
service); B (pricing and bookkeeping); and C (securities lending
transactions) (relating to Fidelity Mid-Cap Stock Fund) were filed as
Exhibit 9(g) to Post-Effective Amendment No. 79.
10. Not applicable.
11. Consent of Coopers & Lybrand is filed herein as Exhibit 11.
12. Not applicable.
13. Not applicable.
14. (a) Fidelity Individual Retirement Account Custodial Agreement and
Disclosure Statement, as currently in effect, is incorporated herein by
reference to Exhibit 14(a) to Post-Effective Amendment No. 67.
(b) Fidelity Defined Contribution Retirement Plan and Trust Agreement, as
currently in effect, is incorporated herein by reference to Exhibit 14(b)
to Post-Effective Amendment No. 67.
(c) Defined Benefit Pension Plan and Trust, as currently in effect, is
incorporated herein by reference to Exhibit 14(c) to Post-Effective
Amendment No. 67.
(d) Fidelity Group Individual Retirement Account Custodial Agreement, as
currently in effect, is incorporated herein by reference to Exhibit 14(d)
to Post-Effective Amendment No. 67.
(e) Fidelity 403(b)(7) Custodial Account Agreement, as currently in effect,
is incorporated herein by reference to Exhibit 14(e) to Post-Effective
Amendment No. 70.
(f) Fidelity Master Plan for Savings and Investments, as currently in
effect, is incorporated herein by reference to Exhibit 14(f) to
Post-Effective Amendment No. 70.
(g) Fidelity 401(a) Prototype Plan for Tax-exempt Employers, as currently
in effect, is incorporated herein by reference to Exhibit 14(g) to
Post-Effective Amendment No. 67.
15. (a) Distribution and Service Plan for Spartan Long-Term Government Bond
Fund is incorporated herein by reference to Exhibit 15(a) to Post-Effective
Amendment No. 67.
(b) Distribution and Service Plan for Fidelity Adjustable Rate Government
Fund is incorporated herein by reference to Exhibit 15(b) to Post-Effective
Amendment No. 70.
(c) Distribution and Service Plan for Fidelity Utilities Income Fund is
filed herein as Exhibit 15(c).
16. A schedule for computation of performance quotations is incorporated
herein by reference to Exhibit 16 to Post-Effective Amendment No. 57. An
amendment to this schedule providing explanation of an additional quotation
is incorporated herein by reference to Exhibit 16 to Post-Effective
Amendment No. 59.
(a) A schedule for computation of performance quotations for Spartan
Long-Term Government Bond Fund is incorporated herein by reference to
Exhibit 16(a) to Post-Effective Amendment No. 66.
(b) A schedule for computation of performance quotations for Fidelity
Adjustable Rate Government Fund is incorporated herein by reference to
Exhibit 16(b) to Post-Effective Amendment No. 70.
(c) A schedule for computation of performance calculations is incorporated
herein by reference to Exhibit 16(c) of Post-Effective Amendment No. 76.
(d) Backup for the computation of Fidelity Equity-Income Fund's moving
average is incorporated herein by reference to Exhibit 16(d) of
Post-Effective Amendment No. 76.
(e) Backup for the computation of Fidelity Real Estate Investment
Portfolio's moving average is incorporated herein by reference to Exhibit
16(e) of Post-Effective Amendment No. 76.
(f) Backup for the computation of Fidelity Utilities Income Fund's moving
average is incorporated herein by reference to Exhibit 16(f) of
Post-Effective Amendment No. 76.
Item 25. Persons Controlled by or Under Common Control with Registrant
The Board of Trustees of Fidelity Devonshire Trust is substantially the
same as the boards of other funds advised by FMR, each of which has
Fidelity Management & Research Company as its investment adviser. In
addition, the officers of these funds are substantially identical.
Nonetheless, the Registrant takes the position that it is not under common
control with these other funds since the power residing in the respective
boards and officers arises as the result of an official position with the
respective funds.
Item 26. Number of Holders of Securities January 31, 1994
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Fidelity Adjustable Rate Government Fund 1
Fidelity Mid Cap Stock Fund 1
Fidelity Equity-Income Fund 625,223
Fidelity Real Estate Investment Portfolio 38,682
Fidelity Utilities Income Fund 107,794
Spartan Long-Term Government Bond Fund 1,996
Item 27. Indemnification
Article XI, Section 2 of the Declaration of Trust sets forth the
reasonable and fair means for determining whether indemnification shall be
provided to any past or present Trustee or officer. It states that the
Registrant shall indemnify any present or past Trustee or officer to the
fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any claim, action, suit or
proceeding in which he is involved by virtue of his service as a trustee,
an officer, or both. Additionally, amounts paid or incurred in settlement
of such matters are covered by this indemnification. Indemnification will
not be provided in certain circumstances, however. These include instances
of willful misfeasance, bad faith, gross negligence, and reckless disregard
of the duties involved in the conduct of the particular office involved.
Item 28. Business and Other Connections of Investment Adviser
(1) FIDELITY MANAGEMENT & RESEARCH COMPANY
FMR serves as investment adviser to a number of other investment
companies. The directors and officers of the Adviser have held, during the
past two fiscal years, the following positions of a substantial nature.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman of the Executive Committee of FMR; President
and Chief Executive Officer of FMR Corp.; Chairman of
the Board and a Director of FMR, FMR Corp., FMR Texas
Inc., Fidelity Management & Research (U.K.) Inc. and
Fidelity Management & Research (Far East) Inc.;
President and Trustee of funds advised by FMR;
J. Gary Burkhead President of FMR; Managing Director of FMR Corp.;
President and a Director of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc. and Fidelity
Management & Research (Far East) Inc.; Senior Vice
President and Trustee of funds advised by FMR.
Peter S. Lynch Vice Chairman of FMR (1992).
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Rufus C. Cushman, Jr. Vice President of FMR and of funds advised by FMR;
Corporate Preferred Group Leader.
Will Danoff Vice President of FMR (1993) and of a fund advised by
FMR.
Scott DeSano Vice President of FMR (1993).
Penelope Dobkin Vice President of FMR and of a fund advised by FMR.
Larry Domash Vice President of FMR (1993).
George Domolky Vice President of FMR (1993) and of a fund advised by
FMR.
Charles F. Dornbush Senior Vice President of FMR; Chief Financial Officer of
the Fidelity funds; Treasurer of FMR Texas Inc., Fidelity
Management & Research (U.K.) Inc., and Fidelity
Management & Research (Far East) Inc.
Robert K. Duby Vice President of FMR.
Margaret L. Eagle Vice President of FMR and of a fund advised by FMR.
Kathryn L. Eklund Vice President of FMR.
Richard B. Fentin Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Daniel R. Frank Vice President of FMR and of funds advised by FMR.
Gary L. French Vice President of FMR and Treasurer of the funds advised
by FMR. Prior to assuming the position as Treasurer he
was Senior Vice President, Fund Accounting - Fidelity
Accounting & Custody Services Co.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Income/Growth Group
Leader and International Group Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Daniel Harmetz Vice President of FMR and of a fund advised by FMR.
Ellen S. Heller Vice President of FMR.
</TABLE>
John Hickling Vice President of FMR (1993) and of funds advised by
FMR.
<TABLE>
<CAPTION>
<S> <C>
Robert F. Hill Vice President of FMR; and Director of Technical
Research.
Stephan Jonas Vice President of FMR (1993).
David B. Jones Vice President of FMR (1993).
Steven Kaye Vice President of FMR (1993) and of a fund advised by
FMR.
Frank Knox Vice President of FMR (1993).
Robert A. Lawrence Senior Vice President of FMR (1993); and High Income
Group Leader.
Alan Leifer Vice President of FMR and of a fund advised by FMR.
Harris Leviton Vice President of FMR (1993) and of a fund advised by
FMR.
Bradford E. Lewis Vice President of FMR and of funds advised by FMR.
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Jacques Perold Vice President of FMR.
Brian Posner Vice President of FMR (1993) and of a fund advised by
FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Richard A. Spillane Vice President of FMR and of funds advised by FMR; and
Director of Equity Research.
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Thomas Steffanci Senior Vice President of FMR (1993); and Fixed-Income
Division Head.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Donald Taylor Vice President of FMR (1993) and of funds advised by
FMR.
Beth F. Terrana Senior Vice President of FMR (1993) and of funds advised
by FMR.
Joel Tillinghast Vice President of FMR (1993) and of a fund advised by
FMR.
Robert Tucket Vice President of FMR (1993).
George A. Vanderheiden Senior Vice President of FMR; Vice President of funds
advised by FMR; and Growth Group Leader.
Jeffrey Vinik Senior Vice President of FMR (1993) and of a fund advised
by FMR.
Guy E. Wickwire Vice President of FMR and of a fund advised by FMR.
Arthur S. Loring Senior Vice President (1993), Clerk and General Counsel of
FMR; Vice President, Legal of FMR Corp.; and Secretary
of funds advised by FMR.
</TABLE>
(2) FIDELITY MANAGEMENT & RESEARCH (U.K.) INC. (FMR U.K.)
FMR U.K. provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following positions
of a substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR U.K.; Chairman of the
Executive Committee of FMR; Chief Executive Officer of FMR
Corp.; Chairman of the Board and a Director of FMR, FMR
Corp., FMR Texas Inc., and Fidelity Management &
Research (Far East) Inc.; President and Trustee of funds advised
by FMR.
J. Gary Burkhead President and Director of FMR U.K.; President of FMR;
Managing Director of FMR Corp.; President and a Director of
FMR Texas Inc. and Fidelity Management & Research (Far
East) Inc.; Senior Vice President and Trustee of funds advised
by FMR.
Richard C. Habermann Senior Vice President of FMR U.K.; Senior Vice President of
Fidelity Management & Research (Far East) Inc.; Director
of Worldwide Research of FMR.
Charles F. Dornbush Treasurer of FMR U.K.; Treasurer of Fidelity Management
& Research (Far East) Inc.; Treasurer of FMR Texas Inc.,
Senior Vice President and Chief Financial Officer of the Fidelity
funds.
David Weinstein Clerk of FMR U.K.; Clerk of Fidelity Management &
Research (Far East) Inc.; Secretary of FMR Texas Inc.
</TABLE>
(3) FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. (FMR Far East)
FMR Far East provides investment advisory services to Fidelity Management
& Research Company and Fidelity Management Trust Company. The
directors and officers of the Sub-Adviser have held the following positions
of a substantial nature during the past two fiscal years.
<TABLE>
<CAPTION>
<S> <C>
Edward C. Johnson 3d Chairman and Director of FMR Far East; Chairman of the
Executive Committee of FMR; Chief Executive Officer of
FMR Corp.; Chairman of the Board and a Director of
FMR, FMR Corp., FMR Texas Inc. and Fidelity
Management & Research (U.K.) Inc.; President and
Trustee of funds advised by FMR.
J. Gary Burkhead President and Director of FMR Far East; President of
FMR; Managing Director of FMR Corp.; President and a
Director of FMR Texas Inc. and Fidelity Management
& Research (U.K.) Inc.; Senior Vice President and
Trustee of funds advised by FMR.
Richard C. Habermann Senior Vice President of FMR Far East; Senior Vice
President of Fidelity Management & Research
(U.K.) Inc.; Director of Worldwide Research of FMR.
William R. Ebsworth Vice President of FMR Far East.
Bill Wilder Vice President of FMR Far East (1993).
Charles F. Dornbush Treasurer of FMR Far East; Treasurer of Fidelity
Management & Research (U.K.) Inc.; Treasurer of
FMR Texas Inc.; Senior Vice President and Chief
Financial Officer of the Fidelity funds.
David C. Weinstein Clerk of FMR Far East; Clerk of Fidelity Management
& Research (U.K.) Inc.; Secretary of FMR Texas
Inc.
</TABLE>
Item 29. Principal Underwriters
(a) Fidelity Distributors Corporation (FDC) acts as distributor for most
funds advised by FMR and the following other funds:
CrestFunds, Inc.
The Victory Funds
ARK Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
Edward C. Johnson 3d Director Trustee and President
Nita B. Kincaid Director None
W. Humphrey Bogart Director None
Kurt A. Lange President and Treasurer None
William L. Adair Senior Vice President None
Thomas W. Littauer Senior Vice President None
Arthur S. Loring Vice President and Clerk Secretary
* 82 Devonshire Street, Boston, MA
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by
Section 31a of the 1940 Act and the Rules promulgated thereunder are
maintained by Fidelity Management & Research Company or Fidelity
Service Co., 82 Devonshire Street, Boston, MA 02109, or the funds'
respective custodians: The Bank of New York, 110 Washington Street, New
York, N.Y. (Spartan Long-Term Government Bond Fund); The Chase Manhattan
Bank, 1211 Avenue of the Americas, New York, N.Y. (Fidelity Equity-Income
Fund); and Brown Brothers Harriman & Co., 40 Water Street, Boston, MA
(Fidelity Utilities Income Fund and Fidelity Real Estate Investment
Portfolio).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant undertakes to file a Post-Effective Amendment, using
financial statements for Fidelity Adjustable Rate Government Fund that need
not be certified, within six months of the fund's effectiveness. The
Registrant also undertakes to present the Management Contract and
Distribution and Service Plan of Fidelity Adjustable Rate Government fund
to shareholders of the fund for their approval at the first shareholder
meeting of the fund, which will be held within 16 months of effectiveness
of Post-Effective Amendment No. 70.
The Registrant undertakes to file a Post-Effective Amendment, using
financial statements for Fidelity Mid-Cap Stock Fund that need not be
certified, within six months of the fund's effectiveness. The Registrant
also undertakes for the fund: (1) to call a meeting of shareholders for
the purpose of voting upon the question of removal of trustee or trustees,
when requested to do so by record holders of not less than 10% of its
outstanding shares; and (2) to assist in communications with other
shareholders pursuant to Section 16(c)(1) and (2), whenever shareholders
meeting the qualifications set forth in Section 16(c) seek the opportunity
to communicate with other shareholders with a view toward requesting a
meeting.
The Registrant on behalf of Fidelity Equity-Income Fund, Fidelity Real
Estate Investment Portfolio, Fidelity Utilities Income Fund, Spartan
Long-Term Government Bond Fund, Fidelity Adjustable Rate Government Fund,
and Fidelity Mid-Cap Stock Fund undertakes, provided the information
required by Item 5A is contained in the annual report, to furnish each
person to whom a prospectus has been delivered, upon their request and
without charge, a copy of the Registrant's lates annual report to
shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for the effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 81 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and Commonwealth of Massachusetts, on the 17th day
of March 1994.
FIDELITY DEVONSHIRE TRUST
By /s/Edward C. Johnson 3d (dagger)
Edward C. Johnson 3d, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
(Signature) (Title) (Date)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Edward C. Johnson 3d(dagger) President and Trustee March 17, 1994
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Gary L. French Treasurer March 17, 1994
Gary L. French
/s/J. Gary Burkhead Trustee March 17, 1994
J. Gary Burkhead
/s/Ralph F. Cox * Trustee March 17, 1994
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee March 17, 1994
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee March 17, 1994
Richard J. Flynn
/s/E. Bradley Jones * Trustee March 17, 1994
E. Bradley Jones
/s/Donald J. Kirk * Trustee March 17, 1994
Donald J. Kirk
/s/Peter S. Lynch * Trustee March 17, 1994
Peter S. Lynch
/s/Edward H. Malone * Trustee March 17, 1994
Edward H. Malone
/s/Marvin L. Mann_____* Trustee March 17, 1994
Marvin L. Mann
/s/Gerald C. McDonough* Trustee March 17, 1994
Gerald C. McDonough
/s/Thomas R. Williams * Trustee March 17, 1994
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated October 20, 1993 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated October 20, 1993 and filed herewith.
POWER OF ATTORNEY
We, the undersigned Directors, Trustees or General Partners, as the case
may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individuals serve as Board Members (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, our true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for us and in our names in the appropriate capacities, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
our names and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS our hands on this twentieth day of October, 1993.
/s/Edward C. Johnson 3d /s/Peter S. Lynch
Edward C. Johnson 3d Peter S. Lynch
/s/J. Gary Burkhead /s/Edward H. Malone
J. Gary Burkhead Edward H. Malone
/s/Richard J. Flynn /s/Gerald C. McDonough
Richard J. Flynn Gerald C. McDonough
/s/E. Bradley Jones /s/Thomas R. Williams
E. Bradley Jones Thomas R. Williams
/s/Donald J. Kirk
Donald J. Kirk
POWER OF ATTORNEY
I, the undersigned President and Director, Trustee or General Partner, as
the case may be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Institutional Trust
Fidelity Advisor Series II Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Magellan Fund
Fidelity Advisor Series IV Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series V Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VII Fidelity Municipal Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Securities Fund
Fidelity Commonwealth Trust Fidelity Select Portfolios
Fidelity Congress Street Fund Fidelity Sterling Performance Portfolio, L.P.
Fidelity Contrafund Fidelity Summer Street Trust
Fidelity Corporate Trust Fidelity Trend Fund
Fidelity Court Street Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Destiny Portfolios Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Union Street Trust
Fidelity Devonshire Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Exchange Fund Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Income Fund
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as President and Board Member (collectively, the
"Funds"), hereby severally constitute and appoint J. Gary Burkhead, my true
and lawful attorney-in-fact, with full power of substitution, and with full
power to sign for me and in my name in the appropriate capacity, all
Pre-Effective Amendments to any Registration Statements of the Funds, any
and all subsequent Post-Effective Amendments to said Registration
Statements, any Registration Statements on Form N-14, and any supplements
or other instruments in connection therewith, and generally to do all such
things in my name and behalf in connection therewith as said
attorney-in-fact deem necessary or appropriate, to comply with the
provisions of the Securities Act of 1933 and Investment Company Act of
1940, and all related requirements of the Securities and Exchange
Commission. I hereby ratify and confirm all that said attorneys-in-fact or
their substitutes may do or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Edward C. Johnson 3d October 20, 1993
Edward C. Johnson 3d
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series VI Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VIII Fidelity New York Municipal Trust
Fidelity California Municipal Trust Fidelity Puritan Trust
Fidelity Capital Trust Fidelity School Street Trust
Fidelity Charles Street Trust Fidelity Select Portfolios
Fidelity Commonwealth Trust Fidelity Sterling Performance Portfolio, L.P.
Fidelity Congress Street Fund Fidelity Summer Street Trust
Fidelity Contrafund Fidelity Trend Fund
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Devonshire Trust Fidelity U.S. Investments-Government Securities
Fidelity Financial Trust Fund, L.P.
Fidelity Fixed-Income Trust Fidelity Yen Performance Portfolio, L.P.
Fidelity Government Securities Fund Spartan U.S. Treasury Money Market
Fidelity Hastings Street Trust Fund
Fidelity Income Fund Variable Insurance Products Fund
Fidelity Institutional Trust Variable Insurance Products Fund II
Fidelity Investment Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Ralph F. Cox October 20, 1993
Ralph F. Cox
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Special Situations Fund
Fidelity Advisor Series IV Fidelity Sterling Performance Portfolio, L.P.
Fidelity Advisor Series VI Fidelity Trend Fund
Fidelity Advisor Series VII Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Advisor Series VIII Fidelity U.S. Investments-Government Securities
Fidelity Contrafund Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Yen Performance Portfolio, L.P.
Portfolio, L.P. Spartan U.S. Treasury Money Market
Fidelity Fixed-Income Trust Fund
Fidelity Government Securities Fund Variable Insurance Products Fund
Fidelity Hastings Street Trust Variable Insurance Products Fund II
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Marvin L. Mann October 20, 1993
Marvin L. Mann
POWER OF ATTORNEY
I, the undersigned Director, Trustee or General Partner, as the case may
be, of the following investment companies:
<TABLE>
<CAPTION>
<S> <C>
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series III Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series IV Fidelity School Street Trust
Fidelity Advisor Series VI Fidelity Select Portfolios
Fidelity Advisor Series VIII Fidelity Sterling Performance Portfolio, L.P.
Fidelity Beacon Street Trust Fidelity Trend Fund
Fidelity Capital Trust Fidelity Union Street Trust
Fidelity Commonwealth Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Contrafund Fidelity U.S. Investments-Government Securities
Fidelity Deutsche Mark Performance Fund, L.P.
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Financial Trust Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund
Fidelity Government Securities Fund Variable Insurance Products Fund II
Fidelity Hastings Street Trust
Fidelity Institutional Trust
</TABLE>
plus any other investment company for which Fidelity Management &
Research Company acts as investment adviser and for which the undersigned
individual serves as a Board Member (collectively, the "Funds"), hereby
severally constitute and appoint Arthur J. Brown, Arthur C. Delibert,
Robert C. Hacker, Richard M. Phillips, Dana L. Platt and Stephanie A.
Xupolos, each of them singly, my true and lawful attorneys-in-fact, with
full power of substitution, and with full power to each of them, to sign
for me and in my name in the appropriate capacity, all Pre-Effective
Amendments to any Registration Statements of the Funds, any and all
subsequent Post-Effective Amendments to said Registration Statements, any
Registration Statements on Form N-14, and any supplements or other
instruments in connection therewith, and generally to do all such things in
my name and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the Securities
Act of 1933 and Investment Company Act of 1940, and all related
requirements of the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorneys-in-fact or their substitutes may do
or cause to be done by virtue hereof.
WITNESS my hand on the date set forth below.
/s/Phyllis Burke Davis October 20, 1993
Phyllis Burke Davis
EXHIBIT 24(A)(1)
FIDELITY
UTILITIES INCOME
FUND
(Registered trademark)
ANNUAL REPORT
JANUARY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the last six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 25 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 29 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 33 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments, either municipal bonds
or municipal bond funds. Often these can provide higher after-tax yields
than comparable taxable investments. For example, if you're in the new 36%
federal income tax bracket and invest $10,000 in a taxable investment
yielding 7%, you'll pay $252 in federal taxes and receive $448 in income.
That same $10,000 invested in a tax-free bond fund yielding 5.5% would
allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
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 JANUARY 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Utilities Income 19.34% 104.73% 140.04%
S&P 500(Registered trademark) 12.88% 90.05% 141.58%
S&P Utilities Index 13.41% 92.78% 135.26%
Average Utility Fund 11.78% 88.85% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on November 27, 1987. 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 67 utility funds tracked by Lipper Analytical
Services. All three benchmarks include reinvested dividends and capital
gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Utilities Income 19.34% 15.41% 15.21%
S&P 500(Registered trademark) 12.88% 13.70% 15.32%
S&P Utilities Index 13.41% 14.03% 14.83%
Average Utility Fund 11.78% 13.53% 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
Utilities Inc S&P Utilities S&P 500
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 23989.27 23526.02 24157.53
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Utilities Income Fund on November 27, 1987, when the fund started. As the
chart shows, by January 31, 1994, the value of your investment would have
grown to $24,004 - a 140.04% 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 $24,158 a 141.58%
increase. A $10,000 investment in the S&P Utilities index would have
grown to $23,526 - a 135.26% increase.
UNDERSTANDING
PERFORMANCE
(checkmark)
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
MARKET RECAP
Low inflation, falling interest rates
and an improving economy
boosted U.S. stocks during the
12 months ended January 31,
1994. The Standard &
Poor's 500 stock index rose
12.88%, slightly ahead of the
market's long-term annual
average return. The technology
sector excelled, and
communication stocks soared as
telephone utilities, cellular
companies, and entertainment
firms formed strategic alliances.
Other top performers were
economically sensitive sectors,
like autos and steel; heavy
machinery; and precious metals,
all up in the second half of the
year. Some tobacco, drug, and
brand name consumer products
stocks picked up by year-end, but
had weak returns for the year
overall. Conversely, financial
stocks did well the first half of the
year, but gave back some of their
gains in the second half. The
NASDAQ Composite Index -
which tracks over-the-counter
stocks - rose 14.95% for the
year, but was outpaced by the
Dow Jones Industrial Average -
an index of 30 blue-chip stocks -
which rose 23.61%. On January
21, the Dow broke the 3900
barrier for the first time, and
finished the month at 3978.
Returns in most international
markets easily outpaced those in
the U.S., with Hong Kong
remaining the big winner even
after a correction in January. The
Morgan Stanley EAFE (Europe,
Australia, Far East) index rose
43.79%, while the Morgan
Stanley Emerging Markets Index
was up 75.51% for the year
ended January 31, 1994.
An interview with John Muresianu, Portfolio Manager of Fidelity
Utilities Income Fund
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. It's been a good year. The fund's total return for the 12 months through
January 31 was 19.34%. The average utility fund had a total return of
11.78% during the period, according to Lipper Analytical Services, and the
S&P Utilities Index returned 13.41%. (photo_of_portfolio_manager)
Q. WHAT DROVE THE SECTOR'S PERFORMANCE?
A. The first three quarters of 1993 were sensational for gas, electric and
telephone utility stocks. As interest rates fell, investors looked to
utilities to boost their income. Moreover, utility companies generally
carry a lot of debt, so their interest expenses decline significantly as
rates fall. That in turn boosts their earnings prospects. But during the
past several months, utilities stocks declined from their peaks.
Q. FOR THE YEAR THE FUND CAME OUT FAR AHEAD OF BOTH THE INDEX AND THE
AVERAGE UTILITY FUND. WHAT MADE THE DIFFERENCE?
A. A couple factors. First, early in the year, I increased the percentage
of the fund in gas and telephone utilities compared to electric utilities;
both outperformed electrics in 1993. Second, I shifted some assets to
non-utilities later in the period, which helped the fund continue to
outperform both the utilities index and the average.
Q. LET'S START WITH GAS UTILITIES. WHAT WAS THE STORY THERE?
A. Gas utilities as a group did better than electric utilities because they
benefited not only from a decline in interest rates but also from a tighter
supply/demand balance for natural gas. On the demand side, federal policy
is promoting the use of this clean, abundant, domestic fuel. On the supply
side, drilling had declined to historic lows in 1992, reducing supply and
pushing up prices. In particular, the fund benefited from owning some gas
stocks that did exceptionally well. For example, the fund's largest natural
gas investments, Enron and Sonat, did much better than the average gas
utility during the year.
Q. WHAT ABOUT TELEPHONE UTILITIES?
A. They did better than electrics because of their prospects for superior
revenue and earnings growth. For example, growth of new telephone lines
helps drive telephone revenues. And line growth at the regional bell
companies has been up 2 - 4%, while call volumes have been up 5 - 8% over
the past year. The companies have also profited from adding new services
for existing customers, such as call waiting, at little additional cost.
Plus, the growth of cellular profits has been explosive. Finally, a big
positive has been the cost reduction story. Telephone companies have (and
are continuing) to cut headcount. They're also seeing the prices of key
components of their capital spending budgets - such as fiber - come down.
Even after dividends and capital spending, the companies still have had
leftover cash. At the end of January, eight of my top 10 investments were
telephone stocks, including Southwestern Bell, Bell Atlantic, and
Ameritech.
Q. HOW DID THE FUND'S INVESTMENT IN OVERSEAS UTILITIES WORK OUT?
A. Very well. At the end of January, the fund had about a 15% stake in
overseas utilities. Some of the largest investments in 1993 were in Hong
Kong, where the fund owned China Light and Power, and Hong Kong Electric;
Latin America, where our investments included telephone utilities like
Telefonos de Mexico and Telebras; and Europe, where we owned electric
utilities like Empresa Nacional De Electricidad (known as Endesa),
Iberdrola, Powergen, and National Power. Hong Kong's electric utilities
have vastly superior sales growth prospects compared to U.S. electric
utilities, even without considering the upside potential from power
projects in mainland China. In Latin America, utilities also have superior
growth prospects and are in many instances benefiting from favorable
regulatory changes. Finally, European utilities have benefited from an even
sharper drop in interest rates than we've seen here in the United States.
My focus has been on foreign utilities that are cheaper than their U.S.
counterparts.
Q. LOOKING BACK, WERE THERE ANY
DISAPPOINTMENTS?
A. Yes. First, I very much wish I'd been quicker in reducing the percentage
of the fund in utilities in general when the stocks peaked in September.
Second, more specifically, I would have been wise to reduce the fund's
stake in gas last summer when the stocks reached rather expensive levels.
Third, several stocks didn't do as well as I'd anticipated. For example,
ENSERCH in the gas group, NYNEX in the telephone group, and Commonwealth
Edison in the electric utility sector. In each instance, however, the
stocks are very cheap, turnaround stories which should do well long term.
Despite these disappointments, 1993's performance was beyond my
expectations and is unlikely to repeat itself.
Q. WHAT'S THE OUTLOOK FOR UTILITIES OVERALL FROM HERE?
A. With U.S. stock prices near historic highs, a correction is a
significant risk. During such a correction, utilities would probably
outperform the market because of their high yields - unless inflation were
accelerating dramatically, which I don't think is likely to happen soon.
Still, it's worth bearing in mind that utilities will underperform other
stocks if the stock market and interest rates both continue to rise.
Q. SO HOW WILL THIS AFFECT YOUR
STRATEGY?
A. Given the possibility of a market correction and the fact that utilities
have lagged the market recently, I'll probably begin to boost the fund's
stake in the sector, keeping my focus on gas and telephones. Longer term, I
expect domestic telephone and gas utilities to continue to outperform
domestic electric utilities. Not only do telephone and gas utilities have
higher revenue and earnings growth, but electrics are just beginning the
process of deregulation, which adds a greater degree of unpredictability to
their earnings prospects. Since no one knows for sure where the market or
interest rates are headed, I'll probably also continue to own some stocks
in other sectors.
Q. WHEN DID YOU START ADDING NON-UTILITIES TO THE FUND?
A. I began late last summer, after all the utility sectors had
significantly outperformed the market and no longer seemed as attractively
priced compared to other sectors in the market. I was also concerned that
interest rates were nearing a bottom, and that the market was entering a
phase less favorable to interest-
sensitive stocks in general.
Q. WHAT DID YOU BUY?
A. My focus was on non-utility stocks that had done relatively poorly over
the last 10 years but were now experiencing a turnaround in their earnings
prospects. Examples were Citicorp, whose earnings have benefited from a
sharp improvement in credit quality, and General Motors, which has
benefited from both an upturn in auto sales related to the economy's
recovery as well as from cost containment. At the end of January, the
percentage of the fund in non-utilities was about 27%. This figure will
vary with prospects for utilities, the outlook for interest rates, and
market conditions.
FUND FACTS
GOAL: to seek high current
income; may also consider
growth potential
START DATE: November 27, 1987
SIZE: as of January 31,
1994, over $1.4 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
(checkmark)
JOHN MURESIANU ON HIS
INVESTMENT STRATEGY:
"I try to buy stocks that are
cheap with superior prospects
for growing earnings. When
one utility sector becomes
expensive compared to its
earnings, I'll reduce the
percentage of the fund
invested in that sector relative
to other sectors. When the
earnings prospects of a
particular sector or stock
improves compared to market
expectations, I'll tend to add
to investments in that stock or
sector. The fund's stake in
non-
utilities will vary with changes
in the earnings prospects and
valuations - yardsticks like
price-to-earnings - of
utilities, as well as changing
interest rates and stock
market conditions."
(bullet) As of January 31, 1994,
telephone utilities accounted
for 27.6% of the fund's
investments, followed by
electric utilities at 25.8% and
gas utilities at 19%.
(bullet) The fund must hold at least
65% of its assets in stocks of
public utility companies.
Recently, that figure stood at
70%.
DISTRIBUTIONS
The Board of Trustees of
Fidelity Utilities Income Fund
voted to pay on March 7,
1994, to shareholders of
record at the opening of
business on March 4, 1994, a
distribution of $.31 derived
from capital gains realized
from sales of portfolio
securities and a dividend of
$.10 from net investment
income.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JANUARY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
SIX MONTHS AGO
Southwestern Bell Corp. 3.0 3.1
Bell Atlantic Corp. 2.9 3.1
Ameritech Corp. 2.8 3.0
BellSouth Corp. 2.7 2.0
Entergy Corp. 2.7 1.7
GTE Corp. 2.6 2.0
Pacific Telesis Group 2.6 2.5
U.S. West, Inc. 2.6 2.8
NYNEX Corp. 2.4 2.8
Enron Corp. 2.1 3.1
TOP INDUSTRIES AS OF JANUARY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
SIX MONTHS AGO
Telephone Services 27.6 23.5
Electric Utilities 25.8 36.2
Gas 19.0 21.6
ASSET ALLOCATION
AS OF JANUARY 31, 1994 * AS OF JULY 31, 1993 **
Row: 1, Col: 1, Value: 3.2
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 35.9
Row: 1, Col: 4, Value: 20.0
Row: 1, Col: 5, Value: 20.0
Row: 1, Col: 6, Value: 20.0
Stocks 88.3%
Bonds 4.4%
Short-term
Investments 7.3%
Stocks 95.9%
Bonds 0.9%
Short-term
Investments 3.2%
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 4.4
Row: 1, Col: 3, Value: 28.3
Row: 1, Col: 4, Value: 20.0
Row: 1, Col: 5, Value: 20.0
Row: 1, Col: 6, Value: 20.0
* FOREIGN
INVESTMENTS 19.2%
** FOREIGN
INVESTMENTS 5.8%
INVESTMENTS JANUARY 31, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 93.1%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.1%
Boeing Co. 20,000 $ 865 09702310
BASIC INDUSTRIES - 1.6%
CHEMICALS & PLASTICS - 0.4%
Eastman Chemical Co. 14,850 650 27743210
NOVA Corp. of Alberta Class A 339,000 2,455 66977110
Union Carbide Corp. 116,600 2,973 90558110
6,078
METALS & MINING - 0.5%
Aluminum Co. of America 60,000 4,747 02224910
Phelps Dodge Corp. 28,000 1,519 71726510
Reynolds Metals Co. 34,300 1,831 76176310
8,097
PAPER & FOREST PRODUCTS - 0.7%
Stone Container Corp. (a) 127,500 2,104 86158910
Temple-Inland, Inc. 53,200 2,793 87986810
Weyerhaeuser Co. 111,500 5,450 96216610
10,347
TOTAL BASIC INDUSTRIES 24,522
CONGLOMERATES - 0.2%
Canadian Pacific Ltd. Ord. 105,000 1,916 13644030
Grupo Carso SA de CV Class A-1 (a) 146,000 1,688 40099594
3,604
CONSTRUCTION & REAL ESTATE - 2.8%
BUILDING MATERIALS - 0.4%
Armstrong World Industries, Inc. 10,000 563 04247610
Cemex SA, Series B (a) 130,000 4,157 15299293
Lafarge Corp. 10,000 250 50586210
Medusa Corp. 15,300 497 58507230
5,467
CONSTRUCTION - 0.2%
Bufete Industrial SA sponsored ADR representing 3
ordinary certificates Banco 11,100 561 11942H10
Hopewell Holdings Ltd. 877,000 999 44099999
Pulte Corp. 5,000 174 74586710
YTL Corporation (a) 250,000 1,273 98799092
3,007
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - 2.2%
Associated Estates Realty Corp. 20,000 $ 435 04560410
Capstead Mortgage Corp. 186,300 7,778 14067E10
Centerpoint Properties Corp. 20,000 372 15189510
Chateau Properties, Inc. 10,000 213 16173910
Crown American Realty Trust (SBI) 20,000 285 22818610
Developers Diversified Realty 56,000 1,589 25159110
Equity Residential Properties Trust (SBI) 35,000 1,019 29476L10
Federal Realty Investment Trust 50,000 1,206 31374720
G&L Realty Corp. (a) 60,000 1,013 36127110
Haagen Alexander Properties, Inc. 167,000 2,818 40443E10
Kimco Realty Corporation 74,600 2,667 49446R10
LTC Properties, Inc. 68,700 910 50217510
Manufactured Home Community 11,300 489 56468210
McArthur/Glen Realty Corp. (a) 10,000 275 57918810
Simon Properties Group, Inc. (a) 135,000 3,308 82880510
Taubman Centers, Inc. 230,000 2,645 87666410
Vornado Realty Trust 55,600 1,946 92904210
Weingarten Realty Investors (SBI) 84,400 3,144 94874110
32,112
TOTAL CONSTRUCTION & REAL ESTATE 40,586
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 2.4%
Chrysler Corp. 176,900 10,879 17119610
Ford Motor Co. 60,000 4,020 34537010
General Motors Corp. 290,100 17,805 37044210
Toyota Motor Corporation 190,000 3,426 89399999
36,130
CONSUMER ELECTRONICS - 0.2%
Matsushita Electric Industrial Co. Ltd. 70,000 1,114 57687910
Sony Corp. 28,000 1,641 83569999
2,755
TEXTILES & APPAREL - 0.0%
Fruit of the Loom, Inc. Class A (a) 10,000 253 35941610
TOTAL DURABLES 39,138
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 4.0%
COAL - 0.0%
Pittston Co. Minerals Group 4,100 $ 112 72570120
ENERGY SERVICES - 0.3%
Halliburton Co. 116,500 3,757 40621610
Schlumberger Ltd. 10,000 594 80685710
4,351
INDEPENDENT POWER - 0.4%
California Energy Co., Inc. (a) 19,400 361 13019010
Magma Power Co. (a) 152,100 5,209 55919410
Thermo Electron Corp. 10,000 429 88355610
5,999
OIL & GAS - 3.3%
British Petroleum PLC ADR 167,500 11,432 11088940
Chevron Corp. 58,100 5,425 16675110
Exxon Corp. 24,500 1,629 30229010
Nuevo Energy Corporation (a) 14,500 315 67050910
Occidental Petroleum Corp. 96,900 1,744 67459910
Petroleum Heat & Power, Inc. Class A 182,000 1,684 71660030
Phillips Petroleum Co. 166,500 4,912 71850710
Royal Dutch Petroleum Co. 125,900 13,849 78025770
Texaco, Inc. 63,200 4,274 88169410
Woodside Petroleum Ltd. 347,000 1,044 98022810
YPF Sociedad Anonima sponsored ADR representing
Class D shares 96,900 2,798 98424510
49,106
TOTAL ENERGY 59,568
FINANCE - 3.0%
BANKS - 1.7%
Banacci SA de CV:
Class C 28,000 270 06399893
Class L (a) 1,400 12
Banc One Corp. 10,000 375 05943810
Citicorp (a) 530,000 23,188 17303410
Grupo Financiero Bancomer Class B (a) 130,000 208 40048694
Mellon Bank Corp. 19,541 1,092 58550910
25,145
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 0.2%
Beneficial Corp. 800 $ 32
Burgenland Holding 14,000 529 12099A22
Dean Witter Discover & Co. 15,112 580 24240V10
Household International, Inc. 56,007 1,855 44181510
2,996
FEDERAL SPONSORED CREDIT - 0.5%
Federal Home Loan Mortgage Corporation 6,900 402 31340030
Federal National Mortgage Association 73,200 6,396 31358610
6,798
INSURANCE - 0.0%
American General Corp. 21,000 601 02635110
SAVINGS & LOANS - 0.1%
Ahmanson (H.F.) & Co. 30,000 563 00867710
Great Western Financial Corp. 30,387 589 39144210
1,152
SECURITIES INDUSTRY - 0.5%
Merrill Lynch & Co., Inc. 69,000 3,088 59018810
Nomura Securities Co. Ltd. 180,000 3,842 65536130
6,930
TOTAL FINANCE 43,622
HEALTH - 1.0%
DRUGS & PHARMACEUTICALS - 0.8%
Amgen, Inc. (a) 10,000 488 03116210
Bristol-Myers Squibb Co. 14,600 845 11012210
Lilly (Eli) & Co. 25,200 1,509 53245710
Merck & Co., Inc. 118,500 4,325 58933110
Pfizer, Inc. 18,800 1,215 71708110
Schering-Plough Corp. 18,800 1,184 80660510
Warner-Lambert Co. 23,700 1,543 93448810
11,109
MEDICAL FACILITIES MANAGEMENT - 0.2%
U.S. Healthcare, Inc. 52,500 3,491 91191010
TOTAL HEALTH 14,600
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 1.7%
ELECTRICAL EQUIPMENT - 0.7%
Alcatel Alsthom CGE 15,600 $ 2,077 01390492
General Electric Co. 45,200 4,870 36960410
Philips NV (a) 109,700 2,770 71833750
9,717
INDUSTRIAL MACHINERY & EQUIPMENT - 1.0%
Caterpillar, Inc. 79,700 8,299 14912310
Deere & Co. 25,200 2,029 24419910
Kenetech Corp. (a) 5,000 130 48887810
Tenneco, Inc. 86,600 4,979 88037010
15,437
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 25,154
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.1%
Tele-Communications, Inc. Class A (a) 19,400 529 87924010
Time Warner, Inc. 6,111 244 88731510
773
LODGING & GAMING - 0.0%
Promus Companies, Inc. (a) 4,000 203 74342A10
PUBLISHING - 0.0%
Times Mirror Co., Series A 11,300 410 88736010
RESTAURANTS - 0.1%
McDonald's Corp. 20,000 1,215 58013510
TOTAL MEDIA & LEISURE 2,601
NONDURABLES - 1.1%
TOBACCO - 1.1%
Philip Morris Companies, Inc. 225,500 13,586 71815410
RJR Nabisco Holdings Corp. (a) 300,000 2,250 74960K10
UST, Inc. 10,000 285 90291110
16,121
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 1.1%
APPAREL STORES - 0.1%
Charming Shoppes, Inc. 11,800 $ 136 16113310
Limited, Inc. (The) 30,000 533 53271610
669
GENERAL MERCHANDISE STORES - 1.0%
Sears, Roebuck & Co. 270,000 14,816 81238710
Wal-Mart Stores, Inc. 10,000 265 93114210
Woolworth Corp. 10,000 260 98088310
15,341
TOTAL RETAIL & WHOLESALE 16,010
SERVICES - 0.3%
ADVERTISING - 0.0%
Foote Cone & Belding Communications, Inc. 300 14
SERVICES - 0.3%
ADT Ltd. 47,200 472 00091530
Block (H&R), Inc. 26,600 1,167 09367110
Chemed Corp. 102,300 3,261 16359610
Jostens, Inc. 10,000 178 48108810
5,078
TOTAL SERVICES 5,092
TECHNOLOGY - 1.8%
COMMUNICATIONS EQUIPMENT - 0.2%
Cisco Systems, Inc. (a) 10,000 725 17275R10
DSC Communications Corp. (a) 33,000 1,984 23331110
Wellfleet Communications, Inc. (a) 10,000 743 94949710
3,452
COMPUTER SERVICES & SOFTWARE - 0.1%
Microsoft Corp. (a) 10,000 851 59491810
COMPUTERS & OFFICE EQUIPMENT - 0.8%
International Business Machines Corp. 200,000 11,350 45920010
Itron, Inc. (a) 4,000 72
46574110
Xerox Corp. 10,000 981 98412110
12,403
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.0%
Applied Materials, Inc. (a) 7,600 $ 335 03822210
ELECTRONICS - 0.5%
Augat, Inc. (a) 3,200 66
Hitachi, Ltd. 392,000 3,264 43357810
Intel Corp. 10,000 652 45814010
Texas Instruments, Inc. 49,776 3,497 88250810
7,479
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. 59,400 2,621 27746110
TOTAL TECHNOLOGY 27,141
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.3%
AMR Corp. (a) 14,500 1,042 00176510
UAL Corp. (a) 21,800 3,205 90254910
USAir Group, Inc. (a) 18,100 267 91190510
4,514
RAILROADS - 0.6%
CSX Corp. 95,400 8,753 12640810
TOTAL TRANSPORTATION 13,267
UTILITIES - 70.7%
CELLULAR - 0.1%
IDB Communications Group, Inc. (a) 23,000 1,256 44935510
ELECTRIC UTILITY - 24.1%
AES Corp. 268,432 6,375 00130H10
Allegheny Power System, Inc. 5,100 128 01741110
American Electric Power Co., Inc. 128,200 4,631 02553710
Boston Edison Co. 179,600 5,029 10059910
CMS Energy Corp. 637,400 15,457 12589610
Carolina Power & Light Co. 10,000 298 14414110
Centerior Energy Corp. 105,700 1,387 15188310
Central & South West Corp. 70,500 2,097 15235710
Central Costanera SA ADR (b) 2,800 104 15324M10
Central Hudson Gas & Electric Corp. 70,300 2,118 15360910
Central Louisiana Electric Co., Inc. 112,600 2,745 15389760
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Central Puerto SA ADR (b) 23,400 $ 1,018 15503810
China Light & Power Co. Ltd. 2,452,800 15,085 16940010
Cincinnati Gas & Electric Co. 142,750 3,783 17207010
Commonwealth Edison Co. 620,700 17,612 20279510
Commonwealth Energy Systems (SBI) 1,000 45
20280010
Consolidated Edison Co. of New York, Inc. 20,000 622 20911110
Consolidated Electric Power Asia Ltd. sponsored ADR (b) 72,100 1,100
20855210
DPL, Inc. 242,050 5,143 23329310
DQE, Inc. 167,200 5,559 23329J10
Destec Energy, Inc. (a) 9,700 146 25063N10
Detroit Edison Company 132,700 3,931 25084710
Dominion Resources, Inc. (Va.) 11,400 493 25747010
Duke Power Co. 30,000 1,260 26439910
EVN (Energie-Versor Nieder) 7,500 1,038 30099292
Eastern Utilities Associates 203,742 5,610 27717310
Electrobras PN B (a) 36,153,690 8,828 69699993
Empresa Nacional De Electricidad SA:
Ord. 12,500 698 29244710
sponsored ADR 161,400 8,978 29244720
Enersis SA sponsored ADR (a) 75,000 1,763 29274F10
Entergy Corp. 1,072,561 39,953 29364G10
FECSA (Fuerzas Elec Cat) Class A 375,000 2,917 35899E22
FPL Group, Inc. 16,000 590 30257110
General Public Utilities Corp. 83,500 2,547 37055010
Hawaiian Electric Industries, Inc. 14,500 513 41987010
Hidro Cantabrico 5,000 163 42899999
Hong Kong Electric Holdings Ord 4,526,000 17,170 43858010
Houston Industries, Inc. 167,000 7,619 44216110
IES Industries, Inc. 74,600 2,285 44949M10
Iberdrola SA 1,620,500 13,822 45499892
Illinois Power Co. 360,400 7,839 45209210
Korea Electric Power Corp. 14,000 541 50099B92
Light (Servicos de Electric) SA Ord. (a) 5,000,000 1,482 53299892
London Electricity PLC 193,700 2,071 54181095
Long Island Lighting Co. 165,300 3,885 54267110
Montana Power Co. 71,600 1,790 61208510
NIPSCO Industries, Inc. 347,100 11,107 62914010
National Power PLC (b) 513,700 3,732 63719496
New England Electric Systems 155,600 5,971 64400110
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Niagara Mohawk Power Corp. 452,500 $ 9,163 65352210
Northeast Utilities 230,600 5,823 66439710
Northern Electricity PLC 363,400 4,142 68499B92
Nova Scotia Power, Inc. 193,700 1,913 66981610
Ohio Edison Co. 50,000 1,094 67734710
PSI Resources, Inc. 310,600 7,959 69363210
Pacific Gas & Electric Co. 68,800 2,331 69430810
PacifiCorp. 68,100 1,277 69511410
Peco Energy Co. 79,200 2,287 69330410
Pinnacle West Capital Corp. (a) 405,400 9,071 72348410
Portland General Corp. 41,500 825 73650610
Powergen PLC Ord. 635,594 5,379 73890594
Public Service Co. of Colorado 208,515 6,542 74444810
Public Service Co. of New Mexico (a) 526,000 6,970 74449910
Public Service Enterprise Group, Inc. 156,400 4,946 74457310
Regional Electricity Companies England & Wales ADR (b) 10,000 985
75901J40
Rochester Gas & Electric Corp. 41,000 1,056 77136710
SCEcorp 18,400 359 78388210
Sevillana de Electricidad 285,000 1,636 81806599
Sithe Energies, Inc. (a) 154,000 2,021 82990410
Southern Co. (a) 183,800 7,995 84258710
Tenega Nasional BHD 160,000 1,006 92099992
Texas Utilities Co. 154,680 5,975 88284810
Union Electrica Fenosa 885,200 4,645 90659510
United Illuminating Co. 69,200 2,578 91063710
Veba Vereinigte Elektrizetaets & Bergwerks AG Ord. 21,700 6,425
92239110
Verbund Gesellschaft 26,600 1,629 92299999
355,110
GAS - 18.5%
Aquila Gas Pipeline Corp. (a) 46,000 604 03839B10
Arkla, Inc. 9,700 82
Brooklyn Union Gas Co. (The) 300,300 8,221 11425910
Coastal Corp. (The) 76,200 2,353 19044110
Columbia Gas System, Inc. (The) (a) 323,700 8,133 19764810
Consolidated Natural Gas Co. 223,200 10,267 20961510
ENSERCH Corp. 1,365,600 24,751 29356710
El Paso Natural Gas Co. 149,800 5,655 28369587
Energen Corp. 104,700 2,421 29265N10
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - CONTINUED
Enron Corp. 951,300 $ 31,274 29356110
Equitable Resources, Inc. 16,200 616 29454910
Hong Kong & China Gas Co. Ltd. 1,542,000 4,292 43855010
MCN Corp. 388,700 14,333 55267J10
MDU Resources Group, Inc. 44,500 1,368 55269010
NICOR, Inc. 95,000 2,731 65408610
ONEOK, Inc. 336,300 6,642 68267810
Pacific Enterprises 785,700 17,678 69423210
Panhandle Eastern Corp. 581,300 14,605 69846210
Piedmont Natural Gas, Inc. 7,046 154 72018610
Questar Corp. 435,900 14,112 74835610
Sonat, Inc. 945,500 29,429 83541510
Southern Union Company 10,350 340 84403010
Tejas Gas Corp. (Del.) (a) 54,000 2,970 87907510
Tejas Power Corp. (a) 223,600 2,348 87907910
Transco Energy Co. 55,000 853 89353210
TransCanada PipeLines Ltd. 575,400 8,767 89352610
Trident NGL Holdings (a) 100,000 1,075 89592610
UGI Corporation 246,331 5,696 90268110
WICOR, Inc. 127,700 4,006 92925310
Washington Gas Light Co. 93,400 3,876 93883710
Westcoat Energy, Inc. 866,100 15,559 95751D10
Western Resources, Inc. 54,600 1,822 95942510
Williams Companies, Inc. 950,200 24,824 96945710
Yankee Energy System, Inc. 62,600 1,510 98477910
273,367
TELEPHONE SERVICES - 27.4%
American Telephone & Telegraph Co. 11,900 675 03017710
Ameritech Corp. 971,400 40,799 03095410
ALC Communications Corp. (a) 10,000 320 00157530
ALLTEL Corp. 30,900 861 02003910
BCE, Inc. 125,300 4,537 05534B10
Bell Atlantic Corp. 759,800 43,119 07785310
BellSouth Corp. 657,400 40,430 07986010
GTE Corp. 1,119,700 38,490 36232010
Hong Kong Telecommunication Ltd.:
ADR 29,100 1,815 43857920
Ord. 494,800 1,031 43857991
LCI International, Inc. (a) 20,000 745 50181310
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
NYNEX Corp. 857,600 $ 35,162 67076810
Nippon Telegraph & Telephone Ord. (a) 186 1,673 65462492
Pacific Telesis Group 666,800 38,424 69489010
SIP Spa 5,200,000 13,330 78401792
Southwestern Bell Corp. 1,065,600 44,622 84533310
Sprint Corporation 35,400 1,283 85206110
Telebras:
ON 61,300,000 2,432 95499795
PN 378,026,000 17,968 95499792
Telecom Argentina Stet France 306,600 2,211 90899992
Telefonica Argentina Class B (a) 96,000 760 87999D92
Telefonica de Espana SA sponsored ADR 189,700 8,181 87938220
Telefonos de Mexico SA sponsored ADR representing
shares Ord. Class L 336,000 24,822 87940378
Telesp PN 4,519,000 1,872 87999B93
U.S. West, Inc. 872,700 38,181 91288910
403,743
WATER - 0.6%
American Water Works, Inc. 103,499 3,208 03041110
Generale des Eaux 10,821 5,359 37099210
8,567
TOTAL UTILITIES 1,042,043
TOTAL COMMON STOCKS
(Cost $1,160,921) 1,373,934
PREFERRED STOCKS - 2.8%
CONVERTIBLE PREFERRED STOCKS - 1.3%
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.0%
Olin Corp., Series A 19,200 921 68066530
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 0.3%
Alumax, Inc., Series A, $4.00 9,366 $ 1,124 02219720
Cyprus Amax Minerals Co., Series A, $4.00 18,733 1,335 23280920
Reynolds Metals Co. $3.31 42,000 2,310 76176350
4,769
TOTAL BASIC INDUSTRIES 5,690
DURABLES - 0.8%
AUTOS, TIRES, & ACCESSORIES - 0.8%
Ford Motor Co. (Del.), Series A, $4.20 101,700 11,378 34537020
ENERGY - 0.1%
OIL & GAS - 0.1%
Tosco Corp., Series F, $4.375 16,500 1,140 89149040
SERVICES - 0.1%
Pittston Co. $3.125 (b) 21,000 1,103 72570140
TOTAL CONVERTIBLE PREFERRED STOCKS 19,311
NONCONVERTIBLE PREFERRED STOCKS - 1.5%
UTILITIES - 1.5%
ELECTRIC UTILITY - 1.0%
Alabama Power Co. Class A 7.60% 116,200 3,036 01039271
Cleveland Electric Illuminating Co., Series L adj. rate 7,700 720
18610850
Gulf Power Co. Class A 7.30% 120,000 3,030 40247984
Mississippi Power Co. depository shares
representing 1/4 share 7 1/4% 135,600 3,475 60541786
Northern Indiana Public Service Co., Series A adj. rate 29,100 1,375
66526287
Public Service Co. of New Hampshire Co., Series A 77,500 2,150 74448283
Texas Utilities Electric Co.:
Series A adj. rate 7,700 745 88285059
Series B adj. rate 4,175 414 88285061
14,945
GAS - 0.3%
ENSERCH Corp., Series D adj. rate 75,500 3,794 29356730
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 0.2%
GTE North, Inc. $7.60 6,800 $ 687 36233750
SIP (Societa Ital Per L'Eser) Spa Di Risp Ord. 600,000 1,314 78401796
Stet Societa Finanziaria Telefonica Spa 500,000 1,134 85982592
3,135
TOTAL Utilities 21,874
TOTAL NONCONVERTIBLE PREFERRED STOCKS 21,874
TOTAL PREFERRED STOCKS
(Cost $33,001) 41,185
CORPORATE BONDS - 0.9%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
CONVERTIBLE BONDS - 0.2%
UTILITIES - 0.2%
GAS - 0.2%
Consolidated Natural Gas Co. 7 1/4%, 12/15/15 A2 $ 2,250 2,559 209615BL
NONCONVERTIBLE BONDS - 0.7%
UTILITIES - 0.7%
ELECTRIC UTILITY - 0.7%
Georgia Power Co. 1st mtg. 6 7/8%, 9/1/02 A3 10,000 10,299 373334DV
TOTAL CORPORATE BONDS
(Cost $11,698) 12,858
REPURCHASE AGREEMENTS - 3.2%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements,
(U.S. Treasury obligations), in a joint
trading account at 3.11% dated
1/31/94 due 2/1/94 $46,885 46,881
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,252,501) $ 1,474,858
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATE VALUE GAIN/(LOSS)
CONTRACTS TO SELL
1,361 GBP 4/25/94 $ 2,039 $ (9)
(Receivable amount $2,030)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.1%
CURRENCY ABBREVIATION
GBP - British pound
LEGEND
1. Non-income producing
2. 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 $8,042,000 or 0.6% of net
assets.
OTHER INFORMATION
Distribution of investments by country, as a percentage of total value of
investment in securities, is as follows:
United States 80.8%
Hong Kong 2.7
Spain 2.7
Canada 2.4
Brazil 2.2
Mexico 2.2
United Kingdom 1.9
Netherlands 1.2
Japan 1.0
Others (individually less than 1%) 2.9
TOTAL 100.0%
INCOME TAX INFORMATION
At January 31, 1994, the aggregate cost of investment securities for income
tax purposes was $1,252,754,000. Net unrealized appreciation aggregated
$222,104,000, of which $236,142,000 related to appreciated investment
securities and $14,038,000 related to depreciated investment securities.
The fund hereby designates $8,577,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
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 shares of Fidelity Utilities Income 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 Income Fund, to the
extent provided by regulations.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JANUARY 31, 1994
ASSETS 3. 4.
5.Investment in securities, at value (including 6. $ 1,474,858
repurchase agreements of $46,881) (cost $1,252,501)
(Notes 1 and 2) - See accompanying schedule
7.Short foreign currency contracts (Note 2) $ (2,039) 8.
Contracts held, at value
9. Receivable for contracts held 2,030 (9)
10.Cash 11. 19
12.Receivable for investments sold 13. 37,244
14.Receivable for fund shares sold 15. 13,407
16.Dividends receivable 17. 5,670
18.Interest receivable 19. 305
20.Other receivables 21. 50
22. TOTAL ASSETS 23. 1,531,544
LIABILITIES 24. 25.
26.Payable for investments purchased 53,833 27.
28.Payable for fund shares redeemed 20,166 29.
30.Accrued management fee 622 31.
32.Other payables and accrued expenses 508 33.
34. TOTAL LIABILITIES 35. 75,129
36.NET ASSETS 37. $ 1,456,415
38.Net Assets consist of (Note 1): 39. 40.
41.Paid in capital 42. $ 1,195,503
43.Undistributed net investment income 44. 2,616
45.Accumulated undistributed net realized gain (loss) on 46. 35,948
investments
47.Net unrealized appreciation (depreciation) on: 48. 49.
50. Investment securities 51. 222,357
52. Foreign currency contracts 53. (9)
54.NET ASSETS, for 91,973 shares outstanding 55. $ 1,456,415
56.NET ASSET VALUE, offering price and redemption price 57. $15.84
per share ($1,456,415 (divided by) 91,973 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JANUARY 31, 1994
INVESTMENT INCOME 59. $ 53,276
58.Dividends
60.Interest (including security lending fees of $12) (Note 61. 6,047
5)
62. TOTAL INCOME 63. 59,323
EXPENSES 64. 65.
66.Management fee (Note 4) $ 7,340 67.
68.Transfer agent fees (Note 4) 3,679 69.
70.Accounting fees and expenses (Note 4) 574 71.
72.Non-interested trustees' compensation 8 73.
74.Custodian fees and expenses 102 75.
76.Registration fees 186 77.
78.Audit 39 79.
80.Legal 14 81.
82.Miscellaneous 130 83.
84. Total expenses before reductions 12,072 85.
86. Expense reductions (Note 7) (63) 12,009
87. NET INVESTMENT INCOME 88. 47,314
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 90. 91.
(NOTES 1 AND 3)
89.Net realized gain (loss) on:
92. Investment securities 47,696 93.
94. Foreign currency contracts (59) 47,637
95.Change in net unrealized appreciation (depreciation) 96. 97.
on:
98. Investment securities 122,736 99.
100. Foreign currency contracts (9) 122,727
101.NET GAIN (LOSS) 102. 170,364
103.NET INCREASE (DECREASE) IN NET ASSETS RESULTING 104. $ 217,678
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JANUARY 31, 1994 JANUARY 31, 1993
INCREASE (DECREASE) IN NET ASSETS
105.Operations $ 47,314 $ 36,001
Net investment income
106. Net realized gain (loss) on investments 47,637 30,318
107. Change in net unrealized appreciation 122,727 50,886
(depreciation) on
investments
108. 217,678 117,205
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS
109.Distributions to shareholders: (47,168) (34,459)
From net investment income
110. From net realized gain (19,433) (23,858)
111. (66,601) (58,317)
TOTAL DISTRIBUTIONS
112.Share transactions 1,145,727 697,327
Net proceeds from sales of shares
113. Reinvestment of distributions from: 40,925 29,792
Net investment income
114. 17,591 21,637
Net realized gain
115. Cost of shares redeemed (901,215) (452,505)
116. 303,028 296,251
Net increase (decrease) in net assets resulting from
share transactions
117. 454,105 355,139
TOTAL INCREASE (DECREASE) IN NET ASSETS
NET ASSETS 118. 119.
120. Beginning of period 1,002,310 647,171
121. $ 1,456,415 $ 1,002,310
End of period (including undistributed net investment
income of $2,616 and $4,171, respectively)
OTHER INFORMATION 123. 124.
122.Shares
125. Sold 75,304 51,961
126. Issued in reinvestment of distributions from: 2,702 2,252
Net investment income
127. 1,187 1,618
Net realized gain
128. Redeemed (59,108) (33,959)
129. Net increase (decrease) 20,085 21,872
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
130. YEARS ENDED JANUARY 31,
131. 1994 1993 1992 1991 1990
132.SELECTED PER-SHARE
DATA
133.Net asset value, $ 13.94 $ 12.94 $ 11.74 $ 11.96 $ 11.10
beginning of period
134.Income from Investment
Operations
135. Net investment income .50 .61 .63 .67 .72
136. Net realized and 2.14 1.37 1.38 .10 1.21
unrealized
gain (loss) on investments
137. Total from investment 2.64 1.98 2.01 .77 1.93
operations
138.Less Distributions
139. From net investment (.52) (.60) (.63) (.69) (.76)
income
140. From net realized gain (.22) (.38) (.18) (.30) (.31)
141. Total distributions (.74) (.98) (.81) (.99) (1.07)
142.Net asset value, end of $ 15.84 $ 13.94 $ 12.94 $ 11.74 $ 11.96
period
143.TOTAL RETURN (dagger) 19.34% 15.92% 17.70% 6.84% 17.70%
144.RATIOS AND
SUPPLEMENTAL DATA
145.Net assets, end of period $ 1,456 $ 1,002 $ 647 $ 220 $ 157
(in millions)
146.Ratio of expenses to .86% .87% .95% .94% 1.02%
average net assets *
147.Ratio of expenses to .87% .87% .95% .94% 1.02%
average net assets before *
expense reductions
148.Ratio of net investment 3.39% 4.57% 5.11% 5.93% 6.19%
income to average net
assets
149.Portfolio turnover rate 47% 73% 39% 43% 61%
</TABLE>
(dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
* SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Utilities 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 current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
It is not practical to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
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
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income is accrued as earned. Dividend and
interest income is recorded net of foreign taxes where recovery of such
taxes is not assured.
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.
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, partnerships, non-taxable dividends, and
losses deferred due to wash sales and excise tax regulations. 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.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective February
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to share
holders to better disclose the differences between financial statement
amounts and distributions determined in accordance with income tax
regulations. Accordingly, amounts as of January 31, 1993 have been
reclassified to reflect an increase in paid in capital of $3,481,000, a
decrease in undistributed net investment income of $740,000 and a decrease
in accumulated net realized gain on investments of $2,741,000.
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 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 presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
2. OPERATING POLICIES -
CONTINUED
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 SEC), the fund, along with other
registered investment companies having management contracts with FMR, may
transfer uninvested cash balances into a joint trading account. These
balances are invested in one or more repurchase agreements that are
collateralized by U.S. Treasury or Federal Agency obligations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $898,401,000 and $575,861,000, respectively, of which sales of
U.S. government and government agency obligations aggregated $42,745,000.
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 ranging from
.30% to .52% 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%.
For the period, the management fee was equivalent to an annual rate of .53%
of average net assets.
On November 17, 1993, the shareholders of the fund approved a new
management contract which took effect on December 1, 1993. The new
management contract implements a performance adjustment (up to a maximum of
+ or - .15%) based on the fund's investment performance as compared to the
appropriate index over a specified period of time and revises the group fee
rate schedule since it resulted in the same or lower management fee. The
performance adjustment will not take effect until the new contract has been
in effect for twelve months.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .2850% to .5200%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the
fund's transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEE - CONTINUED
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 $427,000 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 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, there were no
loans outstanding.
6. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $2,157,000 and $2,157,000,
respectively. The weighted average interest rate was 3.56%.
7. 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
$63,000 under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Street Trust and the Shareholders of
Fidelity Utilities Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Street Trust: Fidelity Utilities Income Fund, including
the schedule of portfolio investments, as of January 31, 1994, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Street Trust: Fidelity Utilities Income Fund as of
January 31, 1994, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND
Boston, Massachusetts
March 4, 1994
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 WRITE FIDELITY
Please locate the address that is closest to you. We'll give your
correspondence immediate attention and send you written confirmation upon
completion of your request. Please send ALL correspondence about retirement
accounts to Dallas.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 2269
Boston, MA 02107-2269
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30280
Salt Lake City, UT 84130-0280
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
Additional Payments
P.O. Box 2656
Boston, MA 02293-0656
Fidelity Investments
Additional Payments
P.O. Box 620024
Dallas, TX 75262-0024
Fidelity Investments
Additional Payments
P.O. Box 31455
Salt Lake City, UT 84131-0455
OVERNIGHT EXPRESS
Fidelity Investments
Additional Payments
World Trade Center
164 Northern Avenue
Boston, MA 02210
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02103-0878
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02101-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 620024
Dallas, TX 75262-0024
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
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
32 West Central Boulevard
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
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. French, Treasurer
John H. Costello, 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 Income Fund
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
EXHIBIT 24(A)(2)
FIDELITY
EQUITY-INCOME
FUND
(Registered trademark)
ANNUAL REPORT
JANUARY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the last six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 42 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 46 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 52 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments, either municipal bonds
or municipal bond funds. Often these can provide higher after-tax yields
than comparable taxable investments. For example, if you're in the new 36%
federal income tax bracket and invest $10,000 in a taxable investment
yielding 7%, you'll pay $252 in federal taxes and receive $448 in income.
That same $10,000 invested in a tax-free bond fund yielding 5.5% would
allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
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 JANUARY 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Equity-Income 22.52% 79.53% 271.02%
Equity-Income (incl. 2% sales charge) 20.07% 75.94% 263.60%
S&P 500 12.88% 90.05% 318.37%
Average Equity Income Fund 15.04% 74.57% 237.91%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one, five, or 10 years. For example, if
you had invested $1,000 in a fund that had a 5% return over the past year,
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 97 funds tracked by Lipper
Analytical Services. Both benchmarks include reinvested dividends and
capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Equity-Income 22.52% 12.42% 14.01%
Equity-Income (incl. 2% sales charge) 20.07% 11.96% 13.78%
S&P 500 12.88% 13.70% 15.39%
Average Equity Income Fund 15.04% 11.70% 12.61%
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 TEN YEARS
Equity Income (023) s&p 500
01/31/84 9800.00 10000.00
02/29/84 9394.60 9648.00
03/31/84 9471.26 9814.91
04/30/84 9458.48 9908.15
05/31/84 9062.44 9359.24
06/30/84 9231.30 9562.34
07/31/84 9213.98 9443.76
08/31/84 9954.67 10487.30
09/30/84 10205.30 10489.40
10/31/84 10394.37 10530.30
11/30/84 10504.29 10412.37
12/31/84 10791.46 10687.25
01/31/85 11602.51 11519.79
02/28/85 11611.52 11661.48
03/31/85 11572.23 11669.65
04/30/85 11567.56 11659.14
05/31/85 12183.26 12333.04
06/30/85 12352.25 12526.67
07/31/85 12413.71 12507.88
08/31/85 12427.89 12401.56
09/30/85 12121.46 12013.39
10/31/85 12519.12 12568.41
11/30/85 13050.93 13430.61
12/31/85 13495.72 14080.65
01/31/86 13790.06 14159.50
02/28/86 14668.19 15218.63
03/31/86 15486.06 16067.83
04/30/86 15412.17 15886.26
05/31/86 15459.67 16731.41
06/30/86 15670.37 17014.17
07/31/86 15104.04 16063.08
08/31/86 15958.88 17254.96
09/30/86 15209.64 15827.98
10/31/86 15863.87 16741.25
11/30/86 16026.08 17148.06
12/31/86 15799.65 16710.79
01/31/87 17328.09 18961.73
02/28/87 17837.57 19710.72
03/31/87 18151.25 20280.36
04/30/87 17921.25 20099.86
05/31/87 17815.57 20274.73
06/30/87 18312.54 21298.60
07/31/87 18859.27 22378.44
08/31/87 19393.44 23213.16
09/30/87 18962.42 22704.79
10/31/87 15633.67 17814.18
11/30/87 14941.24 16346.29
12/31/87 15540.99 17590.24
01/31/88 16579.42 18330.79
02/29/88 17354.70 19185.01
03/31/88 17145.34 18592.19
04/30/88 17382.97 18798.56
05/31/88 17584.60 18962.11
06/30/88 18581.16 19832.47
07/31/88 18544.73 19757.11
08/31/88 18173.10 19085.37
09/30/88 18708.45 19898.40
10/31/88 19040.29 20451.58
11/30/88 18855.93 20159.12
12/31/88 19036.33 20511.91
01/31/89 20252.54 22013.38
02/28/89 20071.24 21465.25
03/31/89 20460.66 21965.39
04/30/89 21223.65 23105.39
05/31/89 21729.72 24041.16
06/30/89 21796.47 23904.12
07/31/89 23212.84 26062.67
08/31/89 23496.12 26573.49
09/30/89 23210.35 26464.54
10/31/89 21978.29 25850.57
11/30/89 22272.40 26377.92
12/31/89 22590.49 27010.99
01/31/90 21204.82 25198.55
02/28/90 21238.42 25523.61
03/31/90 21252.92 26199.99
04/30/90 20454.13 25544.99
05/31/90 21771.29 28035.62
06/30/90 21683.12 27844.98
07/31/90 21373.61 27755.88
08/31/90 19714.27 25246.75
09/30/90 18287.81 24017.23
10/31/90 17921.88 23913.96
11/30/90 19045.81 25458.80
12/31/90 19423.18 26169.10
01/31/91 20369.76 27310.07
02/28/91 21798.74 29262.74
03/31/91 22115.95 29970.90
04/30/91 22226.53 30042.83
05/31/91 23387.62 31340.68
06/30/91 22364.83 29905.28
07/31/91 23558.61 31298.86
08/31/91 24090.22 32040.64
09/30/91 23972.44 31505.57
10/31/91 24340.52 31927.74
11/30/91 23377.85 30641.05
12/31/91 25134.23 34146.39
01/31/92 25382.61 33511.27
02/29/92 26156.42 33946.91
03/31/92 25803.81 33284.95
04/30/92 26673.28 34263.52
05/31/92 26934.12 34431.42
06/30/92 26623.78 33918.39
07/31/92 27286.94 35305.65
08/31/92 26740.81 34581.88
09/30/92 26956.18 34989.95
10/31/92 27231.85 35112.42
11/30/92 28127.76 36309.75
12/31/92 28822.80 36756.36
01/31/93 29677.25 37065.11
02/28/93 30392.60 37569.20
03/31/93 31392.22 38361.91
04/30/93 31332.10 37433.55
05/31/93 31893.21 38436.77
06/30/93 32278.61 38548.24
07/31/93 32773.65 38394.04
08/31/93 33874.86 39849.18
09/30/93 33826.27 39542.34
10/31/93 34406.67 40360.86
11/30/93 33856.81 39977.44
12/31/93 34964.77 40461.16
01/31/94 36359.65 41836.84
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Equity-Income Fund on January 31, 1984, and paid a 2% sales charge. As the
chart shows, by January 31, 1994, the value of your investment would have
grown to $36,360 - a 263.60% 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
$41,837 - a 318.37% 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
MARKET RECAP
Low inflation, falling interest rates
and an improving economy
boosted U.S. stocks during the
12 months ended January 31,
1994. The Standard &
Poor's 500 stock index rose
12.88%, slightly ahead of the
market's long-term annual
average return. The technology
sector excelled, and
communication stocks soared as
telephone utilities, cellular
companies, and entertainment
firms formed strategic alliances.
Other top performers were
economically sensitive sectors,
like autos and steel; heavy
machinery; and precious metals,
all up in the second half of the
year. Some tobacco, drug, and
brand name consumer products
stocks picked up by year-end, but
had weak returns for the year
overall. Conversely, financial
stocks did well the first half of the
year, but gave back some of their
gains in the second half. The
NASDAQ Composite Index -
which tracks over-the-counter
stocks - rose 14.95% for the
year, but was outpaced by the
Dow Jones Industrial Average -
an index of 30 blue-chip stocks -
which rose 23.61%. On January
21, the Dow broke the 3900
barrier for the first time, and
finished the month at 3978.
Returns in most international
markets easily outpaced those in
the U.S., with Hong Kong
remaining the big winner even
after a correction in January. The
Morgan Stanley EAFE (Europe,
Australia, Far East) index rose
43.79%, while the Morgan
Stanley Emerging Markets Index
was up 75.51% for the year
ended January 31, 1994.
Q. STEVE, HOW DID THE FUND DO?
A. The fund had a good year. Its total return for the 12 months ended
January 31, 1994 was 22.52%. The average equity income fund tracked by
Lipper Analytical Services returned 15.04% during the same period.
Q. HOW DID THE FUND BEAT THE AVERAGE BY SUCH A WIDE MARGIN?
A. Many of the fund's best performing stocks over the last six months were
cyclicals - those that rise and fall in tandem with the economy. The stocks
of many industrial machinery and equipment companies - 5.9% of the fund on
January 31 - are good examples. Farm equipment manufacturers Deere and
Tenneco were among the fund's top performers. The fund's second largest
investment, conglomerate General Electric, owns several businesses that
tend to prosper along with the economy; so it also performed well. In
addition, the fund had 5.4% stake in consumer cyclicals, or durable goods,
on January 31. I also increased the fund's investment in the so-called deep
cyclicals, or basic industries - those companies that provide raw materials
for consumer products - from 7.4% to 8.8% over the last six months.
Q. LET'S BEGIN WITH THE CONSUMER CYCLICALS. WHICH WERE THE WINNERS?
A. Among the biggest were the U.S. auto manufacturers; Detroit roared down
Wall Street in 1993. A combination of strong domestic sales and a
relatively weak dollar versus the Japanese yen - which made the Japanese
producers less competitive - triggered a strong rise in corporate profits
at the Big Three. During the six months ended January 31, Chrysler's stock
rose 40%, Ford was up 27% and General Motors, 26%. To a lesser extent, the
fund benefited from investing in foreign auto companies based in countries
with improving economies. Examples included Volkswagen and Fiat.
Q. HOW ABOUT THE DEEP CYCLICALS?
A. To build all of those cars, you need plenty of steel. An increasing
demand for steel domestically helped drive up prices. Add to that a weaker
dollar, and U.S. steel companies suddenly improved their standing among
rivals in Europe and Japan. The stocks of Bethlehem Steel - up 61% over the
last six months - U.S. Steel (up 46%) and Inland Steel (up 37%) all helped
the fund. Companies that produce other basic commodities like aluminum,
paper products and chemicals also were strong performers. In hindsight, I
wish I had invested more heavily in these areas. Last fall, I wasn't
enthusiastic about the outlook of commodity prices and their effect on the
earnings of these companies. It turned out the market was more optimistic
than I was. Not taking better advantage of the run-up among these stocks
was a disappointment.
Q. OVER THE PAST SIX MONTHS, THE FUND HAD AT LEAST 19% OF ITS INVESTMENTS
IN FINANCIAL STOCKS. HOW DID THEY DO?
A. On the whole, quite well, but it wasn't easy. Over the past three years,
you almost could have thrown darts at a list of financial stocks and landed
on winners. The profit margins of banks, especially, benefited from falling
interest rates, and the prices of these stocks rose to high levels. But
everything changed last fall when interest rates appeared to have bottomed
out. Investors quickly began taking profits, which sent some of these
stocks reeling. The fund took some lumps, which I regret, but it's helped
to stay focused on specific types of financial stocks.
Q. WHICH WERE THOSE?
A. In a period of stable or rising interest rates, some banks will have the
ability to sustain earnings growth. Others will have trouble. I zeroed in
on two types of banks: those that might still see earnings improvement from
declining non-performing loans, and those that are beginning to see loan
growth. Among the first batch, Citicorp - the fund's largest investment -
performed well. The fund's stake in Citicorp is in convertible preferred
stock, which tends to pay better than average yields. First Chicago and
First Interstate also held up well, and I expect them to improve in '94.
The second group included some of the better regional banks, mainly those
in the Midwest: Banc One, Firstar and Mercantile Bank, among them. I expect
stronger performance from these names in the months ahead.
Q. YOU MAINTAINED AT LEAST AN 8% STAKE IN ENERGY OVER THE PAST SIX MONTHS.
DID THE FUND'S ENERGY STOCKS STUMBLE WHEN OIL PRICES FELL LAST FALL?
A. No, because I kept most of the fund's energy investments in the large
multinational companies like British Petroleum, Exxon and Mobil. These
companies were able to offset the impact of slumping oil prices through
their strong refining and marketing businesses. When crude prices fall,
these companies don't reduce their prices at the gas pump quite as quickly,
which helps earnings. I think a shrinking demand from some of the more
sluggish economies around the world helped trigger the lower prices. As
these economies pick up, I think demand will too. Plus, these multinational
companies have large dividend yields and dramatically improved balance
sheets after years of restructuring. Given all these factors, I recently
increased the fund's investments in companies like Exxon, Mobil and
Chevron.
Q. OVER THE PAST SIX MONTHS, THE FUND HAS KEPT ABOUT A 20% STAKE IN
FOREIGN INVESTMENTS. HAVE YOU MADE ANY CHANGES?
A. Yes. I cut back on the fund's investments in Hong Kong, which had a wild
ride in '93, up 117% in U.S. dollars. Hong Kong attracted my attention more
than other booming Asian markets because - being a part of the British
Commonwealth - companies there have adopted a U.K. style of management and
structure. That often includes paying high dividends. Also, as Hong Kong
prepares to become a part of China in 1997, some companies have begun
securing joint business ventures with the Chinese. That's given investors
reason for optimism about the future. A couple of large conglomerates,
Hutchison Whampoa and Citic Pacific, helped the fund, as did property
companies Hang Lung and Amoy, and hotel builder Shangri-La, among others. I
reduced my Hong Kong investments by about two-thirds late in the period
because valuations - stock prices compared to other measures like earnings
- - were so high. In some cases, I didn't move quickly enough, because the
Hong Kong market saw a sudden correction in January. I kept intact,
however, most of the fund's investment in Germany, my other main focus
overseas.
Q. WHAT OPPORTUNITIES DID YOU FIND THERE?
A. Germany is a traditional economic recovery story. After a prolonged
recession, the government began stimulating the economy by dropping
interest rates. That helped German financial stocks like Deutsche Bank. In
addition, German manufacturers who cut costs and restructured during the
bad times are bouncing back now. I already mentioned Volkswagen. Mannesmann
- - a large German industrial and engineering firm - and Siemens - an
electronics company - have also done well.
Q. WHAT'S AHEAD FOR THE FUND?
A. Many investors are concerned about high valuations in the U.S. stock
market. What makes me more uncomfortable is how long we've gone - more than
three years - without a market correction of at least 10%. Usually, that
period is more along the order of 18 to 24 months. But there is an up side.
The improving economy and stabilizing interest rates have changed the stock
investing landscape from a market driven by falling rates to a market
driven by stronger corporate earnings, which creates some interesting
investing opportunities. As long as inflation and interest rates remain
low, and we're able to find companies well-
positioned to grow earnings, I'll stay optimistic. Plus, a market
correction would probably provide more chances to buy attractive stocks at
reasonable prices.
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 January 31,
1994, over $6.9 billion
MANAGER: Stephen
Petersen, since August
1993; manager, various
institutional accounts, since
1987
(checkmark)
STEPHEN PETERSEN ON
INDUSTRIAL AMERICA:
"The last 10 to 15 years have
been volatile for most major
American corporations. To
survive, many have undergone
significant restructuring and
cost cutting. Those that did the
best job have benefited most
as the economy has shown
vibrant signs of life over the
past year. The combination of
a strengthening economy and
a devalued dollar has made
American corporations more
competitive worldwide. Stock
prices have reflected this
improvement, and I expect the
resurgence of industrial
America to be a major
investment theme for the fund
for some time to come."
(bullet) The fund had a 12.9%
investment in bonds on
January 31. The bulk of these
investments were in high-yield
issues in the United States -
which benefited from a better
economy - and the foreign
debt of governments in
emerging nations. These
bonds are dollar-denominated,
and don't carry the currency
risk of non-dollar denominated
bonds.
DISTRIBUTIONS
The Board of Trustees of
Fidelity Equity-Income Fund
voted to pay on March 7,
1994, to shareholders of
record at the opening of
business on March 4, 1994, a
distribution of $1.03 derived
from capital gains realized
from sales of portfolio
securities and a dividend of
$.26 from net investment
income.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JANUARY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Citicorp 2.7 3.1
General Electric Co. 2.1 2.2
Entergy Corp. 1.1 1.3
NationsBank Corp. 1.0 0.6
Grace (W.R.) & Co. 1.0 0.8
International Business Machines 0.9 0.0
Corp.
First Fidelity Bancorporation 0.9 1.3
CSX Corp. 0.9 0.9
Caterpillar, Inc. 0.8 0.7
Xerox Corp. 0.8 0.7
TOP FIVE INDUSTRIES AS OF JANUARY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Finance 21.3 21.8
Utilities 12.1 12.9
Basic Industries 8.8 7.4
Energy 8.7 8.3
Industrial Machinery and 6.1 7.6
Equipment
ASSET ALLOCATION
AS OF JANUARY 31, 1994* AS OF JULY 31, 1993**
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: 31.6
Row: 1, Col: 5, Value: 20.0
Row: 1, Col: 6, Value: 20.0
Stocks 75.6%
Bonds 6.4%
Convertible
securities 14.0%
Other securities
and short-term
investments 4.0%
Stocks 71.6%
Bonds 7.2%
Convertible
securities 15.1%
Other securities
and short-term
investments 6.1%
Row: 1, Col: 1, Value: 4.0
Row: 1, Col: 2, Value: 14.0
Row: 1, Col: 3, Value: 6.4
Row: 1, Col: 4, Value: 35.6
Row: 1, Col: 5, Value: 20.0
Row: 1, Col: 6, Value: 20.0
* FOREIGN
INVESTMENTS 21.5%
** FOREIGN
INVESTMENTS 19.5%
INVESTMENTS JANUARY 31, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 69.9%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.8%
DEFENSE ELECTRONICS - 0.8%
E-Systems, Inc. 193,700 $ 8,717 26915730
General Motors Corp. Class H 159,700 6,268 37044250
Raytheon Co. 565,500 38,312 75511110
53,297
BASIC INDUSTRIES - 6.6%
CHEMICALS & PLASTICS - 3.4%
Akzo NV:
Ord. 45,000 4,875 01019910
sponsored ADR 115,700 6,262 01019930
Betz Laboratories, Inc. 168,300 8,478 08777910
du Pont (E.I.) de Nemours & Co. 248,800 13,933 26353410
Eastman Chemical Co. 110,175 4,820 27743210
Goodrich (B.F.) Company 372,200 15,539 38238810
Grace (W.R.) & Co. 1,446,200 65,983 38388310
Imperial Chemical Industries:
Ord 1,828,600 21,864 45270440
PLC ADR 223,600 10,901 45270450
Lyondell Petrochemical Co. 743,500 16,915 55207810
PPG Industries, Inc. 100,700 7,943 69350610
Potash Corp. of Saskatchewan 559,100 15,933 73755L10
Union Carbide Corp. 960,800 24,500 90558110
Vigoro Corp. 284,900 8,974 92675410
Witco Corp. 237,900 7,821 97738510
234,741
IRON & STEEL - 1.1%
British Steel PLC:
ADR 330,700 7,110 11101530
Ord. 5,641,600 12,170 11101510
Compania Siderurgica Nacional (b) 228,000,000 6,760 24499523
LTV Corp. (b) 463,300 8,166 50192110
Mannesmann AG Ord. 160,900 38,205 56377510
USX-U.S. Steel Group 142,000 6,248 90337T10
78,659
METALS & MINING - 1.4%
Alumax, Inc. 213,500 5,711 02219710
Aluminum Co. of America 385,674 30,516 02224910
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
METALS & MINING - CONTINUED
De Beers Consolidated Mines Ltd. ADR 732,200 $ 16,749 24025330
Noranda, Inc. 379,500 7,603 65542210
Preussag AG 36,500 9,755 74137599
Reynolds Metals Co. 478,000 25,513 76176310
95,847
PAPER & FOREST PRODUCTS - 0.7%
Champion International Corp. 86,800 2,897 15852510
Georgia-Pacific Corp. 113,300 8,526 37329810
International Paper Co. 273,100 20,516 46014610
Union Camp Corp. 71,000 3,488 90553010
Weyerhaeuser Co. 332,500 16,251 96216610
51,678
TOTAL BASIC INDUSTRIES 460,925
CONGLOMERATES - 4.4%
Alexander & Baldwin, Inc. 200,200 5,305 01448210
Allied-Signal, Inc. 580,600 45,650 01951210
Brascan Ltd. Class A 1,148,300 15,660 10550240
Canadian Pacific Ltd. Ord. 1,223,900 22,331 13644030
Crane Co. 63,500 1,699 22439910
Dial Corp. (The) 755,700 32,967 25247010
Hanson Trust PLC:
Ord. 2,443,600 10,616 41135210
sponsored ADR 989,500 21,398 41135230
ITT Corp. 484,100 47,623 45067910
Penn Central Corp. 265,600 8,068 70727110
Teledyne, Inc. 5,500 128 87933510
Textron, Inc. 679,500 40,175 88320310
United Technologies Corp. 785,200 52,903 91301710
304,523
CONSTRUCTION & REAL ESTATE - 2.0%
BUILDING MATERIALS - 0.5%
Armstrong World Industries, Inc. 543,000 30,544 04247610
CONSTRUCTION - 0.1%
Hopewell Holdings Ltd. 8,708,000 9,922 44099999
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
ENGINEERING - 0.1%
EG&G, Inc. 298,700 $ 5,675 26845710
REAL ESTATE INVESTMENT TRUSTS - 1.3%
Carr Realty Corp. 120,400 2,829 14441K10
Crown American Realty Trust (SBI) 412,100 5,872 22818610
Equity Residential Property Trust (SBI) 379,800 11,062 29476L10
Federal Realty Investment Trust (SBI) 530,800 12,805 31374720
General Growth Properties, Inc. 21,800 469 37002110
Haagen Alexander Properties, Inc. 180,200 3,041 40443E10
Health Care Property Investors, Inc. 65,000 1,869 42191510
Meditrust (SBI) 67,450 2,201 58501T10
Merry Land & Investment Co., Inc. 253,200 5,570 59043810
Nationwide Health Properties, Inc. 481,800 17,344 63862010
Property Trust of America (SBI) 3,292 63 74344510
Regency Realty Group 40,000 715 75893910
Simon Properties Group, Inc. (b) 371,100 9,092 82880510
Taubman Centers, Inc. 310,600 3,572 87666410
Vornado Realty Trust 114,000 3,990 92904210
Weingarten Realty Investors (SBI) 257,900 9,607 94874110
Western Investment Real Estate Trust (SBI) 118,400 1,510 95846810
91,611
TOTAL CONSTRUCTION & REAL ESTATE 137,752
DURABLES - 3.6%
AUTOS, TIRES, & ACCESSORIES - 2.7%
Dana Corp. 168,700 9,848 23581110
Echlin, Inc. 486,300 16,899 27874910
Fiat Spa 3,504,700 10,085 31562110
General Motors Corp. 621,800 38,163 37044210
Genuine Parts Company 411,800 15,957 37246010
Johnson Controls, Inc. 357,600 21,009 47836610
Snap-on Tools Corp. 312,800 13,411 83303410
TRW, Inc. 327,400 24,473 87264910
Toyota Motor Corporation 436,000 7,862 89399999
Volkswagen AG 98,600 25,146 92866210
182,853
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.7%
Matsushita Electric Industrial Co. Ltd. 663,000 $ 10,552 57687910
Sony Corp. 131,100 7,683 83569999
Whirlpool Corp. 423,400 28,632 96332010
46,867
TEXTILES & APPAREL - 0.2%
Guilford Mills, Inc. 141,450 3,147 40179410
Unifi, Inc. 253,300 6,269 90467710
VF Corp. 92,700 4,299 91820410
13,715
TOTAL DURABLES 243,435
ENERGY - 7.4%
COAL - 0.0%
Eastern Enterprises Co. 88,600 2,304 27637F10
ENERGY SERVICES - 1.7%
Baker Hughes, Inc. 1,593,500 32,069 05722410
Halliburton Co. 987,500 31,847 40621610
McDermott International, Inc. 506,100 11,957 58003710
Schlumberger Ltd. 632,400 37,549 80685710
Smith International, Inc. (b) 219,262 2,165 83211010
115,587
OIL & GAS - 5.7%
Amoco Corp. 288,700 15,518 03190510
British Petroleum PLC:
ADR 765,600 52,252 11088940
Ord. 6,308,500 35,908 11088910
Chevron Corp. 378,100 35,304 16675110
Exxon Corp. 413,100 27,471 30229010
Imperial Oil Ltd. 545,000 19,068 45303840
Kerr-McGee Corp. 525,600 24,178 49238610
Louisiana Land & Exploration Co. 98,500 4,100 54626810
Mobil Corp. 183,500 14,864 60705910
Murphy Oil Corp. 498,600 20,630 62671710
Occidental Petroleum Corp. 1,438,000 25,884 67459910
Pennzoil Co. 103,200 5,702 70990310
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Phillips Petroleum Co. 741,600 $ 21,877 71850710
Royal Dutch Petroleum Co. 275,400 30,294 78025770
Total Compagnie Francaise des Petroles Class B 457,850 25,336 20434510
Total SA sponsored ADR (b) 142,500 3,919 89151E10
Unocal Corp. 826,700 24,284 91528910
Woodside Petroleum Ltd. 3,085,800 9,281 98022810
YPF Sociedad Anonima sponsored ADR representing
Class D shares 70,300 2,030 98424510
397,900
TOTAL ENERGY 515,791
FINANCE - 15.0%
BANKS - 8.7%
Banc One Corp. 490,200 18,383 05943810
Banco Central SA (Reg.) 229,300 5,229 05947010
Bank of New York Co., Inc. 840,947 47,408 06405710
Bank of Nova Scotia, Halifax 267,200 6,534 06414910
BankAmerica Corp. 244,800 11,383 06605010
Bayerische Vereinsbank AG:
Ord. 69,700 21,943 07276110
(rights) (b) 69,700 402 07276192
Boatmen's Bancshares, Inc. 423,700 12,393 09665010
Chemical Banking Corp. 187,800 7,418 16372210
Comerica, Inc. 643,826 18,108 20034010
Commerzbank AG 74,600 16,152 20259710
Commerzbank AG (rights) (b) 74,600 215 20299027
Crestar Financial Corp. 217,769 9,282 22609110
Deutsche Bank AG 55,700 26,914 25152592
Dresdner Bank AG Ord. 61,500 15,443 26156110
First Chicago Corp. 674,800 31,716 31945510
First Fidelity Bancorporation 1,429,781 63,089 32019510
First Interstate Bancorp 708,663 49,696 32054810
First Union Corp. 348,139 15,144 33735810
Firstar Corp. 183,200 5,725 33761C10
KeyCorp. 560,000 20,720 49326310
Mellon Bank Corp. 869,436 48,580 58550910
Mercantile Bancorporation, Inc. 374,700 18,360 58734210
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Morgan (J.P.) & Co., Inc. 126,172 $ 9,053 61688010
NationsBank Corp. 1,313,720 66,671 63858510
Royal Bank of Canada 561,400 13,306 78008710
Signet Banking Corp. 513,411 19,702 82668110
Wells Fargo & Co. 178,100 24,422 94974010
Westpac Banking Corp. sponsored ADR 85,100 1,670 96121430
605,061
CLOSED END INVESTMENT COMPANY - 0.2%
Jardine Strategic Holdings Ord. 1,466,500 6,456 47199020
Latin American Investment Fund, Inc. 138,000 4,675 51827910
11,131
CREDIT & OTHER FINANCE - 2.5%
American Express Co. 801,900 26,262 02581610
Argentaria Corp. Bancaria de Esp 353,600 16,809 21991392
Beneficial Corp. 1,135,800 45,006 08172110
Brierley Investments Ltd. 4,345,600 3,531 10901410
Citic Pacific Ltd. Ord. 3,692,000 11,903 45299792
GFC Financial Corp. 487,950 15,126 36160910
Household International, Inc. 1,433,208 47,475 44181510
Jardine Matheson & Co. Ltd. Ord. 898,400 9,131 47111510
175,243
INSURANCE - 2.3%
ACE Ltd. 180,000 5,085 00499G92
Allstate Corp. 304,200 8,670 02000210
American Bankers Insurance Group, Inc. 471,620 12,439 02445610
American General Corp. 1,079,300 30,895 02635110
CIGNA Corp. 290,100 20,053 12550910
Continental Corp. 76,800 2,170 21132710
Exel Ltd. 37,400 1,632 30161610
NWNL Companies, Inc. 345,800 10,849 62945T10
Paul Revere Corp. (b) 83,500 2,119 70355910
SAFECO Corp. 328,800 19,399 78642910
St. Paul Companies, Inc. (The) 284,900 25,178 79286010
Travelers, Inc. (The) 489,500 20,620 89419010
159,109
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.8%
Ahmanson (H.F.) & Co. 1,671,300 $ 31,337 00867710
Great Western Financial Corp. 1,040,733 20,164 39144210
51,501
SECURITIES INDUSTRY - 0.5%
Bear Stearns Companies, Inc. 509,215 12,412 07390210
First Marathon, Inc. Class A 146,300 1,953 32076L20
Nomura Securities Co. Ltd. 396,000 8,452 65536130
PaineWebber Group, Inc. 411,900 12,203 69562910
35,020
TOTAL FINANCE 1,037,065
HEALTH - 2.4%
DRUGS & PHARMACEUTICALS - 1.4%
IMCERA Group, Inc. 942,500 35,697 45245410
Pfizer, Inc. 471,600 30,477 71708110
Schering-Plough Corp. 127,400 8,026 80660510
SmithKline Beecham PLC ADR 309,700 9,136 83237840
Upjohn Co. 74,700 2,241 91530210
Warner-Lambert Co. 172,800 11,254 93448810
96,831
MEDICAL EQUIPMENT & SUPPLIES - 0.5%
Bergen Brunswig Corp. Class A 101,600 1,892 08373910
Johnson & Johnson 798,500 33,837 47816010
35,729
MEDICAL FACILITIES MANAGEMENT - 0.5%
HCA - Hospital Corporation of America Class A (b) 870,200 33,829
40412010
TOTAL HEALTH 166,389
INDUSTRIAL MACHINERY & EQUIPMENT - 5.9%
ELECTRICAL EQUIPMENT - 3.9%
General Electric Co. 1,331,800 143,501 36960410
General Signal Corp. 902,400 32,825 37083810
Hutchison Whampoa Ltd. Ord. 4,561,000 23,917 44841510
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
ELECTRICAL EQUIPMENT - CONTINUED
Philips Electronics 1,287,300 $ 32,466 71833799
Philips NV (b) 736,900 18,607 71833750
Siemens AG 47,600 19,838 82619710
271,154
INDUSTRIAL MACHINERY & EQUIPMENT - 1.9%
Caterpillar, Inc. 554,400 57,727 14912310
Deere & Co. 214,600 17,275 24419910
Duriron Company, Inc. 231,100 5,778 26684910
Mitsubishi Heavy Industry 2,179,000 14,253 60699310
Parker-Hannifin Corp. 133,600 5,110 70109410
Tenneco, Inc. 543,800 31,269 88037010
131,412
POLLUTION CONTROL - 0.1%
Ogden Corp. 382,900 8,902 67634610
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 411,468
MEDIA & LEISURE - 1.2%
BROADCASTING - 0.0%
SCI Television, Inc. (b) 120,933 1,451 78389520
SCI Television, Inc. Class B (warrants) (b) 31,312 6 78389513
Time Warner, Inc. 620 25 88731510
1,482
ENTERTAINMENT - 0.1%
Cedar Fair LP (depositary units) 270,100 9,825 15018510
LODGING & GAMING - 0.0%
Bally Gaming International, Inc. (g) 10,738 150 05873195
Bally Gaming International, Inc. (warrants) (b)(g) 225,000 1,688
05873194
Bally's Grand, Inc. 30,351 372 05873J10
2,210
PUBLISHING - 1.0%
Commerce Clearing House, Inc. Class B 7,900 144 20059720
Gannett Co., Inc. 187,800 10,705 36473010
Houghton Mifflin Co. 173,100 7,790 44156010
MaClean Hunter Ltd. 1,409,400 14,979 55474980
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
McGraw-Hill, Inc. 3,000 $ 208 58064510
Reader's Digest Association, Inc. (The) Class A (non-vtg.) 167,300 7,779
75526710
Times Mirror Co. Series A 651,700 23,624 88736010
Torstar Corp. Class B 128,900 2,667 89147420
67,896
RESTAURANTS - 0.1%
Cafe De Coral Holdings Ltd. 5,834,400 3,626 12799092
TOTAL MEDIA & LEISURE 85,039
NONDURABLES - 1.9%
BEVERAGES - 0.6%
Anheuser-Busch Companies, Inc. 388,100 19,017 03522910
Heileman G Class 1 Unit (g) 100 2,000 42288492
Seagram Co. Ltd. 543,000 16,598 81185010
37,615
FOODS - 0.3%
Borden, Inc. 162,800 2,503 09959910
CPC International, Inc. 90,900 4,443 12614910
Heinz (H.J.) Co. 252,800 8,784 42307410
Pokphand CP Co. (Hong Kong Reg.) Ord. (b) 100,000 37 73299893
Ralston Purina Co. 114,900 5,056 75127730
20,823
HOUSEHOLD PRODUCTS - 0.3%
Avon Products, Inc. 437,952 23,923 05430310
TOBACCO - 0.7%
Philip Morris Companies, Inc. 821,700 49,507 71815410
TOTAL NONDURABLES 131,868
RETAIL & WHOLESALE - 2.9%
APPAREL STORES - 0.6%
Charming Shoppes, Inc. 817,500 9,401 16113310
Edison Brothers Stores, Inc. 383,000 11,538 28087510
United States Shoe Corp. 1,402,400 17,705 91260510
38,644
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
DRUG STORES - 0.1%
Rite Aid Corporation 357,400 $ 6,657 76775410
GENERAL MERCHANDISE STORES - 1.3%
Bradlees, Inc. 136,200 1,754 10449910
Federated Department Stores, Inc. (b) 223,394 4,887 31410J10
K mart Corp. 212,300 4,166 48258410
May Department Stores Co. (The) 51,700 2,042 57777810
Penney (J.C.) Co., Inc. 1,014,300 53,124 70816010
Sears, Roebuck & Co. 392,200 21,522 81238710
87,495
GROCERY STORES - 0.7%
Grand Union Capital Corp. Class B (b)(f) 6,979 4,746 40099B92
Grand Union Co. (warrants) (b) 1,749 1,224 38653295
Great Atlantic & Pacific Tea Co., Inc. 669,100 15,891 39006410
Supervalue, Inc. 767,400 29,929 86853610
51,790
RETAIL & WHOLESALE, MISCELLANEOUS- 0.2%
International Semi-Tech Microelectronics, Inc. 480,000 2,618 46031K50
Sotheby's Holdings, Inc. Class A 646,900 10,674 83589810
13,292
TRADING COMPANIES - 0.0%
Li & Fung Ltd. 919,000 690 51899592
TOTAL RETAIL & WHOLESALE 198,568
SERVICES - 0.8%
ADVERTISING - 0.1%
Omnicom Group, Inc. 150,000 7,350 68191910
LEASING & RENTAL - 0.2%
GATX Corp. 181,400 7,732 36144810
Ryder Systems, Inc. 328,500 8,828 78354910
16,560
PRINTING - 0.3%
Harland (John H.) Co. 128,500 2,956 41269310
Moore Corporation Ltd. 713,500 14,629 61578510
Standard Register Co. 19,500 434 85388710
18,019
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - CONTINUED
SERVICES - 0.2%
National Service Industries, Inc. 444,100 $ 11,991 63765710
ServiceMaster LP 63,600 1,749 81761510
13,740
TOTAL SERVICES 55,669
TECHNOLOGY - 2.7%
COMMUNICATIONS - 0.0%
Digital Link 9,500 133
COMPUTER SERVICES & SOFTWARE - 0.1%
Sterling Software, Inc. (b) 118,677 4,005 85954710
COMPUTERS & OFFICE EQUIPMENT - 1.8%
International Business Machines Corp. 1,135,400 64,434 45920010
Semi-tech Microelectronics 3,120,700 5,980 81699192
Xerox Corp. 575,181 56,440 98412110
126,854
ELECTRONICS - 0.6%
Astrex, Inc. 615,723 77 04635720
Texas Instruments, Inc. 224,572 15,777 88250810
Thomas & Betts Corp. 157,900 9,987 88431510
Toshiba Corp. 1,935,000 12,959 89149310
38,800
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. 336,200 14,835 27746110
TOTAL TECHNOLOGY 184,627
TRANSPORTATION - 1.1%
AIR TRANSPORTATION - 0.1%
Swire Pacific Class A 564,000 4,637 87079410
RAILROADS - 0.9%
CSX Corp. 680,300 62,418 12640810
SHIPPING - 0.1%
Shun Tak Holdings Ltd. 6,618,000 7,883 82799192
TOTAL TRANSPORTATION 74,938
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 11.2%
CELLULAR - 0.0%
Pactel Corp. (b) 87,400 $ 2,207 69525210
ELECTRIC UTILITY - 5.1%
Baltimore Gas & Electric Co. 277,200 6,895 05916510
Cincinnati Gas & Electric Co. 116,800 3,095 17207010
Commonwealth Edison Co. 490,800 13,926 20279510
Consolidated Electric Power Asia Ltd. (b) 65,473 102 20855292
DPL, Inc. 1,044,150 22,188 23329310
DQE, Inc. 162,000 5,387 23329J10
EUA Power Corp. contingent int. ctf. (b) 8,140 8 26926020
Entergy Corp. 2,044,400 76,154 29364G10
Hong Kong Electric Holdings Ord. 3,582,000 13,589 43858010
Houston Industries, Inc. 594,100 27,106 44216110
Illinois Power Co. 1,306,300 28,412 45209210
Korea Electric Power Corp. 825,000 31,895 50099B92
Niagara Mohawk Power Corp. 516,400 10,457 65352210
PSI Resources, Inc. 234,700 6,014 69363210
Pacific Gas & Electric Co. 217,500 7,368 69430810
PacifiCorp. 663,300 12,437 69511410
Peco Energy Co. 670,100 19,349 69330410
Pinnacle West Capital Corp. (b) 776,300 17,370 72348410
Portland General Corp. 308,900 6,139 73650610
Texas Utilities Co. 155,730 6,015 88284810
United Illuminating Co. 53,800 2,004 91063710
Veba Vereinigte Elektrizetaets & Bergwerks AG Ord. 120,400 35,649
92239110
351,559
GAS - 2.0%
Consolidated Natural Gas Co. 362,700 16,684 20961510
El Paso Natural Gas Co. 235,872 8,904 28369587
Energen Corp. 150,900 3,490 29265N10
Enron Corp. 828,300 27,230 29356110
MCN Corp. 216,300 7,976 55267J10
Pacific Enterprises 393,800 8,861 69423210
Panhandle Eastern Corp. 1,346,600 33,833 69846210
TransCanada PipeLines Ltd. 981,200 14,950 89352610
Williams Companies, Inc. 705,400 18,429 96945710
140,357
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - 4.1%
ALLTEL Corp. 1,143,200 $ 31,867 02003910
Ameritech Corp. 753,400 31,643 03095410
Bell Atlantic Corp. 671,200 38,091 07785310
BellSouth Corp. 367,900 22,626 07986010
Comsat Corp. Series 1 142,300 3,860 20564D10
GTE Corp. 618,600 21,264 36232010
NYNEX Corp. 264,000 10,824 67076810
Pacific Telesis Group 431,600 24,871 69489010
Southwestern Bell Corp. 683,600 28,626 84533310
Sprint Corporation 871,700 31,599 85206110
U.S. West, Inc. 911,700 39,886 91288910
285,157
TOTAL UTILITIES 779,280
TOTAL COMMON STOCKS
(Cost $3,766,811) 4,840,634
PREFERRED STOCKS - 12.3%
CONVERTIBLE PREFERRED STOCKS - 10.6%
BASIC INDUSTRIES - 1.3%
IRON & STEEL - 0.4%
Armco, Inc. Class A $3.625 147,200 8,538 04217040
Bethlehem Steel Corp.:
$3.00 (b)(h) 226,800 15,195 08750950
$5.00 75,100 4,149 08750930
Inland Steel Industries, Inc. Series G, $4.625 exch. 66,700 4,336
45747250
32,218
METALS & MINING - 0.8%
Alumax, Inc. Series A, $4.00 238,266 28,592 02219720
Cyprus Amax Minerals Co. Series A, $4.00 221,033 15,749 23280920
Reynolds Metals Co. $3.31 146,600 8,063 76176350
52,404
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
PACKAGING & CONTAINERS - 0.1%
Sonoco Series A, $2.25 149,000 $ 8,381 83549520
TOTAL BASIC INDUSTRIES 93,003
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE - 0.2%
Amoy Properties Ltd. 5 1/2% (h) 40,000 4,880 03189292
Rouse Co. Series A 166,000 8,549 77927320
13,429
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES - 1.5%
Chrysler Corp. Series A, $4.625 (h) 327,500 56,330 17119670
Federal Mogul Corp. $1.9375 (h) 47,000 4,982 31354920
Ford Motor Co. (Del.) Series A, $4.20 385,100 43,083 34537020
104,395
ENERGY - 0.9%
ENERGY SERVICES - 0.0%
Reading & Bates Corp. $1.625 150,400 4,004 75528188
OIL & GAS - 0.9%
Maxus Energy Corp. $4.00 137,100 6,152 57773020
Occidental Petroleum Corp. $3.00 651,500 32,331 67459979
Unocal Corp. $3.50 (b)(h) 373,900 22,341 91528920
60,824
TOTAL ENERGY 64,828
FINANCE - 3.6%
BANKS - 3.1%
Citicorp $5.375 (h) 1,491,900 184,622 17303451
Norwest Corp. Series B, $3.50 398,100 30,853 66938080
215,475
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 0.1%
American Express Co. 6 1/4% 212,700 $ 9,226 02581613
INSURANCE - 0.3%
I.C.H. Corp. Series 1986 A, $1.75 exch. 23,400 445 44926430
USF&G Corp. Series C, $5.00 297,600 19,381 90329030
19,826
SAVINGS & LOANS - 0.1%
Glendale Federal Bank Series E, $2.1875 280,100 7,038 37850740
TOTAL FINANCE 251,565
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT - 0.0%
Beverly Enterprises, Inc. $2.75 31,000 1,821 08785120
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Cooper Industries, Inc. $8.00 exch. (b) 64,700 1,674 21666950
MEDIA & LEISURE - 0.3%
BROADCASTING - 0.3%
CBS, Inc. Series B, $10.00 50,000 11,050 12484593
Evergreen Media Corp. $3.00 exch. 241,500 11,743 30024820
22,793
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (b) 956,400 6 87799010
TOTAL MEDIA & LEISURE 22,799
NONDURABLES - 0.2%
TOBACCO - 0.2%
RJR Nabisco Holdings Corp. Series A, depositary
shares representing 1/4 share 1,407,600 11,085 74960K40
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SERVICES - 0.3%
LEASING & RENTAL - 0.2%
GATX Corp. $3.875 exch. 250,000 $ 14,031 36144840
SERVICES - 0.1%
Pittston Co. $3.125 (h) 94,000 4,935 72570140
TOTAL SERVICES 18,966
TECHNOLOGY - 0.4%
COMPUTER SERVICES & SOFTWARE - 0.1%
Ceridian Corp. (b) 141,100 8,201 15677T40
COMPUTERS & OFFICE EQUIPMENT - 0.2%
Unisys Corp. Series A, $3.75 (b) 168,300 8,415 90921420
ELECTRONICS - 0.1%
National Semiconductor Corp. $3.25 64,700 4,666 63764050
TOTAL TECHNOLOGY 21,282
TRANSPORTATION - 1.7%
AIR TRANSPORTATION - 1.4%
AMR Corp. $3.00 (b)(h) 955,700 51,608 00176588
UAL, Inc. 6 1/4% (h) 400,800 40,882 90254930
92,490
RAILROADS - 0.2%
Burlington Northern Railroad Co. 6.20% 212,700 15,793 12189760
TRUCKING & FREIGHT - 0.1%
TNT Ltd. 8% 3,862,300 7,123 93599293
TOTAL TRANSPORTATION 115,406
UTILITIES - 0.2%
GAS - 0.2%
Enron Corp. Series J, $10.50 31,800 14,310 29356160
Tejas Gas Corp. Delaware $2.625 49,100 2,504 87907550
16,814
TOTAL CONVERTIBLE PREFERRED STOCKS 737,067
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - 1.7%
FINANCE - 1.4%
BANKS - 1.4%
Chase Manhattan Corp. Series F adj. rate 105,942 $ 5,337 16161060
Continental Bank Corp.:
Series 1 262,564 13,259 21111320
Series 2, adj. rate (b) 148,680 4,070 21111340
First Bank Systems, Inc. Series 1989 B, adj. rate 35,500 1,842 31927940
First Chicago Corp.:
adj. rate 166,630 8,394 31945530
Series C, adj. rate 57,218 5,629 31945550
First Fidelity Bancorporation Series D, adj. rate (b) 41,570 4,188
32019550
First Interstate Bancorp depositary shares representing
1/8th share:
Series F 449,200 12,690 32054887
Series G, 9% 178,200 4,967 32054884
First Union Corp. Series 1990, adj. rate (b) 19,500 1,046 33735820
Marine Midland Banks, Inc. Series A, adj. rate (b) 271,000 13,008
56828730
Mellon Bank Corp. 320,000 8,880 58550986
Shawmut National Corp.:
adj. rate 92,965 4,369 82048420
9.30%, depositary shares representing 1/10th share 194,350 5,393
82048440
UJB Financial Corp. Series B, adj. rate. 100,000 4,900 90276020
97,972
MEDIA & LEISURE - 0.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. Series B, pay-in-kind (b) 129,225 969 53803230
UTILITIES - 0.3%
ELECTRIC UTILITY - 0.1%
Gulf States Utilities Co. Series B, adj. rate 19,829 1,001 40255075
Louisiana Power & Light Co. 9.68% 50,300 1,396 54638777
Niagara Mohawk Power Corp. Series A, adj. rate 104,595 2,576 65352285
4,973
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
UTILITIES - CONTINUED
GAS - 0.2%
ENSERCH Corp.:
Series D, adj. rate (b) 111,400 $ 5,599 29356730
Series E, adj. rate 78,500 7,889 29356750
13,488
TOTAL UTILITIES 18,461
TOTAL NONCONVERTIBLE PREFERRED STOCKS 117,402
TOTAL PREFERRED STOCKS
(Cost $664,076) 854,469
CORPORATE BONDS - 7.5%
MOODY'S RATINGS (E) PRINCIPAL
(UNAUDITED) AMOUNT (A)
(000S)
CONVERTIBLE BONDS - 4.5%
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.3%
Hercules, Inc. 8%, 8/15/10 A3 $ 9,340 22,984 427056AK
PACKAGING & CONTAINERS - 0.1%
International Container Term Services, Inc.
unsecured 6%, 2/19/00 (h) - 2,100 3,024 459360AA
PAPER & FOREST PRODUCTS - 0.1%
Stone Container Corp. 8 7/8%,
7/15/00 (h) B2 4,690 7,809 861589AL
TOTAL BASIC INDUSTRIES 33,817
CONGLOMERATES - 0.1%
Mark IV Industries, Inc. 6 1/4%, 2/15/07 B1 5,840 8,293 570387AF
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (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 $ 3,920 21148CAB
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%, 1/15/04 - 1,374 1,381 151895AA
Meditrust 9%, 1/1/02 Ba2 3,250 3,867 58501TAA
5,248
TOTAL CONSTRUCTION & REAL ESTATE 9,168
DURABLES - 0.1%
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. liquid yield option note
0%, 5/14/11 Baa1 7,290 3,581 963320AJ
ENERGY - 0.3%
ENERGY SERVICES - 0.1%
Lone Star Technologies, Inc. euro 8%,
8/27/02 - 6,285 5,468 5423129A
OIL & GAS - 0.2%
Cross Timbers Oil Co. 5 1/4%, 11/1/03 B2 3,310 3,029 227573AA
Oryx Energy Co. 7 1/2%, 5/15/14 B1 12,040 11,618 68763FAD
USX-Marathon Group 7%, 6/15/17 BB- 221 211 902905AF
14,858
TOTAL ENERGY 20,326
FINANCE - 0.5%
BANKS - 0.2%
Bank of Boston Corp. 7 3/4%, 6/15/11 Baa2 4,182 4,684 060716AF
Bank of New York Co., Inc. 7 1/2%,
8/15/01 Baa1 6,370 9,714 064057AK
14,398
CREDIT & OTHER FINANCE - 0.0%
Siderurgica Brasileiras SA inflation
indexed 6%, 8/15/99 - BRC 15,062 2,339 82599PAA
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
CONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
INSURANCE - 0.3%
Fremont General Corp. 0%, 10/12/13 Ba2 $ 46,800 $ 16,965 357288AF
NAC RE Corp. 5 1/4%, 12/15/02 Baa3 1,410 1,364 628907AC
18,329
TOTAL FINANCE 35,066
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Alcatel Alsthom 6 1/2%, 1/1/00 - FRF 64 9,359 20436392
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.5%
Comcast Corp. 1 1/8%, 4/15/07 B1 27,170 13,992 200300AR
Time Warner, Inc. 8 3/4%, 1/10/15 Ba3 12,987 13,701 887315AQ
Time Warner, Inc. liquid yield option note
0%, 6/22/13 Ba1 22,000 8,718 887315AS
36,411
ENTERTAINMENT - 0.1%
RHI Entertainment 6 1/2%, 6/1/03 (h) - 3,830 6,511 749559AA
LEISURE DURABLES & TOYS - 0.1%
Outboard Marine Corp. 7%, 8/1/02 B1 5,790 6,716 690020AD
LODGING & GAMING - 0.1%
Shangri-La Asia Cap Ltd. euro 2 7/8%,
12/16/00 (h) - 5,060 4,744 819426AA
RESTAURANTS - 0.0%
Flagstar Corp. 10%, 11/1/14 B2 2,030 1,939 338473AC
TOTAL MEDIA & LEISURE 56,321
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.1%
Petrie Stores Corp. sinking fund 8%, 12/15/10 Ba2 8,510 10,808
716434AC
GENERAL MERCHANDISE STORES - 0.2%
Federated Department Stores, Inc. 0%, 2/15/04 Ba3 11,790 11,053
31410JAC
Parisian, Inc. 9 7/8%, 7/15/03 B3 2,000 2,000 700147AB
13,053
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
CONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
Tiffany & Company euro 6 3/8%, 3/15/01 Baa1 $ 4,230 $ 4,230 8865479B
Waban, Inc. 6 1/2%, 7/1/02 Ba3 2,510 2,359 929394AA
6,589
TOTAL RETAIL & WHOLESALE 30,450
SERVICES - 0.3%
ADVERTISING - 0.1%
Omnicom Group, Inc. 4 1/2%, 9/1/00 (h) Baa3 4,910 5,303 681919AB
SERVICES - 0.2%
ADT Ltd. euro 6%, 10/3/02 - 10,060 13,732 001999AD
TOTAL SERVICES 19,035
TECHNOLOGY - 0.9%
COMPUTER SERVICES & SOFTWARE - 0.2%
Sterling Software, Inc. 5 3/4%, 2/1/03 B1 7,384 9,895 859547AD
COMPUTERS & OFFICE EQUIPMENT - 0.4%
AST Research, Inc. 0%, 12/14/13 B2 12,730 5,569 001907AB
IBM France 5 3/4%, 1/1/98 (b) - FRF 285 21,028 45499D22
Quantum Corp. 6 3/8%, 4/1/02 B2 2,750 2,915 747906AA
29,512
ELECTRONICS - 0.1%
Storage Technology Corp. 8%, 5/31/15 B2 8,550 9,362 862111AG
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. liquid yield option note
0%, 10/15/11 Baa1 50,910 16,673 277461BA
TOTAL TECHNOLOGY 65,442
TRANSPORTATION - 0.2%
AIR TRANSPORTATION - 0.1%
Delta Air Lines, Inc. 3.23%, 6/15/03 Ba3 7,110 5,901 247361YA
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
CONVERTIBLE BONDS - CONTINUED
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 0.1%
Greyhound Lines, Inc. 8 1/2%, 3/31/07 B3 $ 5,160 $ 5,908 398048AD
TOTAL TRANSPORTATION 11,809
UTILITIES - 0.2%
CELLULAR - 0.1%
Cellular Communications, Inc. 0%, 7/27/99 B1 5,430 4,073 150917AA
Rogers Communications, Inc. liquid yield
option note 0%, 5/20/13 Ba3 10,730 4,399 775109AD
8,472
TELEPHONE SERVICES - 0.1%
CAM-NET Communications Network
10%, 8/15/97 (h) - 3,250 3,185 13173M9A
TOTAL UTILITIES 11,657
TOTAL CONVERTIBLE BONDS 314,324
NONCONVERTIBLE BONDS - 3.0%
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.1%
American Pacific Corp. 11%, 12/15/02 (h) - 3,000 3,000 0287409C
IMC Fertilizer Group, Inc. 10 3/4%, 6/15/03 B3 1,000 1,080 449669AG
Methanex Corp. 8 7/8%, 11/15/01 Ba3 6,000 6,285 59151KAA
10,365
IRON & STEEL - 0.1%
Acindar Industria Argentina De Aceros
10 1/2%, 12/10/94 (h) - 1,200 1,176 004514AA
Hylsa de CV 11%, 2/23/98 (h) - 5,000 5,463 449086AA
6,639
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical Corp.
12 3/4%, 2/1/03 B2 $ 2,000 $ 2,160 483008AD
PACKAGING & CONTAINERS - 0.1%
Owens Illinois, Inc. 10 1/4%, 4/1/99 B2 4,230 4,505 690768AG
TOTAL BASIC INDUSTRIES 23,669
CONGLOMERATES - 0.2%
Coltec Industries, Inc. 10 1/4%, 4/1/02 Ba2 11,410 12,294 196879AB
CONSTRUCTION & REAL ESTATE - 0.2%
BUILDING MATERIALS - 0.1%
PT Semen Cibinong 9%, 12/15/98 (h) - 2,000 2,033 69364UAA
Tolmex SA de CV 8 3/8%, 11/1/03 Ba2 1,000 1,055 889557AA
USG Corp.:
10 1/4%, 12/15/02 B2 2,403 2,463 903293AK
Series B, 10 1/4%, 12/15/02 B2 924 956 903293AL
6,507
CONSTRUCTION - 0.1%
Hillsborough/Jim Walter Corp. 17%, 1/1/96 (c) Ca 1,430 1,216 373280AE
Ryland Group, Inc. 9 5/8%, 6/1/04 Ba3 1,500 1,541 783764AC
Tribasa Toll Road Trust 10 1/2%, 12/1/11 (h) - 2,500 2,650 896015AA
5,407
TOTAL CONSTRUCTION & REAL ESTATE 11,914
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Consorcio G Grupo Dina 10 1/2%,
11/18/97 (h) - 5,000 5,537 210996AA
Grupo Imsa SA de CV euro 8 3/4%, 7/7/98 (h) - 2,000 2,063 40048TAA
7,600
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
NONCONVERTIBLE BONDS - CONTINUED
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.1%
Fieldcrest Cannon, Inc. 11 1/4%, 6/15/04 B2 $ 5,500 $ 6,064 316549AC
TOTAL DURABLES 13,664
ENERGY - 0.1%
OIL & GAS - 0.1%
Mesa Capital Corp. secured 12 3/4%,
6/30/98 (d) - 2,000 1,813 590910AF
Petrolera Argentina San Jorge SA, secured
negotiable obligation 11%, 2/9/98 (h) - 1,900 1,985 71654PAA
3,798
FINANCE - 0.8%
BANKS - 0.3%
Bancomer SA 9%, 6/1/00 (h) - 11,250 12,262 059682AA
Bank of Boston Corp. euro 6%, 9/12/00 (i) Baa1 2,800 2,797 060716AD
Nigeria Brady 5 1/2%, 11/15/20 - 5,250 3,130 997999AC
18,189
CREDIT & OTHER FINANCE - 0.5%
Chrysler Financial Corp. 9 1/2%, 12/15/99 Baa2 11,710 13,753 171205CY
GPA Delaware, Inc. gtd. 8 3/4%, 12/15/98 Caa 140 119 361928AA
GPA Group 8.28% 12/13/97 (h) - 120 106 396994CN
General Electric Capital Corp. peso linked
11.09%, 10/29/96 (i) Aaa 2,000 2,005 36962FPE
Offshore Mexican Bond Ltd. inflation indexed jr.
secured 0%, 7/20/94 (h) - 10,000 13,800 676257AA
Third Mexican Acceptance Corp. coll. notes gtd.
by Grupo Sidek SA and Grupo Situr SA
10 1/2%, 3/15/98 (h) - 4,000 4,183 884149AB
33,966
INSURANCE - 0.0%
Penncorp Financial Group, Inc. 9 1/4%,
12/15/03 B1 2,050 2,101 708094AA
SAVINGS & LOANS - 0.0%
Chevy Chase Savings Bank 9 1/4%, 12/1/05 B2 500 520 166784AE
TOTAL FINANCE 54,776
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
NONCONVERTIBLE BONDS - CONTINUED
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT - 0.1%
Hallmark Healthcare Corp. 10 5/8%, 11/15/03 B3 $ 3,500 $ 3,649 40624GAA
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Welbilt Corp. 12 1/4%, 11/1/99 Ba3 1,400 1,593 949085AC
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.2%
Jones Intercable, Inc. 11 1/2%, 7/15/04 B2 2,000 2,320 480206AG
New City 11 3/8%, 11/1/03 B3 3,250 3,387 651086AB
SCI Television, Inc.:
secured 7 1/2%, 6/30/98 (i) - 2,261 2,210 783895AK
secured 11%, 6/30/05 - 3,488 3,663 783895AJ
Turner Broadcasting System, Inc. 12%,
10/15/01 B1 3,120 3,381 900262AN
14,961
ENTERTAINMENT - 0.0%
Kloster Cruise, Ltd, 13%, 5/1/03 B2 2,000 2,233 498760AC
Live Entertainment, Inc. 10%, 9/1/98 - 861 788 538032AC
3,021
LODGING & GAMING - 0.2%
Bally Gaming International, Inc. 10 3/8%,
7/29/98 - 7,500 7,500 0587319C
Embassy Suites, Inc. gtd 8 3/4%, 3/15/00 (h) B1 4,500 4,680 290807AH
12,180
PUBLISHING - 0.1%
Enquirer/Star Group, Inc. Unit 0%, 5/15/97 Ba3 4,080 3,356 293554AA
TOTAL MEDIA & LEISURE 33,518
NONDURABLES - 0.3%
BEVERAGES - 0.0%
Dr. Pepper/Seven-Up Companies, Inc.
11 1/2%, 11/1/02 (d) B3 3,000 2,400 256131AD
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 0.3%
Revlon Consumer Products Corp.
9 3/8%, 4/1/01 B2 $ 15,000 $ 14,625 761519AF
Revlon World Wide secured 0%, 3/15/98 B3 6,000 3,105 76154KAB
17,730
TOTAL NONDURABLES 20,130
RETAIL & WHOLESALE - 0.0%
APPAREL STORES - 0.0%
Apparel Retailers, Inc. 12 3/4%, 8/15/05 Caa 570 353 037795AB
SERVICES - 0.1%
ADT Operations, Inc. gtd. 9 1/4%, 8/1/03 B2 10,000 10,350 000945AB
TRANSPORTATION - 0.0%
SHIPPING - 0.0%
Eletson Holdings, Inc. 9 1/4%, 11/15/03 Ba2 400 414 286204AA
UTILITIES - 0.2%
ELECTRIC UTILITY - 0.0%
Del Norte Funding Corp. 9.05%, 1/2/99 (c) Ca 2,364 1,938 245279AA
EUA Power Corp. secured, pay-in-kind:
Series B, 17 1/2%, 5/15/93 (c) - 7,390 1,035 269260AC
Series C, 17 1/2%, 11/15/99 (c)(h) - 2,265 317 269260AB
El Paso Funding Corp. lease oblig.
10 3/4%, 4/1/13 (c) Ca 1,000 850 283681AC
4,140
GAS - 0.2%
Columbia Gas System, Inc.:
9%, 8/1/95 (c) Caa 1,000 1,180 197648BT
9 1/2%, 10/10/19 (c) B1 1,500 1,830 19765AAT
10 1/4%, 8/1/11 (c) Caa 150 187 197648BU
10.15%, 11/1/13 (c) Caa 500 608 197648BW
9.91%, 5/28/20 (c) - 1,590 1,852 19765ABN
Ferrellgas, Inc. 12%, 8/1/96 - 2,350 2,591 315290AD
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
GAS - CONTINUED
SFP Pipeline Holdings, Inc. exch.
0%, 8/15/10 (i) Baa3 $ 3,690 $ 4,797 784163AA
13,045
TOTAL UTILITIES 17,185
TOTAL NONCONVERTIBLE BONDS 207,307
TOTAL CORPORATE BONDS
(Cost $491,874) 521,631
FOREIGN GOVERNMENT OBLIGATIONS - 4.8%
Argentina Republic:
BOCON:
Peso:
3.9775%, 4/1/07 (i) - ARP 9,723 7,039 039995AW
3.9775%, 9/1/02 (i) - ARP 13,339 10,122 039995AJ
3.9775%, 4/1/01 (i) - ARP 5,705 4,624 039995AH
3.3125%, 4/1/01 (i) B1 25,772 22,285 039995AF
3.3125%, 9/1/02 (i) - 644 531 039995AM
Brady:
euro:
4%, 3/31/23 B1 89,000 62,410 039995AD
4 1/4%, 3/31/23 B1 500 435 039995AL
4%, 3/31/23 (h) - 10,626 7,451 0401149Y
4%, 3/31/23 (h) - 41,250 28,927 0401149G
BOTE:
2.0588%, 4/1/96 (i) - 950 592 0401149N
3.1225%, 4/3/00 (i) - 8,534 7,514 0401149W
4.1875%, 3/31/05 (h) (i) - 1,075 947 039995AT
euro 4.1875%, 3/31/05 (i) BB- 22,750 20,048 039995AU
Brazilian Government euro
4.3125%, 1/1/01 (i) B2 15,939 13,708 1057569E
Ecuador Republic 0%, 8/15/06 - 4,500 2,925 88399HAA
French Government:
OAT 8 1/2%, 4/25/03 Aaa FRF 66,580 13,546 351996AQ
OAT 8 1/2%, 4/25/23 Aaa FRF 155,630 34,073 351996AC
FOREIGN GOVERNMENT OBLIGATIONS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
Mexican Adjustabanos:
5.30%, 7/14/94 AA- MXN 8,410 $ 3,603 597998SV
7 1/4%, 2/17/94 AA- MXN 3,700 1,675 597998SA
Mexican Brady discount:
4.3125%, 12/31/19 (i) Ba3 12,650 11,780 597998RJ
4.3125%, 12/31/19 (i) Ba3 5,500 5,122 597998MN
Mexican Bondes:
10 3/4%, 11/10/94 (i) AA- MXN 19,100 6,154 597998TD
10.31%, 9/22/94 (i) - MXN 24,700 7,957 597998TE
Mexican Government Cetes 0%, 3/17/94 - MXN 18,500 5,880 597998TU
Mexican Government Brady:
6 1/4%, 12/31/19 Ba3 13,500 11,154 597998MM
6 1/4%, 12/31/19 Ba3 16,250 13,427 597998PF
6.63%, 12/31/19 Ba2 FRF 15,000 2,064 597998VQ
Mexico Value Recovery (rights) (b) - 54,417 1 59304893
Morocco Trust:
4 1/2%, 1/3/09 (h)(i) - 25,250 21,052 617727AA
(A) 8.5175%, 1/1/09 (i) - JPY 384,301 2,948 6177279C
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $277,833) 329,994
OTHER SECURITIES - 0.6%
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) 355 345 61799FAF
PURCHASED BANK DEBT - 0.6%
El Paso Electric Co. (c):
unsecured term loan:
0%, 1/3/95 (i) 667 584 2836779H
0%, 4/1/95 (i) 147 129 2836779L
unsecured 0%,12/1/95 (i) 118 103 2836779K
term loan:
7%, 10/26/94 (i) 2,571 2,610 2836779F
0%, 1/4/95 (i) 508 515 2836779J
OTHER SECURITIES - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S)
(000S)
PURCHASED BANK DEBT - CONTINUED
Macy (R.H.) & Co. (c):
aquisition letter of credit:
5/27/94 $ 2,303 $ 2,142 556994BN
7/10/94 6,166 5,735 556994AF
facility letter of credit 7/10/94 30 28 556994AG
funded letter of credit 0%, 5/27/95 1,724 1,603 556994CJ
mortgage loan participation 5/27/94 16,000 14,560 556994BK
revolver loan:
5/27/94 752 699 556994BM
7/10/94 1,712 1,592 556994AE
5/27/95 550 511 556994CH
Special Real Estate Cap:
0%, 5/27/94 3,305 3,073 556993BC
0%, 9/30/95 1,715 1,594 557991AA
term loan:
0%, 5/27/95 2,148 1,998 556994CN
0%, 5/27/95 726 675 556994CG
0%, 5/27/96 1,713 1,594 556993BD
0%, 5/27/96 707 657 556993BE
term loan note :
5/27/94 975 907 556994BL
7/10/94 2,259 2,101 556994AC
43,410
TOTAL OTHER SECURITIES
(Cost $31,138) 43,755
COMMERCIAL PAPER - 0.5%
FINANCE - 0.5%
BANKS - 0.5%
Banco Nacional De Mexico SA 0%, 12/8/94
(Cost $30,645) MXN 109,020 31,960
REPURCHASE AGREEMENTS - 4.4%
MATURITY VALUE (NOTE 1)
AMOUNT (000S)
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 3.19% dated
1/31/94 due 2/1/94 $306,998 $ 306,971
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $5,569,348) $ 6,929,414
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO SELL
151,402 DEM 2/7/94 to 4/28/94 $ 87,052 $ 3,078
3,123,749 ESP 2/16/94 22,241 245
371,773 FRF 2/16/94 63,055 (701)
4,301,601 ITL 4/26/94 2,516 (30)
3,173,876 JPY 4/18/94 29,258 (945)
TOTAL CONTRACTS TO SELL
(Receivable amount $205,769) $ 204,122 $ 1,647
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.9%
CURRENCY TYPE ABBREVIATIONS
ARP - Argentinean peso
BRC - Brazilian cruzeiro
FRF - French franc
DEM - German Deutsche mark
ITL - Italian lira
JPY - Japanese yen
ESP - Spanish peseta
MXN - Mexican peso
LEGEND
1. Principal amount is stated in United States dollars unless otherwise
noted.
2. Non-income producing
3. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
5. Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
6. Affiliated company (see Note 6 of Notes to Financial Statements).
7. 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
Bally Gaming
International,Inc.
(warrants) 6/29/93 $ -
Bally Gaming
International, Inc. 9/29/93 157,000
Heilman G Class 1
Unit 1/21/94 2,000,000
8. 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 $533,983,000 or 7.7% of net
assets.
9. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
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 1.1% AAA, AA, A 1.4%
Baa 1.0% BBB 1.1%
Ba 2.1% BB 2.0%
B 3.9% B 2.1%
Caa 0.0% 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 4.0%
including long-term debt categorized as other securities.
Distribution of investments by country, as a percentage of total value of
investment in securities, is as follows:
United States 78.5%
Germany 3.0
United Kingdom 2.8
Canada 2.6
Argentina 2.6
Mexico 2.1
Netherlands 1.9
France 1.6
Hong Kong 1.5
Others (individually less than 1%) 3.4
TOTAL 100.0%
INCOME TAX INFORMATION
At January 31, 1994, the aggregate cost of investment securities for income
tax purposes was $5,579,111,000. Net unrealized appreciation aggregated
$1,350,303,000, of which $1,435,852,000 related to appreciated investment
securities and $85,549,000 related to depreciated investment securities.
The fund hereby designates $42,300,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
EXCEPT PER-SHARE AMOUNTS JANUARY 31, 1994
ASSETS 10. 11.
12.Investment in securities, at value (including 13. $ 6,929,414
repurchase agreements of $306,971) (cost
$5,569,348) (Notes 1 and 2) - See accompanying
schedule
14.Short foreign currency contracts (Note 2) $ (204,122) 15.
Contracts held, at value
16. Receivable for contracts held 205,769 1,647
17.Cash 18. 632
19.Receivable for investments sold 20. 105,781
21.Receivable for fund shares sold 22. 18,656
23.Dividends receivable 24. 15,838
25.Interest receivable 26. 12,546
27.Other receivables 28. 3,346
29. TOTAL ASSETS 30. 7,087,860
LIABILITIES 31. 32.
33.Payable for investments purchased 125,336 34.
35.Payable for fund shares redeemed 9,395 36.
37.Accrued management fee 2,467 38.
39.Other payables and accrued expenses 1,821 40.
41.Collateral on securities loaned, at value (Note 5) 5,570 42.
43. TOTAL LIABILITIES 44. 144,589
45.NET ASSETS 46. $ 6,943,271
47.Net Assets consist of (Note 1): 48. 49.
50.Paid in capital 51. $ 5,331,522
52.Undistributed net investment income 53. 11,688
54.Accumulated undistributed net realized gain (loss) on 55. 238,348
investments
56.Net unrealized appreciation (depreciation) on: 57. 58.
59. Investment securities 60. 1,360,066
61. Foreign currency contracts 62. 1,647
63.NET ASSETS, for 197,293 shares outstanding 64. $ 6,943,271
65.NET ASSET VALUE, offering price and redemption price 66. $35.19
per share ($6,943,271 (divided by) 197,293 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED JANUARY 31, 1994
INVESTMENT INCOME 68. $ 186,499
67.Dividends
69.Interest (including security lending fees of $48) (Note 70. 67,361
5)
71. TOTAL INCOME 72. 253,860
EXPENSES 73. 74.
75.Management fee (Note 4) $ 23,042 76.
77.Transfer agent fees (Note 4) 14,205 78.
79.Accounting fees and expenses (Note 4) 798 80.
81.Non-interested trustees' compensation 40 82.
83.Custodian fees and expenses 1,013 84.
85.Registration fees 303 86.
87.Legal 159 88.
89.Interest (Note 7) 7 90.
91.Miscellaneous 370 92.
93. Total expenses before reductions 39,937 94.
95. Expense reductions (Note 8) (250) 39,687
96.NET INVESTMENT INCOME 97. 214,173
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 99. 100.
(NOTES 1, 2 AND 3)
98.Net realized gain (loss) on:
101. Investment securities 493,621 102.
103. Foreign currency contracts (9,988) 104.
105. Written options 771 484,404
106.Change in net unrealized appreciation 107. 108.
(depreciation) on:
109. Investment securities 529,991 110.
111. Foreign currency contracts 1,647 112.
113. Written options (616) 531,022
114.NET GAIN (LOSS) 115. 1,015,426
116.NET INCREASE (DECREASE) IN NET ASSETS RESULTING 117. $ 1,229,599
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEARS ENDED JANUARY 31,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
118.Operations $ 214,173 $ 186,958
Net investment income
119. Net realized gain (loss) on investments 484,404 255,901
120. Change in net unrealized appreciation 531,022 297,462
(depreciation) on
investments
121. 1,229,599 740,321
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS
122.Distributions to shareholders: (213,298) (181,525)
From net investment income
123. From net realized gain (23,174) -
124. (236,472) (181,525)
TOTAL DISTRIBUTIONS
125.Share transactions 1,968,083 1,326,164
Net proceeds from sales of shares
126. Reinvestment of distributions from: 202,501 170,447
Net investment income
127. 22,386 -
Net realized gain
128. Cost of shares redeemed (1,365,987) (1,353,207)
129. 826,983 143,404
Net increase (decrease) in net assets resulting from
share transactions
130. 1,820,110 702,200
TOTAL INCREASE (DECREASE) IN NET ASSETS
NET ASSETS 131. 132.
133. Beginning of period 5,123,161 4,420,961
134. $ 6,943,271 $ 5,123,161
End of period (including undistributed net investment
income of $11,688 and $26,292, respectively)
OTHER INFORMATION 136. 137.
135.Shares
138. Sold 60,873 47,962
139. Issued in reinvestment of distributions from: 6,291 6,223
Net investment income
140. 672 -
Net realized gain
141. Redeemed (42,075) (49,065)
142. Net increase (decrease) 25,761 5,120
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
143. YEARS ENDED JANUARY 31,
144. 1994 1993# 1992 1991 1990
145.SELECTED PER-SHARE DATA
146.Net asset value, $ 29.87 $ 26.57 $ 22.38 $ 25.25 $ 26.81
beginning of period
147.Income from Investment
Operations
148. Net investment income 1.11 1.11** 1.18 1.46 1.71
149. Net realized and 5.48 3.27 4.21 (2.48) (.36)
unrealized
gain (loss) on investments
150. Total from investment 6.59 4.38 5.39 (1.02) 1.35
operations
151.Less Distributions
152. From net investment (1.15) (1.08) (1.20) (1.55) (1.75)
income
153. From net realized gain (.12) - - (.30) (1.16)
154. Total distributions (1.27) (1.08) (1.20) (1.85) (2.91)
155.Net asset value, end of $ 35.19 $ 29.87 $ 26.57 $ 22.38 $ 25.25
period
156.TOTAL RETURN (double dagger) 22.52% 16.92% 24.61% (3.94)% 4.70%
157.RATIOS AND SUPPLEMENTAL DATA
158.Net assets, end of period $ 6,943 $ 5,123 $ 4,421 $ 3,941 $ 4,752
(in millions)
159.Ratio of expenses to .66% .67% .68% .70% .71%
average net assets
160.Ratio of net investment 3.55% 4.02% 4.81% 6.18% 6.10%
income to average net
assets
161.Portfolio turnover rate 70% 84% 111% 107% 92%
</TABLE>
(double dagger) TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
# AS OF FEBRUARY 1, 1993 THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
** NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1994
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 current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
It is not practical to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
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
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 where recovery of such taxes is not assured.
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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
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 utilitized 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 differences relating to shareholder distributions will result in
reclassifications to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective February
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of January 31, 1993 have been reclassified to
reflect an increase in paid in capital of $8,341,000, a decrease in
undistributed net investment income of $8,878,000 and a decrease in
accumulated net realized loss on investments of $537,000.
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 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 presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker 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
2. OPERATING POLICIES -
CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by
U.S. Treasury or Federal Agency obligations.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures 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.
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 $3,838,000 or .06% of net assets.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $5,060,648,000 and $4,072,312,000 respectively, of which U.S.
government and government agency obligations aggregated $139,945,000 and
$681,000, respectively.
3. PURCHASES AND SALES OF INVESTMENTS - CONTINUED
SUMMARY OF WRITTEN OPTIONS
NUMBER OF AGGREGATE FACE VALUE
CONTRACTS OF CONTRACTS
Argentina Brady Put Options:
Outstanding at January 31, 1993 25,000 $ 750,000
Contracts opened - -
Contracts expired (25,000) (750,000) Contracts closed - -
Outstanding at January 31, 1994 - $ -
Venezuelan DCB Call Options:
Outstanding at January 31, 1993 - $ -
Contracts opened 1 21,000
Contracts expired (1) (21,000) Contracts closed - -
Outstanding at January 31, 1994 - $ -
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates ranging from
.30% to .52% and is based on the monthly average net assets of all the
mutual funds advised by FMR. The annual individual fund fee rate is .12%.
For the period, the management fee was equivalent to an annual rate of .38%
of average net assets.
On November 17, 1993, the shareholders of the fund approved a new
management contract which took effect on December 1, 1993. The new
management contract increases the individual fund fee rate from .04% to
.12% and revises the new group fee rate schedule.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .2850% to .5200%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
SALES LOAD. For the period February 1, 1993 to November 30, 1993, Fidelity
Distributors Corporation (FDC), an affiliate of FMR and the general
distributor of the fund, received sales charges of $1,297,000 on sales of
shares of the fund.
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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the
fund's transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Co. (FSC), an
affiliate of FMR, 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 $2,077,000 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 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 $5,444,000 and
$5,570,000 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
Grand Union Capital Corp. Class B $ 6,530,000 $ - $ - $ 4,746,000
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 $40,794,000 and $17,124,000,
respectively. The weighted average interest rate was 3.75%.
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
$250,000 under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Equity-Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Trust: Fidelity Equity-Income Fund, including the
schedule of portfolio investments, as of January 31, 1994, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Trust: Fidelity Equity-Income Fund as of January
31, 1994, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND
Boston, Massachusetts
March 4, 1994
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
32 West Central Boulevard
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
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. French, Treasurer
John H. Costello, 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
The Chase Manhattan Bank, N.A.
New York, NY
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 Income Fund
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
EXHIBIT 24(A)(3)
FIDELITY
REAL ESTATE INVESTMENT
PORTFOLIO
(Registered trademark)
ANNUAL REPORT
JANUARY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the last six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 15 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 19 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 23 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments, either municipal bonds
or municipal bond funds. Often these can provide higher after-tax yields
than comparable taxable investments. For example, if you're in the new 36%
federal income tax bracket and invest $10,000 in a taxable investment
yielding 7%, you'll pay $252 in federal taxes and receive $448 in income.
That same $10,000 invested in a tax-free bond fund yielding 5.5% would
allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
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 JANUARY 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Real Estate Investment 8.10% 94.03% 98.50%
S&P 500(Registered trademark) 12.88% 90.05% 149.00%
Average Real Estate Fund 19.22% 68.16% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, 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
500 Composite Stock Price Index - 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 only nine real estate funds tracked by Lipper Analytical
Services. Both benchmarks include reinvested dividends and capital gains,
if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1994 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Real Estate Investment 8.10% 14.18% 9.97%
S&P 500(Registered trademark) 12.88% 13.70% 13.48%
Average Real Estate Fund 19.22% 10.74% 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
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
$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 January 31, 1994, the value of your investment would
have grown to $19,850 - a 98.50% 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
$24,900 - a 149.00% 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
MARKET RECAP
Low inflation, falling interest rates
and an improving economy
boosted U.S. stocks during the
12 months ended January 31,
1994. The Standard &
Poor's 500 stock index rose
12.88%, slightly ahead of the
market's long-term annual
average return. The technology
sector excelled, and
communication stocks soared as
telephone utilities, cellular
companies, and entertainment
firms formed strategic alliances.
Other top performers were
economically sensitive sectors,
like autos and steel;
entertainment; heavy machinery;
and precious metals, all up in the
second half of the year. Some
tobacco, drug, and brand name
consumer products stocks picked
up by year-end, but had weak
returns for the year overall.
Conversely, financial stocks did
well the first half of the year, but
gave back some of their gains in
the second half. The NASDAQ
Composite Index - which tracks
over the counter stocks - rose
14.95% for the year, but was
outpaced by the Dow Jones
Industrial Average - an index of
30 blue-chip stocks - which rose
23.61% . On January 21, the Dow
broke the 3900 barrier for the first
time, and finished the month at
3978. Returns in most
international markets easily
outpaced those in the U.S., with
Hong Kong remaining the big
winner even after a correction in
January. The Morgan Stanley
EAFE (Europe, Australia, Far
East) index rose 43.79%, while
the Morgan Stanley Emerging
Markets Index was up 75.51% for
the year ended January 31, 1994.
An interview with Barry Greenfield, Portfolio Manager of Fidelity Real
Estate Investment Portfolio
Q. BARRY, HOW DID THE FUND DO?
A. It's been a difficult year, especially the last six months. The fund's
total return for the 12 months ended January 31, 1994 was 8.10%, compared
to a 19.22% total return for the average real estate fund tracked by Lipper
Analytical Services.
Q. WHY THE SUBPAR PERFORMANCE?
A. If you divide the year down the middle, separate reasons emerge for each
six-month period. In the first half of 1993, the fund was wrestling with
enormous growth; assets went from $250 million on January 1 to $525 million
by April 30. It was very difficult putting all of that cash to work
quickly, because REITs, or real estate investment trusts - which make up
the bulk of the fund - usually trade more slowly than stocks in the S&P
500. Instead of getting higher yields in real estate investments, some of
the fund was earning about 3% in short-term instruments. The fund's cash
level reached a high of about 17% last spring, but I'd reduced it to about
8% by the end of July.
Q. WHAT ABOUT THE LAST SIX MONTHS?
A. After two and a half years of outstanding performance, the REIT market
began to cool off in March of 1993. What we saw then was very much like a
typical correction in the stock market. REIT prices had simply far exceeded
the improving business prospects of the underlying companies. A period of
generally falling REIT prices began, which may not end until later in 1994.
Q. WHAT DID THAT MEAN TO THE FUND?
A. Many of the fund's bigger, blue-chip names - those that had helped
performance in previous years - suffered, and, in hindsight, I stuck with
them too long. I've since reduced some of the fund's investments in
companies like Weingarten Realty, Meditrust and Taubman Centers. The REITs
that did well were brand new issues - of which there was an explosion in
'93. Although I should have taken better advantage of this trend, I've been
a cautious buyer because, in some cases, the quality of these new issues
was suspect. The prices of some rose mainly due to the strong market demand
for REITs, but I chose not to invest.
Q. ARE YOU MAKING CHANGES IN HOPES OF IMPROVING PERFORMANCE?
A. Yes, several. In 1991 and '92, the fund emphasized the REITs of
apartments, health-care facilities and neighborhood shopping centers, which
were safe havens in a volatile real estate market. Apartment construction
has declined to very low levels, which helps reduce vacancy rates on
existing properties, and rents are climbing, so this sector looks solid.
The latter two groups have been good, steady investments for the fund, but
there are other sectors that are looking more attractive. I'm working to
add to those groups that should benefit most from the strengthening U.S.
economy: mobile home parks, factory outlet retail centers, and especially,
industrial properties and hotels.
Q. WHY THE EMPHASIS ON THE LATTER TWO?
A. A stronger economy means people are traveling more. As occupancy rates
rise to near 70%, hotels gain the ability to raise their room rates, which
goes straight to the bottom line. As for U.S. factories, they're increasing
output these days. When production lines quicken, there's often a need to
keep more inventory close-at-hand. Plus, purchasing agents may begin to
stockpile materials as a hedge against rising commodity prices. All of this
stands to benefit industrial buildings and warehouses. As another strategic
change, I'm rotating the geographical emphasis of the REITs I'm buying for
the fund.
Q. HOW ARE YOU DOING THAT?
A. Over the past year, many of the fund's investments have been in areas of
the country that have bounced back from the recession most quickly: the
Southwest, the Southeast, Denver, Dallas, and, to a lesser extent, the
Midwest. Going forward, I'll look for opportunities in the Midwest,
Northeast and on the West Coast. I think these will be the next areas to
see recovering real estate markets. I feel that Southwest REITs may now be
overpriced, and California REITs possibly underpriced, reflecting that
state's continuing recession and recent earthquake.
Q. HOW DO YOU FEEL ABOUT THE COMING SIX MONTHS?
A. This correction we're seeing in the REIT market may have a few more
months left in it, but I think the worst is over. The underlying prospects
of these real estate companies appear to be quite good. Many of the quality
new companies and older established names gained access to new capital
during the market run-up, and have put that money to work at attractive
prices. This should produce good results going forward. I'll be looking to
trade some of the fund's older, established, weaker- performing investments
for some new, quality companies in the sectors I've discussed.
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 January 31,
1994, over $430 million
MANAGER: Barry Greenfield,
since November 1986;
manager, Fidelity Fund, 1982
- - 1993
(checkmark)
BARRY GREENFIELD ON THE REIT
MARKET:
"1991 through 1993 was an
extremely strong period for
REITs. Investors searched for
high yields, and bid up prices
to very high levels. Once the
REIT market corrects, which
it's doing now, I think it'll take
on a different face. Broadly
speaking, real estate
companies have solid
business prospects, and I
think we'll see a switch to a
more earnings-driven market
in the months ahead. What
affects the real estate market
most is not interest rates, or
the economy in general. It's
overbuilding, causing a
situation where too much
space is chasing too few
people. Over the past five
years, we've seen very low
levels of new construction,
which has created an
atmosphere of low supply.
That's good for real estate
investors, and I expect this
trend will help the market for
several years to come."
(bullet) Over the past six months,
the fund's investment in
apartment REITs has
increased from 12.4% to
22.6%. Investments in mobile
home parks have jumped
from 0% to 7.0% and factory
outlets from 0.7% to 6.1%.
The improving economy has
helped real estate companies
in each of these groups.
(bullet) In January 1992, REITs
were roughly a $5 billion
industry. That figure doubled
by January 1993, and grew to
about $35 billion by the
beginning of 1994.
INVESTMENT CHANGES
TOP TEN INVESTMENTS AS OF JANUARY 31, 1994
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Developers Diversified Realty 6.0 4.5
Corp.
Manufactured Home
Communities, 5.2 2.1
Inc.
Equity Residential Properties Trust 5.1 -
(SBI)
Kimco Realty Corporation 4.4 4.9
Federal Realty Investment Trust 4.4 5.4
(SBI)
Simon Properties Group, Inc. 4.3 -
Property Trust of America (SBI) 3.5 3.4
Nationwide Health Properties, Inc. 2.9 3.6
Carr Realty Corp. 2.8 3.8
Vornado Realty Trust 2.6 1.6
TOP FIVE REIT SECTORS AS OF JANUARY 31, 1994*
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Shopping Centers 26.8 39.7
Apartments 22.6 12.4
Mobile Home Parks 7.0 -
Malls 6.5 -
Factory Outlets 6.1 0.7
* EXCLUDES SECURITIES WITH MATURITIES OF LESS THAN ONE YEAR
ASSET ALLOCATION
AS OF JANUARY 31, 1994* AS OF JULY 31, 1993**
Row: 1, Col: 1, Value: 7.8
Row: 1, Col: 2, Value: 8.4
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 43.8
Stocks 78.7%
Bonds 1.4%
Convertibles 12.6%
Short-term
investments 7.3%
Stocks 83.8%
Bonds 0.0%
Convertibles 8.4%
Short-term
investments 7.8%
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 12.6
Row: 1, Col: 3, Value: 1.4
Row: 1, Col: 4, Value: 38.7
Row: 1, Col: 5, Value: 20.0
Row: 1, Col: 6, Value: 20.0
* FOREIGN
INVESTMENTS 1.0%
** FOREIGN
INVESTMENTS 2.0%
INVESTMENTS JANUARY 31, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 83.8%
SHARES VALUE (NOTE 1)
(000S)
CONGLOMERATES - 1.0%
Brierley Investments Ltd. 5,321,739 $ 4,323,668 10901410
CONSTRUCTION & REAL ESTATE - 1.9%
CONSTRUCTION - 1.5%
C Brewer Homes, Inc. (a) 25,000 400,000 10757510
Engle Homes, Inc. 30,000 495,000 29289610
Kaufman & Broad Home Corp. 90,000 2,092,500 48616810
Oriole Homes Corp.:
Class A 11,900 145,775 68626410
Class B 105,900 1,323,750 68626420
Standard Pacific Corp. 80,100 941,175 85375C10
Sundance Homes, Inc. (a) 50,000 543,750 86724Q10
UDC Homes, Inc. 30,000 288,750 90264610
Washington Homes, Inc. 46,000 442,750 93886410
6,673,450
REAL ESTATE - 0.4%
Rouse Co. (The) 100,900 1,664,850 77927310
TOTAL CONSTRUCTION & REAL ESTATE 8,338,300
REAL ESTATE INVESTMENT TRUSTS (REITS) - 78.5%
REITS - APARTMENTS - 21.4%
Avalon Properties, Inc. 153,500 3,338,625 05346910
Berkshire Realty, Inc. 573,500 6,738,625 08471010
Camden Property Trust (SBI) (a) 185,200 4,467,950 13313110
Colonial Property Trust (SBI) 230,000 5,175,000 19587210
Equity Residential Properties Trust (SBI) 755,000 21,989,375 29476L10
Holly Residential Properties, Inc. 290,400 5,263,500 43602310
Merry Land & Investment Co., Inc. 427,500 9,405,000 59043810
Oasis Residential, Inc. 310,000 7,905,000 67421610
Post Properties, Inc. (a) 266,500 7,861,750 73746410
Property Trust of America (SBI) 793,000 15,067,000 74344510
Southwestern Property Trust, Inc. 248,000 3,069,000 84573410
United Dominion Realty Trust, Inc. 160,500 2,307,188 91019710
92,588,013
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - FACTORY OUTLETS - 6.1%
Chelsea GCA Realty, Inc. (a) 250,000 $ 7,062,500 16326210
Factory Stores America, Inc. 285,000 7,659,375 30306910
McArthur/Glen Realty Corp. (a) 268,100 7,372,750 57918810
Tanger Factory Outlet Centers, Inc. 140,700 4,115,475 87546510
26,210,100
REITS - HEALTHCARE FACILITIES - 3.6%
LTC Properties, Inc. 250,400 3,317,800 50217510
Nationwide Health Properties, Inc. 345,000 12,420,000 63862010
15,737,800
REITS - HOTELS - 0.9%
Jameson Co. 28,000 255,500 47045710
RFS Hotel Investors, Inc. 105,000 1,548,750 74955J10
Resort Income Investors, Inc. 155,700 2,043,563 76116510
3,847,813
REITS - INDUSTRIAL BUILDINGS - 0.6%
American Industrial Properties (SBI) 197,200 419,050 02679110
Centerpoint Properties Corp. 100,500 1,871,813 15189510
Copley Properties, Inc. 18,100 181,000 21745410
2,471,863
REITS - LAND - 0.4%
Storage Equities, Inc. 125,000 1,953,125 86211010
REITS - MALLS - 6.5%
CBL & Associates Properties, Inc. 80,200 1,543,850 12483010
Crown American Realty Trust (SBI) 200,000 2,850,000 22818610
MSA Realty Corp. 115,900 767,838 55349510
Simon Properties Group, Inc. (a) 765,000 18,742,500
Urban Shopping Centers, Inc. (a) 200,000 4,425,000 82880510
28,329,188
REITS - MIXED USE - 2.7%
Bedford Property Investors, Inc. 244,000 1,433,500 07644610
Cousins Properties, Inc. 160,000 2,760,000 22279510
Duke Realty Investors, Inc. 199,810 4,595,630 26441150
EastGroup Properties (SBI) (c) 136,500 2,695,875 27727010
11,485,005
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - MOBILE HOME PARKS - 7.0%
Chateau Properties, Inc. 120,000 $ 2,550,000 16173910
Manufactured Home Communities, Inc. (c) 521,100 22,537,575 56468210
ROC Communities, Inc. 158,000 3,456,250 74965010
Sun Communities, Inc. 75,000 1,612,500 86667410
30,156,325
REITS - OFFICE BUILDINGS - 3.7%
Carr Realty Corp. 525,000 12,337,500 14441K10
Crocker Realty Investors, Inc. 50,000 400,000 22682410
G&L Realty Corp. (a) 200,200 3,378,375 36127110
16,115,875
REITS - SHOPPING CENTERS - 25.6%
Bradley Real Estate Trust (SBI) (c) 1,192,400 10,880,650 10458310
Burnham Pacific Properties, Inc. 375,022 6,891,029 12232C10
Developers Diversified Realty Corp. (c) 921,200 26,139,050 25159110
Dial Real Estate Investment Trust, Inc. (c) 284,300 2,949,613 25247810
Federal Realty Investment Trust (SBI) 781,700 18,858,513 31374720
Haagen Alexander Properties, Inc. 325,000 5,484,375 40443E10
Kimco Realty Corporation 527,700 18,865,275 49446R10
New Plan Realty Trust (SBI) 855 20,680 49446R10
Taubman Centers, Inc. 232,600 2,674,900 87666410
Vornado Realty Trust 323,000 11,305,000 92904210
Weingarten Realty Investors (SBI) 182,000 6,779,500 94874110
110,848,585
TOTAL REAL ESTATE INVESTMENT TRUSTS 339,743,692
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Catalina Lighting, Inc. (a) 27,700 290,850 14886510
MEDIA & LEISURE - 2.3%
LODGING & GAMING - 2.3%
La Quinta Motor Inns, Inc. 177,400 5,410,700 50419510
Red Lion Inns LP 155,800 4,420,825 75670210
Resort Hotels PLC 200,000 121,975 75499492
9,953,500
TOTAL COMMON STOCKS
(Cost $338,121,908) 362,650,010
CONVERTIBLE PREFERRED STOCKS - 3.7%
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 2.1%
REAL ESTATE - 2.1%
Catellus Development Corp., Series A, $3.75 61,900 $ 3,621,150 14911120
Rouse Co., Series A 102,200 5,263,300 77927320
8,884,450
REAL ESTATE INVESTMENT TRUSTS (REITS) - 1.6%
REITS - APARTMENTS - 1.2%
Merry Land & Investment Co., Inc., Series A, $1.75 175,000 5,228,125
59043820
REITS - INDUSTRIAL BUILDINGS - 0.4%
Storage Equities, Inc. $2.0625 60,000 1,740,000 86211040
TOTAL REAL ESTATE INVESTMENT TRUSTS 6,968,125
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $14,467,541) 15,852,575
CONVERTIBLE BONDS - 4.7%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) (B) (AMOUNT)
CONSTRUCTION & REAL ESTATE - 1.2%
CONSTRUCTION - 0.7%
Engle Homes, Inc.:
7%, 3/1/03 - $ 1,000,000 1,240,000 292896AB
7%, 3/1/03 (e) - 1,700,000 2,006,000 292896AA
3,246,000
REAL ESTATE - 0.5%
National Health Investors, Inc. 7 3/8%,
4/1/98 (d) - 2,100,000 2,131,500 63633D9D
TOTAL CONSTRUCTION & REAL ESTATE 5,377,500
REAL ESTATE INVESTMENT TRUSTS (REITS) - 3.5%
REITS - HEALTHCARE FACILITIES - 2.3%
Burnham Pacific Properties, Inc. 8 1/2%,
7/15/02 BBB- 8,763,000 9,946,005 12232CAB
CONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - SHOPPING CENTERS - 1.2%
LTC Properties, Inc. 9 3/4%, 7/1/94 - $ 4,100,000 $ 5,309,500 502175AA
TOTAL REAL ESTATE INVESTMENT TRUSTS 15,255,505
TOTAL CONVERTIBLE BONDS
(Cost $19,977,146) 20,633,005
REPURCHASE AGREEMENTS - 7.8%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 3.19%
dated 1/31/94 due 2/1/94 $ 33,828,996 33,826,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $406,392,595) $ 432,961,590
LEGEND
1. Non-income producing
2. Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
3. Affiliated company (see Note 5 of Notes to Financial Statements).
4. 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
National Health
Investors, Inc.
7 3/8%, 4/1/98 3/18/93 $ 2,100,000
5. 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 $2,006,000 or 0.5% of net
assets.
INCOME TAX INFORMATION
At January 31, 1994, the aggregate cost of investment securities for income
tax purposes was $406,617,542. Net unrealized appreciation aggregated
$26,344,048, of which $36,250,101 related to appreciated investment
securities and $9,906,053 related to depreciated investment securities.
The fund hereby designates $1,009,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 31, 1994
ASSETS 6. 7.
8.Investment in securities, at value (including 9. $ 432,961,590
repurchase agreements of $33,826,000) (cost
$406,392,595) (Notes 1 and 2) - See accompanying
schedule
10.Cash 11. 956
12.Receivable for investments sold 13. 5,829,198
14.Receivable for fund shares sold 15. 1,897,022
16.Dividends receivable 17. 1,264,222
18.Interest receivable 19. 192,658
20.Other receivables 21. 6,150
22. TOTAL ASSETS 23. 442,151,796
LIABILITIES 24. 25.
26.Payable for investments purchased $ 5,798,057 27.
28.Payable for fund shares redeemed 5,258,945 29.
30.Accrued management fee 221,304 31.
32.Other payables and accrued expenses 268,945 33.
34. TOTAL LIABILITIES 35. 11,547,251
36.NET ASSETS 37. $ 430,604,545
38.Net Assets consist of (Note 1): 39. 40.
41.Paid in capital 42. $ 403,126,305
43.Undistributed net investment income 44. 932,472
45.Accumulated undistributed net realized gain (loss) on 46. (23,227)
investments
47.Net unrealized appreciation (depreciation) on 48. 26,568,995
investment securities
49.NET ASSETS, for 31,487,778 shares outstanding 50. $ 430,604,545
51.NET ASSET VALUE, offering price and redemption price 52. $13.68
per share ($430,604,545 (divided by) 31,487,778 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED JANUARY 31, 1994
INVESTMENT INCOME 54. $ 19,301,782
53.Dividends (including $2,457,643 received from
affiliated issuers) (Note 5)
55.Interest 56. 3,567,676
57. TOTAL INCOME 58. 22,869,458
EXPENSES 59. 60.
61.Management fee (Note 4) $ 2,615,114 62.
63.Transfer agent fees (Note 4) 1,719,258 64.
65.Accounting fees and expenses (Note 4) 251,620 66.
67.Non-interested trustees' compensation 2,579 68.
69.Custodian fees and expenses 50,867 70.
71.Registration fees 160,680 72.
73.Audit 24,617 74.
75.Legal 3,919 76.
77.Miscellaneous 65,518 78.
79. Total expenses before reductions 4,894,172 80.
81. Expense reductions (Note 6) (152,993) 4,741,179
82.NET INVESTMENT INCOME 83. 18,128,279
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 85. 1,412,613
(NOTES 1 AND 3)
84.Net realized gain (loss) on investment securities
86.Change in net unrealized appreciation (depreciation) 87. 3,281,151
on investment securities
88.NET GAIN (LOSS) 89. 4,693,764
90.NET INCREASE (DECREASE) IN NET ASSETS RESULTING 91. $ 22,822,043
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
92.Operations $ 18,128,279 $ 5,708,247
Net investment income
93. Net realized gain (loss) on investments 1,412,613 4,822,950
94. Change in net unrealized appreciation (depreciation) 3,281,151 12,474,888
on
investments
95. NET INCREASE (DECREASE) IN NET ASSETS RESULTING 22,822,043 23,006,085
FROM OPERATIONS
96.Distributions to shareholders from net investment (17,531,033) (3,648,679)
income
97.Share transactions 902,518,648 249,400,216
Net proceeds from sales of shares
98. Reinvestment of distributions from net investment 16,135,275 3,348,980
income
99. Cost of shares redeemed (739,963,733) (101,879,509)
100. 178,690,190 150,869,687
Net increase (decrease) in net assets resulting from
share transactions
101. 183,981,200 170,227,093
TOTAL INCREASE (DECREASE) IN NET ASSETS
NET ASSETS 102. 103.
104. Beginning of period 246,623,345 76,396,252
105. $ 430,604,545 $ 246,623,345
End of period (including undistributed net investment
income of $932,472 and $5,598,311, respectively)
OTHER INFORMATION 107. 108.
106.Shares
109. Sold 64,864,558 20,196,161
110. Issued in reinvestment of distributions from net 1,182,763 286,620
investment
income
111. Redeemed (53,208,850) (8,421,503)
112. Net increase (decrease) 12,838,471 12,061,278
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
113. YEARS ENDED JANUARY 31,
114. 1994 1993 1992 1991 1990
115. 116. 117. 118. 119.
120.SELECTED PER-SHARE
DATA
121.Net asset value, $ 13.22 $ 11.60 $ 9.03 $ 9.38 $ 9.01
beginning of period
122.Income from Investment
Operations
123. Net investment income .54 .68(dagger) .43 .77 .74
124. Net realized and .52 1.37 2.63 (.61) .17
unrealized
gain (loss) on investments
125. Total from investment 1.06 2.05 3.06 .16 .91
operations
126.Less Distributions
127. From net investment (.60) (.43) (.49) (.51) (.54)
income
128.Net asset value, end of $ 13.68 $ 13.22 $ 11.60 $ 9.03 $ 9.38
period
129.TOTAL RETURN 8.10% 18.26% 35.00% 2.05% 10.17%
(double dagger)
130.RATIOS AND
SUPPLEMENTAL DATA
131.Net assets, end of period $ 430,605 $ 246,623 $ 76,396 $ 44,530 $ 50,033
(000 omitted)
132.Ratio of expenses to 1.13%* 1.16% 1.24% 1.47% 1.39%
average
net assets
133.Ratio of expenses to 1.17%* 1.16% 1.24% 1.47% 1.39%
average
net assets before expense
reductions
134.Ratio of net investment 4.34% 5.81% 5.84% 8.45% 7.11%
income to average net
assets
135.Portfolio turnover rate 110% 82% 84% 49% 70%
</TABLE>
(double dagger) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIOD SHOWN.
(dagger) NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
* SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1994
1. 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 (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 current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
It is not practical to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
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
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income is accrued as earned. Dividend and
interest income is recorded net of foreign taxes where recovery of such
taxes is not assured.
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.
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
partnerships, non-taxable dividends and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective February
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of January 31, 1993 have been restated to reflect
an increase in paid in capital of $84,910, a decrease in undistributed net
investment income of $3,987,411 and a decrease in accumulated net realized
loss on investments of $3,902,501.
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 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.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
more repurchase agreements that 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 $2,131,500 or 0.5% of net assets.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $593,566,465 and $417,241,210, respectively, of which sales of
U.S. government and government agency obligations aggregated $15,605,000.
4. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates ranging from
.30% to .52% and is based on the monthly average net assets of all the
mutual funds advised by FMR. The annual individual fund fee rate is .30%.
For the period, the management fee was equivalent to an annual rate of .63%
of average net assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from .2850% to .5200%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the
fund's transfer, dividend disbursing and shareholder servicing agent. FSC
receives fees based on the type, size, number of accounts and the number of
transactions made by shareholders. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEE. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
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 $355,703 for the period.
5. 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
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Bradley Real Estate Trust (SBI) $ 3,280,209 - $ 483,030 $ 10,880,650
Developers Diversified Realty Corp. 9,723,536 $ 29,875 916,880
26,139,050
Dial Real Estate Investment Trust, Inc. 1,689,415 1,921,715 375,760
2,949,613
EastGroup Properties (SBI) 365,725 67,295 144,782 2,695,875
Manufactured Home Communities, Inc. 5,084,033 - 537,191 22,537,575
TOTALS $ 20,142,918 $ 2,018,885 $ 2,457,643 $ 65,202,763
6. 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
$152,993 under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Real Estate Investment Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Trust: Fidelity Real Estate Investment Portfolio,
including the schedule of portfolio investments, as of January 31, 1994,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1994, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Trust: Fidelity Real Estate Investment Portfolio as
of January 31, 1994, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND
Boston, Massachusetts
March 4, 1994
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Barry A. Greenfield, Vice President
Gary L. French, Treasurer
John H. Costello, 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 Income Fund
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
EXHIBIT 24(A)(4)
SPARTAN(Registered trademark)
LONG-TERM GOVERNMENT BOND
FUND
(Registered trademark)
ANNUAL REPORT
JANUARY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy, and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the last six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market value.
FINANCIAL STATEMENTS 13 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 17 Footnotes to the financial
statements.
REPORT OF INDEPENDENT 20 The auditor's opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS
CORPORATION IS A
BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED
BY THE
FDIC.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Once the new year begins, many people start reviewing their finances and
calculating their tax bills. No one wants to pay more taxes than they have
to. But a recent survey of 500 U.S. households, conducted by Fidelity and
Yankelovich Partners, showed that few people have taken steps to reduce
their taxes under the new legislation. Many were not even aware that the
new tax laws were retroactive to January 1993.
Whether or not you're someone whose tax bill will increase as a result of
these changes, it may make sense to consider ways to keep more of what you
earn.
First, if your employer offers a 401(k) or 403(b) retirement savings plan,
consider enrolling. These plans are set up so you can make regular
contributions -
before taxes - to a retirement savings plan. They offer a disciplined
savings strategy, the ability to accumulate earnings tax-deferred, and
immediate tax savings. For example, if you earn $40,000 a year and
contribute 7% of your salary to your 401(k) plan, your annual contribution
is $2,800. That reduces your taxable income to $37,200 and, if you're in
the
28% tax bracket, saves you $784 in federal taxes. In addition, you pay no
taxes on any earnings until withdrawal.
It may be a good idea to contact your benefits office as soon as possible
to find out when you can enroll or increase your contribution. Most
employers allow employees to make changes only a few times each year.
Second, consider an IRA. Many people are eligible to make an IRA
contribution (up to $2,000) that is fully tax deductible. That includes
people who are not covered by company pension plans, or those within
certain income brackets. Even if you don't qualify for a fully deductible
contribution, any IRA earnings will grow tax-deferred until withdrawal.
Third, consider adding to your tax-free investments, either municipal bonds
or municipal bond funds. Often these can provide higher after-tax yields
than comparable taxable investments. For example, if you're in the new 36%
federal income tax bracket and invest $10,000 in a taxable investment
yielding 7%, you'll pay $252 in federal taxes and receive $448 in income.
That same $10,000 invested in a tax-free bond fund yielding 5.5% would
allow you to keep $550 in income.
These are three investment strategies that could help lower your tax bill
in 1994. If you're interested in learning more, please call us at
1-800-544-8888 or visit a Fidelity Investor Center.
Wishing you a prosperous new year,
Edward C. Johnson 3d, Chairman
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 JANUARY 31, 1994 PAST 1 LIFE OF
YEAR FUND
Spartan Long-Term Government 16.77% 67.49%
Lehman Brothers Long-Term Government 16.90% n/a
Bond Index
Average General U.S. Government 8.66% n/a
Bond Fund
Consumer Price Index 2.52% 10.17%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, 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 142 funds tracked by Lipper Analytical Services. These
benchmarks include reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index helps show how
your fund did compared to inflation. (The periods covered by CPI numbers
are the closest available match to those covered by the fund.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1994 PAST 1 LIFE OF
YEAR FUND
Spartan Long-Term Government 16.77% 16.65%
Lehman Brothers Long-Term Government 16.90% n/a
Bond Index
Average General U.S. Government 8.66% n/a
Bond Fund
Consumer Price Index 2.52% 2.94%
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
Sp LT Gov't Bond LB Gov't Bond
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
$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 January 31, 1994, the value of your
investment, with dividends reinvested would have grown to $16,751 - a
67.51% increase on your initial investment. This assumes you still owned
the fund on January 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
$16,780 - a 67.80% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
INCOME
YEARS ENDED JANUARY 31, 1994 1993 1992
Income return 7.14% 7.69% 7.15%
Capital gain return 4.62% 1.69% 0.76%
Change in share price 5.01% 4.55% 5.05%
Total return 16.77% 13.93% 12.96%
Income returns, capital gain returns, and changes in share price are all
part of a bond fund's total return. An income return reflects the dividends
paid by the fund. A capital gain return reflects the amount paid by the
fund to shareholders based on the profits it has from selling bonds that
have grown in value. Both returns assume the dividends or gains are
reinvested. Changes in the fund's share price include changes in the prices
of the bonds owned by the fund. Change in share price and total return
figures include the effect of the $5 account closeout fee.
DIVIDENDS AND YIELD
PERIODS ENDED JANUARY 31, 1994 PAST 30 PAST 6 PAST 1
DAYS MONTHS YEAR
Dividends per share n/a 44.00(cents) 84.00(cents)
Annualized dividend rate n/a 6.65% 6.54%
Annualized yield 5.93% n/a n/a
Dividends per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $13.13 over
the past six months and $12.85 over the past year, you can compare the
fund's income over these two periods. The 30-day annualized yield is a
standard formula for all funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Bond investments overseas and in
the United States provided
historically attractive returns for the
12 months ended January 31,
1994. Here at home, falling interest
rates pushed up bond prices
steadily through mid-October,
when the yield on the benchmark
30-year Treasury bond reached a
historic low, at 5.79%. By year-end,
a strengthening economy had
fueled mild inflation fears. That
pushed up the yield on the 30-year
bond to 6.35% by December 31,
which forced bond investors to give
back some of their earlier profits.
From there, inflation jitters eased
and yields moved within a narrow
range; the yield on the 30-year
Treasury dropped to 6.23% by
January 31. Long Treasuries
returned 9.73% for the 12 months
ended January 31. Mortgage
securities continued to lag other
fixed-income investments,
reflecting the impact of refinancings
by millions of homeowners. The
Salomon Brothers Mortgage Index
rose just 6.64%. For comparison,
the Lehman Brothers Aggregate
Bond Index - a broad measure of
bond performance - returned
9.14%. The strengthening
economy boosted returns of
corporate junk bonds; the Merrill
Lynch High Yield Master Index
rose 16.69%. Globally, falling
interest rates and low inflation
drove strong returns in Europe,
Japan, and many of the emerging
markets. The Salomon Brothers
World Government Bond Index -
which includes U.S. issues - was
up 12.22% for the year, while the
J.P. Morgan Emerging Markets
Bond Index had a total return of
43.06%.
An interview with Curtis
Hollingsworth, Portfolio Manager of Spartan Long-Term Government Bond Fund
Q. HOW HAS THE FUND DONE?
A. Quite well. The best way to measure the fund's performance is by its
total return. This reflects income, or interest payments, plus capital
gains - which occur when the fund profits from selling bonds that have
grown in value - and changes in share price. The fund had a total return
of 16.77% for the year ending January 31, 1994. This return was nearly
double the 8.66% return of the average general U.S. government bond fund,
according to Lipper Analytical Services.
Q. WHAT'S BEHIND THESE OUTSTANDING NUMBERS?
A. The fund performed well because, as part of its charter, 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 decline, as they did
this past year, the fund typically does quite well. On the other hand,
when interest rates increase, the fund usually performs poorly.
Q. YOU TOOK OVER THE FUND THIS PAST
OCTOBER. HAVE YOU CHANGED ITS STRATEGY?
A. Very little. My philosophy has been, if it isn't broken, why fix it. I
have, however, made some changes to note. I sold the fund's collateralized
mortgage obligations (CMOs) at a profit. A CMO is a more complicated type
of mortgage-backed bond that funds sometimes use instead of conventional
mortgage securities. At the end of January, the fund was divided between
Treasuries and government agency bonds (81.5%), foreign government
obligations (14.1%), and cash and short-term investments (4.4%).
Q. YOU MENTIONED FOREIGN GOVERNMENT OBLIGATIONS. WHERE HAVE YOU INVESTED
OVERSEAS?
A. For the first three quarters of 1993, about 10% of the fund was in
Mexican Cetes - the Mexican equivalent of U.S. Treasury bills. The Cetes
performed very well, so, in the fourth quarter, I sold all of them at a
profit to purchase AAA government bonds issued by France and Denmark.
Yields were higher for these bonds than for comparable U.S. bonds because
interest rates have not fallen as far in Europe as they have here. In
addition, the outlook for inflation is extremely good, and Europe's
economic cycle is running slightly behind our own. So, European interest
rates may have further to fall resulting in price gains for bonds. Over the
next six months, I expect to increase the fund's investment in foreign
bonds to take advantage of the performance of these markets.
Q. WHAT OTHER CHANGES DID YOU MAKE?
A. I began using a strategy known as duration averaging. Duration is a way
to measure how sensitive a bond is to changes in interest rates. It looks
at the bond's maturity, or how much time remains until the issuer is
scheduled to pay off the principal, as well as the frequency and amount of
interest payments. The longer the average duration of a fund, the more its
share price will move up as rates fall or down as rates rise. For example,
if the fund had a duration of 10 years and interest rates rose 1%, its
share price would fall roughly 10%. Conversely, if interest rates fell 1%,
its share price would rise about 10%.
Q. SO HOW DOES DURATION AVERAGING WORK?
A. Duration averaging is a disciplined approach to managing the fund's
duration. It's similar to dollar-cost averaging in the stock market, where
you invest equal amounts of money at regular intervals. What I do is
lengthen the duration after rates rise and shorten it after they fall. To
implement this strategy, I rely on our in-house economic analyst to
forecast the average yield on the 30-year Treasury bond. Right now, the
analyst expects the average to be 5.75% over the next two years. So when
30-year Treasuries are yielding 5.75%, the fund would be at its neutral
duration of 11 years. But when 30-year Treasury yields are higher than
5.75%, the fund's duration will be longer. And when yields are lower, the
fund will be shorter.
Q. WHAT CAN SHAREHOLDERS EXPECT GOING FORWARD?
A. As I noted earlier, shareholders can expect the fund's overseas
investments to increase over the next six months to take advantage of
higher yields and anticipated declines in some foreign interest rates. In
general, I think long-term bonds will continue to perform reasonably well.
However, the really big double-digit price gains that we've seen over the
past several years are behind us. We'll probably see more modest returns
over the next year.
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 January 31,
1994, about $67 million
MANAGER: Curtis
Hollingsworth, since October
1993; manager, 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
(checkmark)
CURT HOLLINGSWORTH ON INTEREST
RATES:
"I expect interest rates to
remain fairly stable over the
next six months. I think the
Federal Reserve's move to
slightly increase interest rates
this February reflects their
resolve to hold down the
inflation rate. Contrary to what
many people have voiced, I
see this move as very good for
bonds over the long term.
There would have been cause
for concern if the Fed hadn't
reacted at all with the economy
growing as quickly as it was."
(bullet) As of January 31, the
fund's duration was 15.4
years. That means that if
interest rates rose 1%, its
share price - $12.74 on
January 31 - would have
fallen roughly 15.4% to
$10.78. Conversely, if interest
rates fell 1%, its share price
would have risen about 15.4%
to $14.70.
(bullet) Nearly 82% of the fund was
invested in U.S. government
and government agency
securities on January 31.
Foreign securities and
short-term investments made
up the rest. Six months ago
about 70% of the fund was in
U.S. government and
government agency
securities.
DISTRIBUTIONS
The Board of Trustees of
Spartan Long-Term
Government Bond Fund
voted to pay on March 7,
1994, to shareholders of
record at the opening of
business on March 4, 1994, a
distribution of $.11 derived
from capital gains realized
from sales of portfolio
securities and a dividend of
$.20 from net investment
income.
INVESTMENT CHANGES
TOP FIVE ISSUERS AS OF JANUARY 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
U.S. Treasury 45.1 29.2
Financing Corporation
(U.S. Government Agency) 27.9 19.5
French Government 7.2 0.0
Danish Government 6.8 0.0
Tennessee Valley Authority
(U.S. Government Agency) 6.0 1.9
</TABLE>
(EXCLUDING REPURCHASE AGREEMENTS)
AVERAGE YEARS TO MATURITY AS OF JANUARY 31, 1994
6 MONTHS AGO
Years 21.3 15.9
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF JANUARY 31, 1994
6 MONTHS AGO
Years 15.4 n/a
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL
LOSE ABOUT 5% OF ITS VALUE.
ASSET ALLOCATION
AS OF JANUARY 31, 1994 AS OF JULY 31, 1993
Row: 1, Col: 1, Value: 14.1
Row: 1, Col: 2, Value: 4.4
Row: 1, Col: 3, Value: 41.5
Row: 1, Col: 4, Value: 40.0
U.S. government
and agency
obligations 70.1%
Short-term
obligations 19.6%
Foreign
investments 10.3%
U.S. government
and agency
obligations 81.5%
Short-term
obligations 4.4%
Foreign
investments 14.1%
Row: 1, Col: 1, Value: 10.3
Row: 1, Col: 2, Value: 19.6
Row: 1, Col: 3, Value: 30.1
Row: 1, Col: 4, Value: 40.0
INVESTMENTS JANUARY 31, 1994
Showing Percentage of Total Value of Investments
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 81.5%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
U.S. TREASURY OBLIGATIONS - 45.1%
7 1/4%, 2/15/23 $ 1,300,000 $ 1,431,625 912810EP
Stripped Coupon Payment:
11/15/13 30,400,000 8,143,248 912833KB
8/15/17 96,000,000 19,824,960 912803AM
29,399,833
U.S. GOVERNMENT AGENCY OBLIGATIONS - 36.4%
Federal Home Loan Bank coupon strip 2/25/04 3,000,000 1,620,000 31339KBG
Financing Corporation:
10.70%, 10/6/17 2,000,000 2,947,500 317705AA
9.80%, 11/30/17 540,000 738,956 317705AC
10.35%, 8/3/18 5,000,000 7,193,750 317705AG
9.65%, 11/2/18 2,400,000 3,255,750 317705AH
Coupon Strips:
Series 7, 8/3/06 100,000 45,066 31771CPY
Series 14, 5/2/04 1,009,000 540,612 31771C6C
Series 15, 9/7/02 5,500,000 3,337,565 31771C3K
Series 19, 6/6/04 200,000 106,544 31771DJT
Tennessee Valley Authority:
8 1/4%, 4/15/42 (Callable 2012) 2,500,000 2,906,000 880591BL
7 1/4%, 7/15/43 1,000,000 1,025,313 880591BW
23,717,056
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $46,623,057) 53,116,889
FOREIGN GOVERNMENT OBLIGATIONS - 14.1%
Danish Government 8%, 5/15/03 (b) DKK 26,300 4,446,315 249998AG
French Government Oat strip 4/25/23 (b) FRF 180,000 4,702,166 351996BK
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $8,897,053) 9,148,481
REPURCHASE AGREEMENTS - 4.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 3.19% dated
1/31/94 due 2/1/94 $2,864,537 $ 2,864,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $58,384,110) $ 65,129,370
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE VALUE GAIN/(LOSS)
CONTRACTS TO SELL
317,227,808 BEF
(Receivable amount $8,665,769) 3/31/94 $ 8,832,694 $ (166,925)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 13.6%
CURRENCY TYPE ABBREVIATIONS
BEF - Belgian franc
DKK - Danish krone
FRF - French franc
LEGEND
7. Principal amount is stated in United States dollars unless otherwise
noted.
8. Principal amount in thousands
Distribution of investments by country, as a percentage of total value of
investment in securities, is as follows:
United States 85.9%
Denmark 6.9
France 7.2
TOTAL 100.0%
INCOME TAX INFORMATION
At January 31, 1994, the aggregate cost of investment securities for income
tax purposes was $58,419,641. Net unrealized appreciation aggregated
$6,709,729, of which $6,743,092, related to appreciated investment
securities and $33,363 related to depreciated investment securities.
The fund hereby designates $2,580,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 31, 1994
ASSETS 9. 10.
11.Investment in securities, at value (including 12. $ 65,129,370
repurchase agreements of $2,864,000) (cost
$58,384,110) (Notes 1 and 2) - See accompanying
schedule
13.Short foreign currency contracts (Note 2) $ (8,832,694) 14.
Contracts held, at value
15. Receivable for contracts held 8,665,769 (166,925)
16.Cash 17. 585
18.Receivable for investments sold 19. 1,747,850
20.Interest receivable 21. 720,117
22. TOTAL ASSETS 23. 67,430,997
LIABILITIES 24. 25.
26.Payable for fund shares redeemed 90,542 27.
28.Accrued management fee 36,908 29.
30. TOTAL LIABILITIES 31. 127,450
32.NET ASSETS 33. $ 67,303,547
34.Net Assets consist of (Note 1): 35. 36.
37.Paid in capital 38. $ 57,980,204
39.Undistributed net investment income 40. 499,970
41.Accumulated undistributed net realized gain (loss) on 42. 2,245,038
investments
43.Net unrealized appreciation (depreciation) on: 44. 45.
46. Investment securities 47. 6,745,260
48. Foreign currency contracts 49. (166,925)
50.NET ASSETS, for 5,283,657 shares outstanding 51. $ 67,303,547
52.NET ASSET VALUE, offering price and redemption price 53. $12.74
per share ($67,303,547 (divided by) 5,283,657 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED JANUARY 31, 1994
INVESTMENT INCOME 55. $ 6,051,982
54.Interest
EXPENSES 56. 57.
58.Management fee (Note 4) $ 557,381 59.
60.Non-interested trustees' compensation 597 61.
62.Interest (Note 5) 521 63.
64. TOTAL EXPENSES 65. 558,499
66.NET INVESTMENT INCOME 67. 5,493,483
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 69. 70.
(NOTES 1, 2 AND 3)
68.Net realized gain (loss) on:
71. Investment securities 5,307,672 72.
73. Foreign currency contracts 158,249 5,465,921
74.Change in net unrealized appreciation (depreciation) 75. 76.
on:
77. Investment securities 2,806,751 78.
79. Foreign currency contracts (166,925) 2,639,826
80.NET GAIN (LOSS) 81. 8,105,747
82.NET INCREASE (DECREASE) IN NET ASSETS RESULTING 83. $ 13,599,230
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
84.Operations $ 5,493,483 $ 5,751,364
Net investment income
85. Net realized gain (loss) on investments 5,465,921 1,284,147
86. Change in net unrealized appreciation (depreciation) 2,639,826 2,487,103
on
investments
87. NET INCREASE (DECREASE) IN NET ASSETS RESULTING 13,599,230 9,522,614
FROM OPERATIONS
88.Distributions to shareholders: (5,701,388) (5,590,626)
From net investment income
89. From net realized gain (2,855,797) (1,265,501)
90. TOTAL DISTRIBUTIONS (8,557,185) (6,856,127)
91.Share transactions 131,601,595 195,418,482
Net proceeds from sales of shares
92. Reinvestment of distributions from: 5,450,221 5,574,135
Net investment income
93. Net realized gain 2,718,913 1,264,096
94. Cost of shares redeemed (160,517,979) (184,906,340)
95. Net increase (decrease) in net assets resulting (20,747,250) 17,350,373
from share transactions
96. TOTAL INCREASE (DECREASE) IN NET ASSETS (15,705,205) 20,016,860
NET ASSETS 97. 98.
99. Beginning of period 83,008,752 62,991,892
100. $ 67,303,547 $ 83,008,752
End of period (including undistributed net investment
income of $499,970 and $597,637, respectively)
OTHER INFORMATION 102. 103.
101.Shares
104. Sold 10,329,522 16,454,365
105. Issued in reinvestment of distributions from: 429,817 474,129
Net investment income
106. 219,444 107,766
Net realized gain
107. Redeemed (12,536,136) (15,626,855)
108. Net increase (decrease) (1,557,353) 1,409,405
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
109. YEARS ENDED JANUARY 31, SEPTEMBER 28,
1990
(COMMENCEMENT OF
OPERATIONS) TO
JANUARY 31,
110. 1994 1993 1992 1991
111.SELECTED PER-SHARE DATA
112.Net asset value, $ 12.130 $ 11.600 $ 11.040 $ 10.000
beginning of period
113.Income from Investment .847 .847 .776 .144
Operations
Net investment income
114. Net realized and 1.123 .703 .604 .996
unrealized
gain (loss) on investments
115. Total from investment 1.970 1.550 1.380 1.140
operations
116.Less Distributions (.840) (.840) (.740) (.100)
From net interest income
117. From net realized gain (.520) (.180) (.080) -
on
investments
118. Total distributions (1.360) (1.020) (.820) (.100)
119.Net asset value, end of $ 12.740 $ 12.130 $ 11.600 $ 11.040
period
120.TOTAL RETURN(dagger) 16.79% 13.95% 12.98% 11.41%
121.RATIOS AND
SUPPLEMENTAL DATA
122.Net assets, end of period $ 67,304 $ 83,009 $ 62,992 $ 33,833
(000 omitted)
123.Ratio of expenses to .65% .65% .65% .65%*
average net assets
124.Ratio of net interest 6.41% 7.35% 7.30% 7.26%*
income to average net
assets
125.Portfolio turnover rate 153% 135% 335% 256%*
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS DO NOT INCLUDE ACCOUNT FEES AND FOR PERIODS OF LESS
THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Long-Term Government Bond 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 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 current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
It is not practical to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
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.
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. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
for income tax purposes. Permanent book and tax basis differences relating
to shareholder distributions will result in reclassifications to paid in
capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective February
1 ,1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of January 31, 1993 have been reclassified to
reflect an increase in paid in capital of $659,482, an increase in
undistributed net investment income of $2,164 and a decrease in accumulated
net realized gain on investments of $661,646.
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 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 presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker 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 registered
investment companies having management contracts with FMR, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
more repurchase agreements that are collateralized by U.S. Treasury or
Federal Agency obligations.
3. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $105,466,840 and $125,787,029, 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 $10,956.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $2,495,000 and $1,310,000,
respectively. The weighted average interest rate was 3.59%.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Spartan Long-Term Government Bond Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Trust: Spartan Long-Term Government Bond Fund,
including the schedule of portfolio investments, as of January 31, 1994,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the three years in the
period then ended - and for the period September 28, 1990 (commencement of
operations) to January 31, 1991. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Trust: Spartan Long-Term Government Bond Fund, as of
January 31, 1994, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the
period then ended - and for the period September 28, 1990 (commencement of
operations) to January 31, 1991, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
March 4, 1994
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
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1.
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2.
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requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(Registered trademark)
4.
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Identification Number (PIN).
5.
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representative.
6.
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1.
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(purchases, redemptions, and
dividends).
2.
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3.
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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
32 West Central Boulevard
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
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Gary L. French, Treasurer
John H. Costello, 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
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Income
Spartan Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate
Government
Spartan Short-Term Income
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
Exhibit 1(a)
FORM OF
AMENDED AND RESTATED DECLARATION OF TRUST
DATED MARCH 17 , 1994
AMENDED AND RESTATED DECLARATION OF TRUST, made March 17, 1994 by each of
the Trustees whose signature is affixed hereto (the "Trustees")
WHEREAS, the Trustees desire to amend and restate this Declaration of
Trust for the sole purpose of supplementing the Declaration to incorporate
amendments duly adopted; and
WHEREAS, this Trust was initially made on March 4 , 1985 by Edward C.
Johnson, 3d, Caleb Loring, Jr., and Frank Nesvet in order to establish a
trust fund for the investment and reinvestment of funds contributed
thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed in Trust
under this Declaration of Trust as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "Fidelity Devonshire Trust".
DEFINITIONS
Section 2. Wherever used hererin, unless otherwise required by the context
or specifically provided:
(a) The Terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the
third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them
in the 1940 Act, as amended from time to time;
(b) The "Trust" refers to Fidelity Devonshire Trust and reference to the
Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series;
(c) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article X, Section 3;
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" refer to the individual trustees in their capacity as
trustees hereunder of the Trust and their successor or successors for the
time being in office as such trustee or trustees;
(f) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series shall be divided from
time to time, and includes fractions of shares as well as whole shares
consistent with the requirements of Federal and/or other securities laws;
and
(g) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
(h) "Series" refers to series of Shares of the Trust established in
accordance with the provisions of Article III.
ARTICLE II
PURPOSE OF TRUST
The Purpose of this Trust is to provide investors a continuous source of
managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The beneficial interest in the Trust shall be divided into such
transferable Shares of one or more separate and distinct Series as the
Trustees shall from time to time create and establish. The number of Shares
is unlimited and each Share shall be without par value and shall be fully
paid and nonassessable. The Trustees shall have full Power and authority,
in their sole discretion and without obtaining any prior authorization or
vote of the Shareholders of the Trust to create and establish (and to
change in any manner) Shares with such preferences, voting powers, rights
and privileges as the Trustees may from time to time determine, to divide
or combine the Shares into a greater or lesser number, to classify or
reclassify any issued Shares into one or more Series of Shares, to abolish
any one or more Series of Shares, and to take such other action with
respect to the Shares as the Trustees may deem desirable.
ESTABLISHMENT OF SERIES
Section 2. The establishment of any Series shall be effective upon the
adoption of a resolution by a majority of the then Trustees setting forth
such establishment and designation and the relative rights and preferences
of the Shares of such Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated,
the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof.
OWNERSHIP OF SHARES
Section 3. The ownership of Shares shall be recorded in the books of the
Trust. The Trustees may make such rules as they consider appropriate for
the transfer of Shares and similar matters. The record books of the Trust
shall be conclusive as to who are the holders of Shares and as to the
number of Shares held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
Section 4. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. Such
investments may be in the form of cash or securities in which the
appropriate Series is authorized to invest, valued as provided in Article
X, Section 3. After the date of the initial contribution of capital, the
number of Shares to represent the initial contribution may in the Trustees'
discretion be considered as outstanding and the amount received by the
Trustees on account of the contribution shall be treated as an asset of the
Trust. Subsequent investments in the Trust shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however,
that the Trustees may, in their sole discretion, (a) impose a sales charge
upon investments in the Trust and (b) issue fractional Shares.
ASSETS AND LIABILITIES OF SERIES
Section 5. All consideration received by the Trust for the issue or sale
of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Series, shall
be allocated by the Trustees between and among one or more of the Series in
such manner as they, in their sole discretion, deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders
of all Series for all purposes, and shall be referred to as assets
belonging to that Series. The assets belonging to a particular Series shall
be so recorded upon the books of the Trust, and shall be held by the
Trustees in Trust for the benefit of the holders of Shares of that Series.
The assets belonging to each particular Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series shall be allocated and charged by the
Trustees between or among any one or more of the Series in such manner as
the Trustees in their sole discretion deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes. Any creditor of any Series may look only to the
assets of that Series to satisfy such creditor's debt.
NO PREEMPTIVE RIGHTS
Section 6. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust
or the Trustees.
LIMITATION OF PERSONAL LIABILITY
Section 7. The Trustees shall have no power to bind any Shareholder
personally or to call upon any shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription for any Shares or
otherwise. Every note, bond, contract or other undertaking issued by or on
behalf of the Trust or the Trustees relating to the Trust shall include a
recitation limiting the obligation represented thereby to the Trust and its
assets (but the omission of such a recitation shall not operate to bind any
Shareholder).
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility.
ELECTION: INITIAL TRUSTEES
Section 2. On a date fixed by the Trustees, the Shareholders shall elect
not less than three Trustees. A Trustee shall not be required to be a
Shareholder of the Trust. The initial Trustees shall be Edward C. Johnson
3d, Caleb Loring, Jr. and Frank Nesvet and such other individuals as the
Board of Trustees shall appoint pursuant to Section 4 of the Article IV.
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided; except (a) that
any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b) that any Trustee may
be removed at any time by written instrument, signed by at least two-thirds
of the number of Trustees prior to such removal, specifying the date when
such removal shall become effective; (c) that any Trustee who requests in
writing to be retired or who has become incapacitated by illness or injury
may be retired by written instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and (a) a Trustee may be
removed at any Special Meeting of the Trust by a vote of two-thirds of the
outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death, resignation,retirement,
removal, incapacity, or inability of any of the Trustees, or in case a
vacancy shall, by reason of an increase in number, or for any other reason,
exist, the remaining Trustees shall fill such vacancy by appointing such
other person as they in their discretion shall see fit consistent with the
limitations under the Investment Company Act of 1940. Such appointment
shall be evidenced by a written instrument signed by a majority of the
Trustees in office or by recording in the records of the Trust, whereupon
the appointment shall take effect. An appointment of a Trustee may be made
by the Trustees then in office in anticipation of a vacancy to occur by
reason of retirement, resignation or increase in number of Trustees
effective at a later date, provided that said appointment shall become
effective only at or after the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted this trust, the trust estate shall vest in
the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder.
The power of appointment is subject to the provisions of Section 16(a) of
the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 5. Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees, not less than three (3) nor more than
twelve (12), serving hereunder at any time shall be determined by the
Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is absent from the Commonwealth of
Massachusetts or, if not a domiciliary of Massachusetts, is absent from his
state of domicile, or is physically or mentally incapacitated by reason of
disease or otherwise, the other Trustees shall have all the powers
hereunder and the certificate of the other Trustees of such vacancy,
absence or incapacity, shall be conclusive, provided, however, that no
vacancy shall remain unfilled for a period longer than six calendar months.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created
Pursuant to the terms of this Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
Section 8. The assets of the Trust shall be held separate and apart from
any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets of
the Trust shall at all times be considered as vested in the Trustees. No
Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or any right of partition or possession thereof, but
each Shareholder shall have a proportionate undivided beneficial interest
in the Trust.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or future
laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Subject to any applicable limitation in the Declaration of
Trust or the Bylaws of the Trust, the Trustees shall have power and
authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by
any present or future law or custom in regard to investments by Trustees,
and to sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust.
(b) To adopt Bylaws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ a bank or trust company as custodian of any assets of the
Trust subject to any conditions set forth in this Declaration of Trust or
in the Bylaws, if any.
(e) To retain a transfer agent and Shareholder servicing agent, or both.
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or
by the Trust itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any officers
of the Trust and to any agent, custodian or underwriter.
(i) To sell or exchange any or all of the assets of the Trust,subject to
the provisions of Article XII, Section 4(b) hereof.
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in its
own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts trust companies or investment companies.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III.
(n) To allocate assets, liabilities and expenses of the Trust to a
particular Series, or to apportion the same between or among two or more
Series, provided that any liabilities or expenses incurred by a particular
Series shall be payable solely out of the assets belonging to that Series
as provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited
to, claims for taxes.
(q) To make distributions of income and of capital gains to Shareholders
in the manner hereinafter provided for.
(r) To borrow money, and to pledge, mortgage or hypothecate the assets of
the Trust, subject to applicable limitations of the 1940 Act.
(s) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon giving notice
to such Shareholder.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or
upon their order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of Shares to the same extent as if he were not a Trustee,
officer or agent; and the Trustees may issue and sell or cause to be issued
and sold Shares to and buy such Shares from any such person of any firm or
company in which he is interested, subject only to the general limitations
herein contained as to the sale and purchase of such Shares; and all
subject to any restrictions which may be contained in the Bylaws.
ACTION BY THE TRUSTEES
Section 3. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone
consent provided a quorum of Trustees participate in any such telephonic
meeting, unless the 1940 Act requires that a particular action be taken
only at a meeting of the Trustees. At any meeting of the Trustees, a
majority of the Trustees shall constitute a quorum. Meetings of the
Trustees may be called orally or in writing by the Chairman of the Trustees
or by any two other Trustees. Notice of the time, date and Place of all
meetings of the Trustees shall be given by the party calling the meeting to
each Trustee by telephone or telegram sent to his home or business address
at least twenty-four hours in advance of the meeting or by written notice
mailed to his home or business address at least seventy-two hours in
advance of the meeting. Notice need not be given to any Trustee who attends
the meeting without objecting to the lack of notice or who executes a
written waiver of notice with respect to the meeting. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may delegate to
any one of their number their authority to approve particular matters or
take particular actions on behalf of the Trust.
CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number to be Chairman of
the Board of Trustees. The Chairman shall preside at all meetings of the
Trustees, shall be responsible for the execution of policies established by
the Trustees and the administration of the Trust, and may be the chief
executive, financial and accounting officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. Subject to the provisions of Article III, Section 5, the
Trustees shall be reimbursed from the Trust estate or the assets belonging
to the appropriate Series for their expenses and disbursements, including,
without limitation, fees and expenses of Trustees who are not Interested
Persons of the Trust, interest expense, taxes, fees and commissions of
every kind, expenses of pricing Trust portfolio securities, expenses of
issue, repurchase and redemption of shares including expenses attributable
to a program of periodic repurchases or redemptions, expenses of
registering and qualifying the Trust and its Shares under Federal and State
laws and regulations, charges of custodians, transfer agents and
registrars, expenses of preparing and setting up in type Prospectuses and
Statements of Additional Information, expenses of printing and distributing
prospectuses sent to existing Shareholders, auditing and legal expenses,
reports to Shareholders, expenses of meetings of Shareholders and proxy
solicitations therefor, insurance expense, association membership dues and
for such non-recurring items as may arise, including litigation to which
the Trust is a party, and for all losses and liabilities by them incurred
in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series prior to any rights or interests
of the Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL, UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the Trustees may in
their discretion from time to time enter into an investment advisory or
management contract(s) with respect to the Trust or any Series thereof
whereby the other party(ies) to such contract(s) shall undertake to furnish
the Trustees such management, investment advisory, statistical and research
facilities and services and such other facilities and services, if any, and
all upon such terms and conditions, as the Trustees may in their discretion
determine. Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser(s) (subject to such general
or specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities and other
investment instruments of the Trust on behalf of the Trustees or may
authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all
without further action by the Trustees). Any such purchases, sales and
exchanges shall be deemed to have been authorized by all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to Shareholder approval, authorize the investment
adviser to employ one or more sub-advisers from time to time to perform
such of the acts and services of the investment adviser, and upon such
terms and conditions, as may be agreed upon between the investment adviser
and sub-adviser.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time to time enter
into (a) contract(s) providing for the sale of the Shares, whereby the
Trust may either agree to sell the Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In
either case, the contract shall be on such terms and conditions as may be
prescribed in the Bylaws, if any, and such further terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provision of this Article VII, or of the Bylaws, if any; and such contract
may also provide for the repurchase or sale of Shares by such other party
as principal or as agent of the Trust.
TRANSFER AGENT
Section 3. The Trustees may in their discretion from time to time enter
into a transfer agency and Shareholder service contract whereby the other
party shall undertake to furnish the Trustees with transfer agency and
Shareholder services. The contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Declaration of Trust or of the Bylaws, if any. Such
services may be provided by one or more entities.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in Sections 1, 2 and 3
of this Article VII or in Article IX hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more
of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no
such contract shall be invalidated or rendered voidable by reason of the
existence of any relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable
for any profit realized directly or indirectly therefrom, provided that the
contract when entered into was reasonable and fair and not inconsistent
with the provisions of this Article VII or the Bylaws, if any. The same
person (including a firm, corporation, partnership, trust, or association)
may be the other party to contracts entered into pursuant to Sections 1, 2
and 3 above or Article IX, and any individual may be financially interested
or otherwise affiliated with persons who are parties to any or all of the
contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Sections 1 and 2 of this
Article VII shall be consistent with and subject to the requirements of
Section 15 of the 1940 Act (including any amendments thereof or other
applicable Act of Congress hereafter enacted) with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any
contract, entered into pursuant to Section 1 shall be effective unless
assented to by a Majority Shareholder Vote.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote (i) for the election
of Trustees as provided in Article IV, Section 2, (ii) for the removal of
Trustees as provided in Article IV, Section 3(d), (iii) with respect to any
investment advisory or management contract as provided in Article VII,
Section 1, (iv) with respect to the amendment of this Declaration of Trust
as provided in Article XII, Section 7, (v) to the same extent as the
shareholders of a Massachusetts business corporation, as to whether or not
a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, provided, however, that a Shareholder of a particular Series
shall not be entitled to bring any derivative or class action on behalf of
any other Series of the Trust, and (vi) with respect to such additional
matters relating to the Trust as may be required or authorized by law, by
this Declaration of Trust, or the Bylaws of the Trust, if any, or any
registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any State, as the Trustees may consider desirable. On any
matter submitted to a vote of the Shareholders, all shares shall be voted
by individual Series, except (i) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual Series; and (ii) when
the Trustees have determined that the matter affects only the interests of
one or more Series, then only the Shareholders of such Series shall be
entitled to vote thereon. A Shareholder of each Series shall be entitled to
one vote for each dollar of net asset value (number of Shares owned times
net asset value per Share) of such series, on any matter on which such
Shareholder is entitled to vote and each fractional dollar amount shall be
entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by
proxy. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required or permitted by law, this
Declaration of Trust or any Bylaws of the Trust to be taken by
Shareholders.
MEETINGS
Section 2. The first Shareholders' meeting shall be held as specified in
Section 2 of Article IV at the principal office of the Trust or such other
place as the Trustees may designate. Special meetings of the Shareholders
of any Series may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least one-tenth
of the outstanding Shares entitled to vote. Whenever ten or more
Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act, as the same may be amended from time to time, seek the
opportunity of furnishing materials to the other Shareholders with a view
to obtaining signatures on such a request for a meeting, the Trustees shall
comply with the provisions of said Section 16(c) with respect to providing
such Shareholders access to the list of the Shareholders of record of the
Trust or the mailing of such materials to such Shareholders of record.
Shareholders shall be entitled to at least fifteen days' notice of any
meeting.
QUORUM AND REQUIRED VOTE
Section 3. A majority of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this Declaration of
Trust permits or requires that holders of any Series shall vote as a Series
then a majority of the aggregate number of Shares of that Series entitled
to vote shall be necessary to constitute a quorum for the transaction of
business by that Series. Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting, without the
necessity of further notice. Except when a larger vote is required by any
provision of this Declaration of Trust or the Bylaws, a majority of the
Shares voted in person or by proxy shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision of law
or of this Declaration of Trust permits or requires that the holders of any
Series shall vote as a Series, then a majority of the Shares of that Series
voted on the matter shall decide that matter insofar as that Series is
concerned.
ARTICLE IX
CUSTODIAN
APPOINTMENT AND DUTIES
Section 1. The Trustees shall at all times employ a bank or trust company
having capital, surplus and undivided profits of at least two million
dollars ($2,000,000), or such other amount or such other entity as shall be
allowed by the Commission or by the 1940 Act, as custodian with authority
as its agent, but subject to such restrictions, limitations and other
requirements, if any , as may be contained in the Bylaws of the Trust:
(1) to hold the securities owned by the Trust and deliver the same upon
written order or oral order, if confirmed in writing, or by such
electro-mechanical or electronic devices as are agreed to by the Trust and
the custodian, if such procedures have been authorized in writing by the
Trust;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish clerical and
accounting services; and
(2) to compute, if authorized to do so by the Trustees, the Net Asset Value
of any Series in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by
it as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services
of the custodian, and upon such terms and conditions, as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank or trust
company organized under the laws of the United States or one of the states
thereof and having capital and surplus and individual profits of at least 2
million dollars ($2,000,000) or such other person as may be permitted by
the Commission, or otherwise in accordance with the 1940 act as from time
to time amended.
CENTRAL CERTIFICATE SYSTEM
Section 2. Subject to such rules, regulations and orders as the Commission
may adopt, the Trustees may direct the custodian to deposit all or any part
of the securities owned by the Trust in a system for the central handling
of securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act as from time to
time amended, pursuant to which system all securities of any particular
class or. series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall
be subject to withdrawal only upon the order of the Trust.
ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 1.
(a) The Trustees may from time to time declare and pay dividends. The
amount of such dividends and the payment of them shall be wholly in the
discretion of the Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by the
laws of Massachusetts, at any time to declare and cause to be paid
dividends on Shares of a particular Series, from the assets belonging to
that Series, which dividends, at the election of the Trustees, may be paid
daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, and may be
payable in Shares of that Series at the election of each Shareholder of
that Series.
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute pro rata among the
Shareholders of a particular Series as of the record date of that Series
fixed as provided in Section 3 hereof a "stock dividend".
REDEMPTIONS
Section 2. In case any holder of record of Shares of a particular Series
desires to dispose of his Shares, he may deposit at the office of the
transfer agent or other authorized agent of that Series a written request
or such other form of request as the Trustees may from time to time
authorize, requesting that the Series purchase the Shares in accordance
with this Section 2; and the Shareholder so requesting shall be entitled to
require the Series to purchase, and the Series or the principal underwriter
of the Series shall purchase his said Shares, but only at the Net Asset
Value thereof (as described in Section 3 hereof). The Series shall make
payment for any such Shares to be redeemed, as aforesaid, in cash or
property from the assets of that Series and payment for such Shares shall
be made by the Series or the principal underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which the
request is effective.
DETERMINATION OF NET ASSET VALUE
AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of any Series shall mean that amount
by which the assets of that Series, exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value per Share
shall be determined separately for each Series of Shares and shall be
determined on such days and at such times as the Trustees may determine.
Such determination shall be made with respect to securities for which
market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair
value as determined in good faith by the Trustees, provided, however, that
the Trustees, without Shareholder approval, may alter the method of
appraising portfolio securities insofar as permitted under the 1940 Act and
the rules, regulations and interpretations thereof promulgated or issued by
the Commission or insofar as permitted by any Order of the Commission
applicable to the Series. The Trustees may delegate any of its powers and
duties under this Section 3 with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the value per Share last
determined to be determined again in similar manner and may fix the time
when such redetermined value shall become effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. The Trustees may declare a suspension of the right of
redemption or postpone the date of payment as permitted under the 1940 Act.
Such suspension shall take effect at such time as the Trustees shall
specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no
right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share existing after the
termination of the suspension.
ARTICLE XI
LIMITATION OF LIABILITIES AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 1. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of
the Trust, the Trustees shall not be responsible for or liable in any event
for neglect or wrongdoing of them or any officer, agent, employee Or
investment adviser of the Trust, but nothing contained herein shall proTect
any Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
INDEMNIFICATION
Section 2.
(a) Subject to the exceptions and limitations contained in Section b)
below:
(i) every person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as 'Covered Person') shall be indemnified by the
appropriate Series to the fullest extent permitted by law against liability
and against all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes involved as
a party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or (B) not to
have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither interested
persons of the Trust nor are parties to the matter based upon a review of
readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees, or by
independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now
or hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel, other
than Trustees and officers, and other persons may be entitled by contract
or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described
in paragraph (a) of this Section 2 may be paid by the applicable Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the applicable Series if it is ultimately determined
that he is not entitled to indemnification under this Section 2; provided,
however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust is insured against
losses arising out of any such advance payments or (c) either a majority of
the Trustees who are neither interested persons of the Trust nor parties to
the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe
that such Covered Person will be found entitled to indemnification under
this Section 2.
SHAREHOLDERS
Section 3. In case any Shareholder or former Shareholder of any Series of
the Trust shall be held to be personally liable solely by reason of his
being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the applicable
Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Series shall, upon request by the
Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon.
ARTICLE XII
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to
bind personally either the Trust's officers or any Shareholder. All persons
extending credit to, contracting with or having any claim against the Trust
or the Trustees shall look only to the assets of the appropriate Series for
payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees, nor any of their agents, whether past, present or future,
shall be personally liable therefor. Nothing in this Declaration of Trust
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee hereunder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and discretions
hereunder in good faith and with reasonable care under the circumstances
then prevailing, shall be binding upon everyone interested. Subject to the
provisions of Section 1 of this Article XII and to Article XI, the Trustees
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Declaration of Trust, and subject to the
provisions of Section 1 of this Article XII and to Article XI, shall be
under no liability for any act or omission in accordance with such advice
or for failing to follow such advice. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books of the Trust
for a period not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for the payment of any dividends, or
the date for the allotment of rights, or the date when any change or
conversion or exchange of Shares shall go into effect; or in lieu of
closing the stock transfer books as aforesaid, the Trustees may fix in
advance a date not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion
or exchange of Shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of, and to vote at,
any such meeting, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of
any such change, conversion or exchange of Shares, and in such case such
Shareholders and only such Shareholders as shall be Shareholders of record
on the date so fixed shall be entitled to such notice of, and to vote at,
such meeting, or to receive payment of such dividend, or to receive such
allotment or rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after
any such record date fixed or aforesaid.
TERMINATION OF TRUST
Section 4.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 4.
(b) Subject to a Majority Shareholder Vote of each Series affected by the
matter or, if applicable, to a Majority Shareholder Vote of the Trust, the
Trustees may
(i) sell and convey the assets of the Trust or any affected Series to
another trust, partnership, association or corporation organized under the
laws of any state which is a diversified open-end management investment
company as defined in the 1940 Act, for adequate consideration which may
include the assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust or any affected Series,
and which may include shares of beneficial interest or stock of such trust,
partnership, association or corporation; or
(ii) at any time sell and convert into money all of the assets of the
Trust or any affected Series.
Upon making provision for the payment of all such liabilities in either
(i) or (ii), by such assumption or otherwise, the Trustees shall distribute
the remaining proceeds or assets (as the case may be) ratably among the
holders of the Shares of the Trust or any affected Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and interest
of all parties shall be cancelled and discharged.
FILING OF COPIES, REFERENCES, AND HEADINGS
Section 5. The original or a copy of this instrument and of each
declaration of trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each supplemental declaration of trust shall be filed by
the Trustees with the Secretary of the Commonwealth of Massachusetts and
the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may
rely on a certificate by an officer or Trustee of the Trust as to whether
or not any such supplemental declarations of trust have been made and as to
any matters in connection with the Trust hereunder, and with the same
effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this instrument or of any
such supplemental declaration of trust. In this instrument or in any such
supplemental declaration of trust, references to this instrument and all
expressions like 'herein,' 'hereof' and 'hereunder,' shall be deemed to
refer to this instrument as amended or affected by any such supplemental
declaration of trust. Headings are placed herein for convenience of
reference only and in case of any conflict, the text of this instrument,
rather than the headings, shall control. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
APPLICABLE LAW
Section 6. The trust set forth in this instrument is made in the
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof,
the Trust may exercise all powers which are ordinarily exercised by such a
trust.
AMENDMENTS
Section 7. If authorized by votes of the Trustees and a Majority
Shareholder Vote, or by any larger vote which may be required by applicable
law or this Declaration of Trust in any particular case, the Trustees shall
amend or otherwise supplement this instrument, by making a declaration of
trust supplemental hereto, which thereafter shall form a part hereof,
except that an amendment which shall affect the Shareholders of one or more
Series but not the Shareholders of all outstanding Series shall be
authorized by vote of the Shareholders holding a majority of the Shares
entitled to vote of each Series affected and no vote of Shareholders of a
Series not affected shall be required. Amendments having the purpose of
changing the name of the Trust or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not require authorization by
Shareholder vote. Copies of the supplemental declaration of trust shall be
filed as specified in Section 5 of this Article XII.
FISCAL YEAR
Section 8. The fiscal year of the Trust shall end on a specified date as
set forth in the Bylaws, provided, however, that the Trustees may, without
Shareholder approval, change the fiscal year of the Trust.
USE OF THE WORD "FIDELITY"
Section 9. Fidelity Management & Research Company ("FMR") has
consented to the use by any Series of the Trust of the identifying word
"Fidelity" in the name of any Series of the Trust at some future date. Such
consent is conditioned upon the employment of FMR as investment adviser of
each Series of the Trust. As between the Trust and itself, FMR controls the
use of the name of the Trust insofar as such name contains the identifying
word "Fidelity". FMR may from time to time use the identifying word
"Fidelity" in other connections and for other purposes, including, without
limitation, in the names of other investment companies, corporations or
businesses which it may manage, advise, sponsor or own or in which it may
have a financial interest. FMR may require the Trust or any Series thereof
to cease using the identifying word "Fidelity" in the name of the Trust or
any Series thereof if the Trust or any Series thereof ceases to employ FMR
or a subsidiary or affiliate thereof as investment adviser.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument this 17th day of March, 1994.
Exhibit 5(a)
MANAGEMENT CONTRACT
between
FIDELITY DEVONSHIRE TRUST:
Fidelity Utilities Income Fund
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 1st day of December 1, 1993 by and between
Fidelity Devonshire Trust, a Massachusetts business trust which may issue
one or more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity Utilities Income Fund (hereinafter called
the "Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser").
Required authorizations and approval by shareholders and Trustees having
been obtained, the Fund, on behalf of the Portfolio, and the Adviser
hereby consent, pursuant to Paragraph 6 of the existing Management Contract
modified November 1, 1988, to a modification of said Contract in the manner
set forth below. The Modified Management Contract shall when executed by
duly authorized officers of the Fund and the Adviser, take effect on the
later of December 1, 1993 or the first day of the month following approval.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Portfolio; and shall pay the salaries and
fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser performing services
relating to research, statistical and investment activities. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds and
other securities and investment instruments on behalf of the Portfolio. The
investment policies and all other actions of the Portfolio are and shall at
all times be subject to the control and direction of the Fund's Board of
Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best efforts
to seek to execute portfolio transactions at prices which are advantageous
to the Portfolio and at commission rates which are reasonable in relation
to the benefits received. In selecting brokers or dealers qualified to
execute a particular transaction, brokers or dealers may be selected who
also provide brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to the Portfolio
and/or the other accounts over which the Adviser or its affiliates exercise
investment discretion. The Adviser is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Adviser and its affiliates have
with respect to accounts over which they exercise investment discretion.
The Trustees of the Fund shall periodically review the commissions paid by
the Portfolio to determine if the commissions paid over representative
periods of time were reasonable in relation to the benefits to the
Portfolio. The Adviser shall, in acting hereunder, be an independent
contractor. The Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Basic Fee and a Performance
Adjustment. The Performance Adjustment is added to or subtracted from the
Basic Fee depending on whether the Portfolio experienced better or worse
performance than the Standard & Poor's Utilities Index (the "Index").
The Performance Adjustment is not cumulative. An increased fee will result
even though the performance of the Portfolio over some period of time
shorter than the performance period has been behind that of the Index, and,
conversely, a reduction in the fee will be made for a month even though the
performance of the Portfolio over some period of time shorter than the
performance period has been ahead of that of the Index. The Basic Fee and
the Performance Adjustment will be computed as follows:
(a) Basic Fee Rate: The annual Basic Fee Rate shall be the sum of the
Group Fee Rate and the Individual Fund Fee Rate calculated to the nearest
millionth decimal place as follows:
(i) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the charter of each investment company) determined
as of the close of business on each business day throughout the month. The
Group Fee Rate shall be determined on a cumulative basis pursuant to the
following schedule:
Average Net Assets Annualized Fee Rate (for each level)
0 - $ 3 .52
billion
3 - 6 .49
6 - 9 .46
9 - 12 .43
12 - 15 .40
15 - 18 .385
18 - 21 .37
21 - 24 .36
24 - 30 .35
30 - 36 .345
36 - 42 .34
42 - 48 .335
48 - 66 .325
66 - 84 .32
84 - 102 .315
102 - 138 .310
138 - 174 .305
over 174 .300
(ii) Individual Fund Fee Rate. The Individual Fund fee rate shall be
.20%.
[The sum of the cumulative Group fee rate, calculated as described above
to the nearest millionth, and the individual Fund fee rate shall constitute
the annual fee rate.
(b) Basic Fee. One-twelfth of the Basic Fee Rate shall be applied to the
average of the net assets of the Portfolio (computed in the manner set
forth in the Fund's Declaration of Trust determined as of the close of
business on each business day throughout the month. The resulting dollar
amount comprises the Basic Fee.
(c) Performance Adjustment Rate: The Performance Adjustment Rate is
0.02% for each percentage point (the performance of the Portfolio and the
Index each being calculated to the nearest 0.01%) that the Portfolio's
investment performance for the performance period was better or worse than
the record of the Index as then constituted. The maximum performance
adjustment rate is 0.15%.
The performance period will commence with the first day of the first full
month following the Portfolio's commencement of operations effective date
of this contract. During the first eleven months of the performance period
for the Portfolio, there will be no performance adjustment. Starting with
the twelfth month of the performance period, the performance adjustment
will take effect. Following the twelfth month a new month will be added to
the performance period until the performance period equals 36 months.
Thereafter the performance period will consist of the current month plus
the previous 35 months.
The Portfolio's investment performance will be measured by comparing (i)
the opening net asset value of one share of the Portfolio on the first
business day of the performance period with (ii) the closing net asset
value of one share of the Portfolio as of the last business day of such
period. In computing the investment performance of the Portfolio and the
investment record of the Index, distributions of realized capital gains,
the value of capital gains taxes per share paid or payable on undistributed
realized long-term capital gains accumulated to the end of such period and
dividends paid out of investment income on the part of the Portfolio, and
all cash distributions of the securities included the Index, will be
treated as reinvested in accordance with Rule 205-1 or any other applicable
rules under the Investment Advisers Act of 1940, as the same from time to
time may be amended.
(d) Performance Adjustment. One-twelfth of the annual Performance
Adjustment Rate will be applied to the average of the net assets of the
Portfolio (computed in the manner set forth in the Fund's Declaration of
Trust or other organizational document) determined as of the close of
business on each business day throughout the month and the performance
period.
(e) In case of termination of this Contract during any month, the fee
for that month shall be reduced proportionately on the basis of the number
of business days during which it is in effect for that month. The Basic
Fee Rate will be computed on the basis of and applied to net assets
averaged over that month ending on the last business day on which this
Contract is in effect. The amount of this Performance Adjustment to the
Basic Fee will be computed on the basis of and applied to net assets
averaged over the 36-month period ending on the last business day on which
this Contract is in effect provided that if this Contract has been in
effect less than 36 months, the computation will be made on the basis of
the period of time during which it has been in effect.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Port- folio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until July 31, 1994
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of this
Contract must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust or
other organizational document and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document are separate and distinct from those of any and
all other Portfolios.
8. This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provision thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
_/s/ J. Gary Burkhead
J.Gary Burkhead
Senior Vice President
Fidelity Utilities Income Fund
/s/ J. Gary Burkhead
J.Gary Burkhead
President of FMR
MANAGEMENT CONTRACT
between
FIDELITY DEVONSHIRE TRUST:
Fidelity Equity-Income Fund
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 1st day of DECEMBER 1993, by and between Fidelity
Devonshire Trust, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"Fund"), on behalf of Fidelity Equity-Income Fund (hereinafter called the
"Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser").
Required authorization and approval by shareholders and Trustees having
been obtained, the Fund, on behalf of the Portfolio, and the Adviser hereby
consent, pursuant to Paragraph 6 of the existing Management Contract dated
April 1,1990, to a modification of said Contract in the manner set forth
below. The Modified Management Contract shall when executed by duly
authorized officers of the Fund and the Adviser, take effect on the later
of December 1, 1993 or the first day of the month following approval.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Portfolio; and shall pay the salaries and
fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best efforts
to seek to execute portfolio transactions at prices which are advantageous
to the Portfolio and at commission rates which are reasonable in relation
to the benefits received. In selecting brokers or dealers qualified to
execute a particular transaction, brokers or dealers may be selected who
also provide brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to the Portfolio
and/or the other accounts over which the Adviser or its affiliates exercise
investment discretion. The Adviser is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Adviser and its affiliates have
with respect to accounts over which they exercise investment discretion.
The Trustees of the Fund shall periodically review the commissions paid by
the Portfolio to determine if the commissions paid over representative
periods of time were reasonable in relation to the benefits to the
Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a Group Fee Rate and an Individual Fund
Fee Rate.
(a) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the charter of each investment company) determined
as of the close of business on each business day throughout the month. The
Group Fee Rate shall be determined on a cumulative basis pursuant to the
following schedule:
Average Annualized Fee Rate (for each level)
Net
Assets
0 - $ 3 billion .520%
3 - 6 .490
6 - 9 .460
9 - 12 .430
12 - 15 .400
15 - 18 .385
18 - 21 .370
21 - 24 .360
24 - 30 .350
30 - 36 .345
36 - 42 .340
42 - 48 .335
48 - 66 .325
66 - 84 .320
84 - 102 .315
102 - 138 .310
138 - 174 .305
Over 174 .300
(b) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
shall be .12%. The Individual Fund Fee Rate shall be adjusted annually on
December 1 or, if later, the first day or anniversary thereof, of the month
the Modified Contract becomes effective pursuant to the following schedule:
Adjustment Date Individual Fund Fee Rate
December 1, 1993* .12%
December 1, 1995* .14%
December 1, 1996* .16%
December 1, 1997* .18%
December 1, 1998* .20%
* of, if later, the first day of the month the Modified Contract becomes
effective in the anniversary thereof.
The sum of the Group Fee Rate, calculated as described above to the
nearest millionth, and the Individual Fund Fee rate shall constitute the
Annual Management Fee Rate. One-twelfth of the Annual Management Fee Rate
shall be applied to the average of the net assets of the Portfolio
(computed in the manner set forth in the Fund's Declaration of Trust or
other organizational document) determined as of the close of business on
each business day throughout the month.
In case of termination of this Contract during any month, the fee for that
month shall be reduced proportionately on the basis of the number of
business days during which it is in effect, and the fee computed upon the
average net assets for the business days it is so in effect for that month.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser ; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders including proxy solicitations therefor; (ix) a pro rata share,
based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for Fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until July 31, 1994
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph 6, the terms of any continuance or modification of this
Contract must have been approved by the vote of a majority of those
Trustees of the Fund who are not parties to the Contract or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust or
other organizational document and agrees that the obligations assumed by
the Fund pursuant to this Contract shall be limited in all cases to the
Portfolio and its assets, and the Adviser shall not seek satisfaction of
any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios of the Fund. In addition, the Adviser
shall not seek satisfaction of any such obligations from the Trustees or
any individual Trustee. The Adviser understands that the rights and
obligations of any Portfolio under the Declaration of Trust or other
organizational document are separate and distinct from those of any and all
other Portfolios.
8. This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Massachusetts, without giving effect to the
choice of laws provisions thereof.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY DEVONSHIRE TRUST
on behalf of Fidelity Equity-Income Fund
/s/ J. Gary Burkhead
By J. Gary Burkehead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
/s/ J. Gary Burkhead
By J. Gary Burkhead
President
EXHIBIT 5(C)
MANAGEMENT CONTRACT
BETWEEN
FIDELITY DEVONSHIRE TRUST:
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 1st day of April, 1993, by and between Fidelity
Devonshire Trust, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"fund"), on behalf of Fidelity Real Estate Investment Portfolio
(hereinafter called the "Portfolio") and Fidelity Management & Research
Company, a Massachusetts corporation (hereinafter called the "Adviser").
Required authorization and approval by shareholders and Trustees having
been obtained, the fund, on behalf of the Portfolio, and Fidelity
Management & Research Company hereby consent, pursuant to Paragraph 6
of the existing Management Contract dated April 1, 1990 to a modification
of said Contract in the manner set forth below. The modified Management
Contract shall take effect when executed by authorized officers of the fund
and the Adviser.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio
office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Portfolio; and shall pay the salaries
and fees of all officers of the fund, of all Trustees of the fund who are
"interested persons" of the fund or of the Adviser and of all personnel of
the fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the fund as the fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the fund's Board of Trustees with respect to fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser, which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best
efforts to seek to execute portfolio transactions at prices which are
advantageous to the Portfolio and at commission rates which are reasonable
in relation to the benefits received. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Portfolio and/or the other accounts over which the Adviser or its
affiliates exercise investment discretion. The Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Adviser and its
affiliates have with respect to accounts over which they exercise
investment discretion. The Trustees of the fund shall periodically review
the commissions paid by the Portfolio to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the fund, and that
the Adviser may be or become interested in the fund as a shareholder or
otherwise.
3. The Adviser will be compensated on the following basis for the services
and facilities to be furnished hereunder. The Adviser shall receive a
monthly management fee, payable monthly as soon as practicable after the
last day of each month, composed of a group fee rate and an individual fund
fee rate.
(a) Group Fee Rate. The group fee rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the charter of each investment company) determined
as of the close of business on each business day throughout the month. The
group fee rate shall be determined on a cumulative basis pursuant to the
following schedule.
Average Net Assets Annualized Fee Rate (for each level)
$0 - 3 billion .520%
3 - 6 .490
6 - 9 .460
9 - 12 .430
12 - 15 .400
15 - 18 .385
18 - 21 .370
21 - 24 .360
24 - 30 .350
30 - 36 .345
36 - 42 .340
42 - 48 .335
48 - 66 .325
66 - 84 .320
84 - 102 .315
102 - 138 .310
138 - 174 .305
Over 174 .300
(b) Individual fund fee rate. The individual fund fee rate shall be .30%.
The sum of the group fee rate, calculated as described above to the
nearest millionth, and the individual fund fee rate shall constitute the
annual management fee rate. One-twelfth of the annual management fee shall
be applied to the average of the net assets of the Portfolio (computed in
the manner set forth in the Declaration of Trust of the fund) determined as
of the close of business on each business day throughout the month.
In case of termination of this Contract during any month, the fee for that
month shall be reduced proportionately on the basis of the number of
business days during which it is in effect, and the fee computed upon the
average net assets for the business days it is so in effect for that month.
4. It is understood that the Portfolio will pay all its expenses other than
those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the fund's Trustees other than
those who are "interested persons" of the fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until July 31, 1993
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually by vote of the
Trustees of the fund or by vote of a majority of the outstanding voting
securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of this Contract
must have been approved by the vote of a majority of those Trustees of the
fund who are not parties to the Contract or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without payment of any
penalty, by action of its Trustees or Board of Directors, as the case may
be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the fund's Declaration of Trust and
agrees that the obligations assumed by the fund pursuant to this Contract
shall be limited in all cases to the Portfolio and its assets, and the
Adviser shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Portfolio or any other Portfolios of
the fund. In addition, the Adviser shall not seek satisfaction of any such
obligations from the Trustees or any individual Trustee. The Adviser
understands that the rights and obligations of any Portfolio under the
Declaration of Trust are separate and distinct from those of any and all
other Portfolios.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, as now in effect or as
hereafter amended, and subject to such orders as may be granted by the
Securities and Exchange Commission.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
FIDELITY DEVONSHIRE TRUST
on behalf of
Fidelity Real Estate Investment Portfolio
By _/s/ J. Gary Burkhead_____
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By _/s/ J. Gary Burkhead
President
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
FIDELITY DEVONSHIRE TRUST ON BEHALF OF FIDELITY EQUITY-INCOME FUND
AGREEMENT made this 1st day of December, 1993, by and between Fidelity
Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Advisor,"); Fidelity Management & Research
(U.K.) Inc. (hereinafter called the "Sub-Advisor"); and Fidelity Devonshire
Trust, a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (hereinafter called the "Trust") on behalf of
Fidelity Equity-Income Fund (hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor to
perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor,
the Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information may
include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the Advisor,
manage all or a portion of the investments of the Portfolio in accordance
with the investment objective, policies and limitations provided in the
Portfolio's Prospectus or other governing instruments, as amended from time
to time, the Investment Company Act of 1940 (the "1940 Act") and rules
thereunder, as amended from time to time, and such other limitations as the
Trust or Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only to
the extent such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including but
not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money or lending securities on behalf of the Portfolio. All investment
management and any other activities of the Sub-Advisor shall at all times
be subject to the control and direction of the Advisor and the Trust's
Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Sub-Advisor shall place all
orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the accounts
over which the Sub-Advisor or Advisor exercise investment discretion. The
Sub-Advisor is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph
(a) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal
to 110% of the Sub-Advisor's costs incurred in connection with rendering
the services referred to in subparagraph (a) of paragraph 1 of this
Agreement. The Sub-Advisory Fee shall not be reduced to reflect expense
reimbursements or fee waivers by the Advisor, if any, in effect from time
to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
Fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1994 and
indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of its
Board of Trustees or Directors, or with respect to the Portfolio by vote of
a majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
/s/ Charles F. Dornbush
BY: Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
/s/ J. Gary Burkhead
BY: J. Gary Burkhead
President
FIDELITY DEVONSHIRE TRUST ON BEHALF OF
FIDELITY EQUITY-INCOME FUND
/s/ J. Gary Burkhead
BY: J. Gary Burkhead
Senior Vice President
EXHIBIT 5(H)
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
FIDELITY DEVONSHIRE TRUST ON BEHALF OF FIDELITY EQUITY-INCOME FUND
AGREEMENT made this 1st day of December, 1993, by and between Fidelity
Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Advisor"); Fidelity Management & Research (Far
East) Inc. (hereinafter called the "Sub-Advisor"); and Fidelity Devonshire
Trust, a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (hereinafter called the "Trust") on behalf of
Fidelity Equity-Income Fund (hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor to
perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor,
the Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information may
include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the Advisor,
manage all or a portion of the investments of the Portfolio in accordance
with the investment objective, policies and limitations provided in the
Portfolio's Prospectus or other governing instruments, as amended from time
to time, the Investment Company Act of 1940 (the "1940 Act") and rules
thereunder, as amended from time to time, and such other limitations as the
Trust or Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only to
the extent such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including but
not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money or lending securities on behalf of the Portfolio. All investment
management and any other activities of the Sub-Advisor shall at all times
be subject to the control and direction of the Advisor and the Trust's
Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Sub-Advisor shall place all
orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the accounts
over which the Sub-Advisor or Advisor exercise investment discretion. The
Sub-Advisor is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph
(a) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal
to 105% of the Sub-Advisor's costs incurred in connection with rendering
the services referred to in subparagraph (a) of paragraph 1 of this
Agreement. The Sub-Advisory Fee shall not be reduced to reflect expense
reimbursements or fee waivers by the Advisor, if any, in effect from time
to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
Fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Fund, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1994 and
indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties,
terminate this Agreement, without payment of any penalty, by action of its
Board of Trustees or Directors, or with respect to the Portfolio by vote of
a majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
/s/ Charles F. Dornbush
BY: Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
/s/ J. Gary Burkhead
BY: J. Gary Burkhead
President
FIDELITY DEVONSHIRE TRUST ON BEHALF OF
FIDELITY EQUITY-INCOME FUND
/s/ J. Gary Burkhead
BY: J. Gary Burhkead
Senior Vice President
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
FIDELITY DEVONSHIRE TRUST ON BEHALF OF
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
AGREEMENT made this 1st day of December, 1993, by and between Fidelity
Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Advisor"); Fidelity Management & Research
(U.K.) Inc. (hereinafter called the "Sub-Advisor"); and Fidelity Devonshire
Trust, a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (hereinafter called the "Trust") on behalf
of Fidelity Real Estate Investment Portfolio (hereinafter called the
"Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor shall
place all orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and/or to
the other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Advisor determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Sub-Advisor has with respect to
accounts over which it exercises investment discretion. The Trustees of
the Trust shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 110% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1994 and
indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by vote of a
majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
BY:_/s / Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: _/s/ J. Gary Burkhead
President
FIDELITY DEVONSHIRE TRUST ON BEHALF OF
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
BY: _/s/ J. Gary Burkhead
Senior Vice President
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
FIDELITY DEVONSHIRE TRUST ON BEHALF OF
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
AGREEMENT made this 1st day of December, 1993, by and between Fidelity
Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Advisor"); Fidelity Management & Research (Far
East) Inc. (hereinafter called the "Sub-Advisor"); and Fidelity Devonshire
Trust, a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (hereinafter called the "Trust") on behalf of
Fidelity Real Estate Investment Portfolio (hereinafter called the
"Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor
to perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only
to the extent such duties are delegated in writing by the Advisor, to
provide additional investment management services to the Portfolio,
including but not limited to services such as managing foreign currency
investments, purchasing and selling or writing futures and options
contracts, borrowing money, or lending securities on behalf of the
Portfolio. All investment management and any other activities of the
Sub-Advisor shall at all times be subject to the control and direction of
the Advisor and the Trust's Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor shall
place all orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Portfolio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and/or to
the other accounts over which the Sub-Advisor or Advisor exercise
investment discretion. The Sub-Advisor is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Advisor determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Sub-Advisor has with respect to
accounts over which it exercises investment discretion. The Trustees of
the Trust shall periodically review the commissions paid by the Portfolio
to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 105% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers and
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1 for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1994
and indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by vote of a
majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
BY:_/s/ Charles F. Dornbush
Treasurer
FIDELITY MANAGEMENT & RESEARCH COMPANY
BY: _/s/ J. Gary Burkhead
President
FIDELITY DEVONSHIRE TRUST ON BEHALF OF
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
BY: _/s/ J. Gary Burkhead
Senior Vice President
Exhibit 5(k)
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
AND
FIDELITY FINANCIAL TRUST ON BEHALF OF FIDELITY UTILITIES INCOME FUND
AGREEMENT made this 1st day of December 1993 by and between Fidelity
Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the "Advisor"); Fidelity Management & Research
(U.K.) Inc. (hereinafter called the "Sub-Advisor"); and Fidelity
Devonshire Trust, a Massachusetts business trust which may issue one or
more series of shares of beneficial interest (hereinafter called the
"Trust") on behalf of (Name of Portfolio) (hereinafter called the
"Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio; and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information and
recommendations with respect to the economies of various countries, and,
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor to
perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor,
the Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations all as the Advisor may reasonably require. Such information
may include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the Advisor,
manage all or a portion of the investments of the Portfolio in accordance
with the investment objective, policies and limitations provided in the
Portfolio's Prospectus or other governing instruments, as amended from time
to time, the Investment Company Act of 1940 (the "1940 Act") and rules
thereunder, as amended from time to time, and such other limitations as the
Trust or Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only to
the extent such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including but
not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money or lending securities on behalf of the Portfolio. All investment
management and any other activities of the Sub-Advisor shall at all times
be subject to the control and direction of the Advisor and the Trust's
Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Sub-Advisor, shall place all
orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Port- folio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph
(a) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal
to 110% of the Sub-Advisor's costs incurred in connection with rendering
the services referred to in subparagraph (a) of paragraph 1 of this
Agreement. The Sub-Advisory Fee shall not be reduced to reflect expense
reimbursements or fee waivers by the Advisor, if any, in effect from time
to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
Fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6. Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the Advisor
or the Sub-Advisor as directors, officers or otherwise and that directors,
officers and stockholders of the Advisor or the Sub-Advisor are or may be
or become similarly interested in the Trust, and that the Advisor or the
Sub-Advisor may be or become interested in the Trust as a shareholder or
otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.
The Sub-Advisor shall for all purposes be an independent contractor and not
an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1994 and
indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by vote of a
majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereto affixed, all as of the
date written above.
/s/ Charles F. Dornbush
Charles F. Ddornbush
Treasurer of FMR
/s/ J. Gary Burkhead
J.Gary Burkhead
President of FMR
/s/ Gary Burkhead
Gary Burkhead
Senior Vice President.
Fidelity Devonshire Trust
EXHIBIT 5(L)
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
AND
FIDELITY DEVONSHIRE TRUST ON BEHALF OF FIDELITY UTILITIES INCOME FUND
AGREEMENT made this 1st day of December, 1993 by and between Fidelity
Management & Research Company, a Massachusetts corporation with
principal offices at 82 Devonshire Street, Boston, Massachusetts
(hereinafter called the Advisor); Fidelity Management & Research (Far
East) Inc. (hereinafter called the Sub-Advisor); and Fidelity Devonshire
Trust, a Massachusetts business trust which may issue one or more series of
shares of beneficial interest (hereinafter called the Trust) on behalf of
(Name of Portfolio) hereinafter called the "Portfolio").
WHEREAS the Trust and the Advisor have entered into a Management Contract
on behalf of the Portfolio, pursuant to which the Advisor is to act as
investment manager of the Portfolio, and
WHEREAS the Sub-Advisor and its subsidiaries and other affiliated persons
have personnel in various locations throughout the world and have been
formed in part for the purpose of researching and compiling information
and recommendations with respect to the economies of various countries, and
securities of issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the Sub-Advisor agree as
follows:
1. Duties: The Advisor may, in its discretion, appoint the Sub-Advisor to
perform one or more of the following services with respect to all or a
portion of the investments of the Portfolio. The services and the portion
of the investments of the Portfolio to be advised or managed by the
Sub-Advisor shall be as agreed upon from time to time by the Advisor and
the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the Advisor, the
Sub-Advisor shall provide investment advice to the Portfolio and the
Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and the Advisor such factual information, research reports and investment
recommendations as the Adviser may reasonably require. Such information may
include written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the Advisor,
the Sub-Advisor shall, subject to the supervision of the Advisor, manage
all or a portion of the investments of the Portfolio in accordance with the
investment objective, policies and limitations provided in the Portfolio's
Prospectus or other governing instruments, as amended from time to time,
the Investment Company Act of 1940 (the "1940 Act") and rules thereunder,
as amended from time to time, and such other limitations as the Trust or
Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only to
the extent such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including but
not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money, or lending securities on behalf of the Portfolio. All investment
management and any other activities of the Sub-Advisor shall at all times
be subject to the control and direction of the Advisor and the Trust's
Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any or all
of the services contemplated by this Agreement directly or through such of
its subsidiaries or other affiliated persons as the Sub-Advisor shall
determine; provided, however, that performance of such services through
such subsidiaries or other affiliated persons shall have been approved by
the Trust to the extent required pursuant to the 1940 Act and rules
thereunder."
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Sub-Advisor, shall place all
orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Sub-Advisor,
which may include brokers or dealers affiliated with the Advisor or
Sub-Advisor. The Sub-Advisor shall use its best efforts to seek to execute
portfolio transactions at prices which are advantageous to the Port- folio
and at commission rates which are reasonable in relation to the benefits
received. In selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of l934) to the Portfolio and/or to the other
accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolio.
4. Compensation: The Advisor shall compensate the Sub-Advisor on the
following basis for the services to be furnished hereunder.
(a) INVESTMENT ADVISORY FEE: For services provided under subparagraph (a)
of paragraph 1 of this Agreement, the Advisor agrees to pay the Sub-Advisor
a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall be equal to 105% of
the Sub-Advisor's costs incurred in connection with rendering the services
referred to in subparagraph (a) of paragraph 1 of this Agreement. The
Sub-Advisory Fee shall not be reduced to reflect expense reimbursements or
fee waivers by the Advisor, if any, in effect from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under subparagraph
(b) of paragraph 1 of this Agreement, the Advisor agrees to pay the
Sub-Advisor a monthly Investment Management Fee. The Investment Management
Fee shall be equal to: (i) 50% of the monthly management fee rate
(including performance adjustments, if any) that the Portfolio is obligated
to pay the Advisor under its Management Contract with the Advisor,
multiplied by: (ii) the fraction equal to the net assets of the Portfolio
as to which the Sub-Advisor shall have provided investment management
services divided by the net assets of the Portfolio for that month. If in
any fiscal year the aggregate expenses of the Portfolio exceed any
applicable expense limitation imposed by any state or federal securities
laws or regulations, and the Advisor waives all or a portion of its
management fee or reimburses the Port-folio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers and
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall have
provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1 for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of its
expenses other than those expressly stated to be payable by the Sub-Advisor
hereunder or by the Advisor under the Management Contract with the
Portfolio, which expenses payable by the Portfolio shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
6 . Interested Persons: It is understood that Trustees, officers, and
shareholders of the Trust are or may be or become interested in the
Advisor or the Sub-Advisor as directors, officers or otherwise and that
directors, officers and stockholders of the Advisor or the Sub-Advisor are
or may be or become similarly interested in the Trust, and that the
Advisor or the Sub-Advisor may be or become interested in the Trust as a
shareholder or otherwise.
7. Services to Other Companies or Accounts: The services of the
Sub-Advisor to the Advisor are not to be deemed to be exclusive, the
Sub-Advisor being free to render services to others and engage in other
activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner,
with the Sub-Advisor's ability to meet all of its obligations hereunder.The
Sub-Advisor shall for all purposes be an independent contractor and not an
agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties hereunder
on the part of the Sub-Advisor, the Sub-Advisor shall not be subject to
liability to the Advisor, the Trust or to any shareholder of the Portfolio
for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph 9, this Agreement shall continue in force until July 31, 1994
and indefinitely thereafter, but only so long as the continuance after such
period shall be specifically approved at least annually by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding
voting securities of the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the Portfolio to
be authorized by vote of a majority of the outstanding voting securities of
the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph 9 , the terms of any continuance or modification of this
Agreement must have been approved by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by vote of a
majority of its outstanding voting securities. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability: The Sub-Advisor is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust or other organizational document of the Trust and
agrees that any obligations of the Trust or the Portfolio arising in
connection with this Agreement shall be limited in all cases to the
Portfolio and its assets, and the Sub-Advisor shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio. Nor shall the Sub-Advisor seek satisfaction of any such
obligation from the Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
_/s/ Charles F. Dornbush
Charles F. Ddornbush
Treasurer of FMR
/s/ J. Gary Burkhead
J.Gary Burkhead
President of FMR
_/s/ Gary Burkhead
Gary Burkhead
Senior Vice President.
Fidelity Devonshire Trust
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and Shareholders of:
Fidelity Utilities Income Fund
Fidelity Real Estate Investment Portfolio
Fidelity Equity-Income Fund
Spartan Long-Term Government Bond Fund
We hereby consent to the incorporation by reference into the Statements of
Additional Information in this Post-Effective Amendment No. 81 to the
Registration Statement (File No. 2-24389) on Form N-1A of our reports dated
March 4, 1994, relating to the financial statements and financial
highlights.
We further consent to the references to our Firm under the captions
"Auditor" in the Statements of Additional Information and "Financial
Highlights" in the Prospectuses included in this Post-Effective Amendment.
/s/COOPERS & LYBRAND
COOPERS & LYBRAND
Boston, Massachusetts
March 16, 1994
