SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (No. 2-24389)
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 86 [X]
and
REGISTRATION STATEMENT (No. 811-1352)
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
Fidelity Devonshire Trust
(Exact Name of Registrant as Specified in Charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: 617-563-7000
Arthur S. Loring, Secretary
82 Devonshire Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
( ) immediately upon filing pursuant to paragraph (b)
(x) on March 22, 1995 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(i)
( ) on ( ) pursuant to paragraph (a)(i)
( ) 75 days after filing pursuant to paragraph (a)(ii)
( ) on ( ) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed
post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and intends to file the Notice required by
such Rule before March 31, 1995.
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.
SPARTAN (REGISTERED TRADEMARK)
LONG-TERM
GOVERNMENT
BOND
FUND
To learn more about the fund and its investments, you can obtain a copy
of the fund's most recent financial report and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated March 22,
1995. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is incorporated herein by reference (legally forms a
part of the prospectus). For a free copy of either document, call
Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
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.
LTG-pro-395
Spartan Long-Term Government Bond seeks income and growth of capital by
investing mainly in long-term U.S. government securities.
PROSPECTUS
MARCH 22, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
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,
ACCOUNT POLICIES AND 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 securities issued and guaranteed by the
U.S. government or its agencies 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, 1995, the fund had over $ 77 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 quarterly rather than
monthly dividends.
The value of the fund's investments and the income they generate will vary
from day to day, and generally reflect interest rates, market conditions,
and other economic and political news. When you sell your shares, they may
be worth more or less than what you paid for them. By itself, the
fund does not constitute a balanced investment plan.
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.
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. Spartan
Long-Term Government Bond
is in the INCOME category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(right arrow) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy ,
sell , or hold shares of a fund. See page for more
information.
Maximum sales charge on purchases and
reinvested distributions 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
Annual account maintenance fee
(for accounts under $2,500) $ 12 .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 Account
open 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 is included in the fund's Annual Report and has been
audited by Coopers & Lybrand L.L.P., independent accountants. Their report
on the financial statements and financial highlights is included in the
Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the fund's Statement
of Additional Information.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1.Year ended January 31 1991 D 1992 1993 1994 1995
2.Net asset value, beginning of period $ 10.000 $ 11.040 $ 11.600 $ 12.130 $ 12.740
3.Income from Investment Operations .144 .776 .847 .847 .5 13
Net investment income
4. Net realized and unrealized gain .996 .604 .703 1.123 (2. 093 )
(loss)
on investments
5. Total from investment operations 1.140 1.380 1.550 1.970 (1.580)
6.Less Distributions (.100) (.740) (.840) (.840) (.5 3 0)
From net investment income C
7. From net realized gain on -- (.080) (.180) (.520) (.1 00 )
investments C
8. Total distributions (.100) (.820) (1.020) (1.360) (.630)
9.Net asset value, end of period $ 11.040 $ 11.600 $ 12.130 $ 12.740 $ 10.530
10.Total return B 11.41% 12.98 13.95 16.79 (12.44)
% % %
11.RATIOS AND SUPPLEMENTAL DATA
12.Net assets, end of period (000 $ 33,833 $ 62,992 $ 83,009 $ 67,304 $ 77, 481
omitted)
13.Ratio of expenses to average net .65% .65 .65 .65 .6 5
assets A % % % %
14.Ratio of net investment income to 7.26% 7.30 7.35 6.41 5.95
average net assets A % % % %
15.Portfolio turnover rate 256% 335 135 153 422
A % % % %
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS
OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
D FROM COMMENCEMENT OF OPERATIONS (SEPTEMBER 28, 1990) TO JANUARY 31,
1991
PERFORMANCE
Bond fund performance can be measured as TOTAL RETURN or YIELD. The total
returns 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.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods Past Life
ended 1 of
January 31, year fund
199 5 A
Spartan -12.4 9.21
Long-Term 4% %
Government
Bond
Consumer 2.80 2.91
Price % %
Index
CUMULATIVE TOTAL RETURNS
Fiscal periods Past Life
ended 1 of
January 31, year fund
199 5 A
Spartan -12.4 46.68
Long-Term 4% %
Government
Bond
Consumer 2.80 13.26
Price % %
Index
A FROM SEPTEMBER 28, 1990
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 yields and carry
more risk than short-term
bond funds.
(checkmark)
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 CONSUMER PRICE INDEX is a widely recognized measure of inflation
calculated by the U.S. government.
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
SPARTAN LONG-TERM GOVERNMENT BOND 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 is manager and vice president of Spartan Long-Term
Government Bond, which he has managed since October 1993. Mr. Hollingsworth
also manages Short-Intermediate Government, Institutional
Short-Intermediate Government, Spartan Limited Maturity Government, and
Spartan Short-Intermediate Government. Previously, he managed Government
Securities and Advisor Government Investment. Mr. Hollingsworth joined
Fidelity in 1983.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (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 FMR. Through ownership of voting common
stock, members of the Edward C. Johnson 3d family form a controlling group
with respect to FMR Corp. Changes may occur in the Johnson family group,
through death or disability, which would result in changes in each
individual family member's holding of stock. Such changes could result in
one or more family members becoming holders of over 25% of the stock. FMR
Corp. has received an opinion of counsel that changes in the composition of
the Johnson family group under these circumstances would not result in the
termination of the fund's management or distribution contracts and,
accordingly, would not require a shareholder vote to continue operation
under those contracts.
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. The fund generally invests in
longer-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. The fund may also invest in futures contracts and
other derivatives to adjust its investment exposure.
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 change daily and are based on
changes in interest rates, market conditions, other economic and political
news , and on the quality and maturity of its investments . In
general, bond prices rise when interest rates fall, and vice versa. This
effect is usually more pronounced for longer-term securities. 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.
It is important to note that neither the fund nor its yield are guaranteed
by the U.S. government.
FMR normally invests the fund's assets according to its investment
strategy. The fund also reserves the right to invest without limitation in
investment-grade money market or short-term debt instruments for temporary,
defensive purposes.
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. A complete listing of the fund's policies
and limitations and more detailed information about the fund's investments
is contained in the fund's SAI. 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. Current holdings and recent investment strategies
are described in the fund's financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
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. In
general, bond prices rise when interest rates fall, and vice versa.
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.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by any other nationally recognized
rating service, or is unrated but judged to be of equivalent quality by
FMR. The fund currently intends to limit its investments in debt securities
to those of A-quality or above.
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.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign
currencies, and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations .
These include risks relating to political or economic conditions in the
foreign country, fluctuations in foreign currencies, withholding or
other taxes, operational risks, increased regulatory burdens, and the
potentially less stringent investor protection and disclosure standards of
foreign markets. Additionally, governmental issuer s of foreign
securities may be unwilling to repay principal and interest when due,
and may require that the conditions for payment be renegotiated. All of
t hese factors c an make foreign investments, especially those in
developing countries, more volatile.
ASSET-BACKED AND MORTGAGE SECURITIES include interests in pools of
lower-rated debt securities, or consumer loans or mortgages, or
complex instruments 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. Some securities may have a structure that makes their reaction
to interest rates and other factors difficult to predict, making their
value highly volatile. These securities may also be subject to
prepayment risk.
STRIPPED SECURITIES are the separate income or principal components of a
debt security . Their risks are similar to those of other debt
securities, although they may be more volatile and the value of certain
types of stripped securities may move in the same direction as interest
rates.
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.
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 some illiquid securities and some 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
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 .65% 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
199 5 , these fees amounted to $ 8,755 , $ 295 , $ 90 ,
and $ 86 , 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 199 5 was 422 %.
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:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid 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.
(solid bullet) Number of Fidelity mutual
funds: over 210
(solid bullet) Assets in Fidelity mutual
funds: over $ 250 billion
(solid bullet) Number of shareholder
accounts: over 20 million
(solid 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.
(solid 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.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid 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.
(solid 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.
(solid 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:
(small solid bullet) Mail in an application with a check, or
(small solid 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.
(checkmark)
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid 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.
(small solid 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) (small solid bullet) Complete and sign the (small solid 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.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid 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) (small solid bullet) There may be a $5.00 (small solid bullet) There may be a $5.00
fee for each wire fee for each wire
purchase. purchase.
(small solid bullet) Call 1-800-544-7777 to (small solid bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (small solid bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(small solid 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid 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 $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:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid 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:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid 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
<TABLE>
<CAPTION>
<S> <C> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Phone 1-800-544-777 (phone_graphic) All account types (small solid bullet) Maximum check request:
except retirement $100,000.
(small solid bullet) For Money Line transfers to
All account types your bank account; minimum:
$10; maximum: $100,000.
(small solid 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 (small solid 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.
(small solid bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (small solid 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, (small solid bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid 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.
(small solid 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>
Check (check_graphic) All account types (small solid bullet) Minimum check: $1,000.
except retirement (small solid bullet) All account owners must sign
a signature card to receive a
checkbook.
</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.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid 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. 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 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 periodic 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
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$500 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid 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 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. 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.
The 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 are generally free
from state and local income taxes. However, particular states may limit
this benefit, and some 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 1995 , 95.93 % 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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments and these taxes generally will reduce the fund's
distributions.
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.
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. If quotations are not
readily available, or if the values have been materially affected by
events occurring after the closing of a foreign market, assets are
valued by a method that the Board of Trustees believes accurately reflects
fair value.
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. Fidelity may only be
liable for losses resulting from unauthorized transactions if it
does not follow 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 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:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid 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
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:
(small solid 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.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid 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.
(small solid 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.
(small solid 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:
(small solid bullet) The $2.00 checkwriting charge will be deducted from
your account.
(small solid bullet) The $5.00 exchange fee will be deducted from the
amount of your exchange.
(small solid bullet) The $5.00 wire fee will be deducted from the amount of
your wire.
(small solid bullet) The $5.00 account closeout fee does not apply to
exchanges or wires, but it will apply to checkwriting.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts, accounts using regular investment plans,
or if total assets in Fidelity funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
maintained by FSC or FBSI which are registered under the same social
security number or which list the same social security number for the
custodian of a Uniform Gifts/Transfers to Minors Act account.
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:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid 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.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid 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.
(small solid 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.
(small solid 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.
(small solid 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.
SPARTAN(registered trademark) LONG-TERM GOVERNMENT BOND FUND
A FUND OF FIDELITY DEVONSHIRE TRUST
STATEMENT OF ADDITIONAL INFORMATION
MARCH 22, 1995
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 22, 1995). Please retain this
document for future reference. The fund's financial statements and
financial highlights, included in the Annual Report for the fiscal year
ended January 31, 1995, are 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 20
INVESTMENT ADVISER
Fidelity Management & Research Company (FMR)
DISTRIBUTOR
Fidelity Distributors Corporation (FDC)
TRANSFER AGENT
Fidelity Service Company (FSC)
LTG-ptb-395
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.
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.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions" 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.
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 United States 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.
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.
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.
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
United States 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.
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, 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,
emerging market securities, 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 was 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 it 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 sell that security back to the
original seller at an agreed-upon price. 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. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well as delays and costs to the fund
in connection with bankruptcy proceedings), it is the fund's current policy
to engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the 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.
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 a 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).
ZERO COUPON BONDS. Zero coupon bonds do not make 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 dividends, the fund takes into account as income
a portion of the difference between a zero coupon bond's purchase price and
its face value.
A broker-dealer creates a derivative zero by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of Derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and
principal components of an outstanding U.S. Treasury bond and selling them
as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be
separated in this fashion.
INTERFUND BORROWING PROGRAM. Pursuant to an exemptive order issued by
the SEC, t he fund has received permission to lend money
to , and borrow money from , other funds advised by FMR or its
affiliates. Interfund loans and borrowings 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 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.
FOREIGN INVESTMENTS. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not subject
to the disclosure and reporting requirements of the U.S. securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable
to those applicable to U.S. issuers. Further, economies of particular
countries or areas of the world may differ favorably or unfavorably from
the economy of the United States.
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.
Foreign markets may offer less protection to investors than U.S. markets.
It is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may expose the fund to increased risk
in the event of a failed trade or the insolvency of a foreign
broker-dealer, and may involve substantial delays. In addition, the costs
of foreign investing, including withholding taxes, brokerage commissions
and custodial costs, are generally higher than for U.S. investors. In
general, there is less overall governmental supervision and regulation of
securities exchanges, brokers, and listed companies than in the United
States. It may also be difficult to enforce legal rights in foreign
countries.
The fund may invest in foreign securities that impose restrictions on
transfer within the United States 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.
The fund may invest in American Depository Receipts and European Depository
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 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 conduct foreign currency
transactions 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. The fund will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to the fund at one rate, while offering a lesser
rate of exchange should the fund desire to resell that currency to the
dealer. Forward contracts are generally 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 for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by the fund. The fund may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes.
When the fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." The fund may 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.
The fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if the fund held investments denominated in
Deutschemarks, the fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if the fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause the fund to assume the risk of fluctuations in the
value of the currency it purchases.
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 currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management strategies
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 currency management strategies will
be advantageous to the fund or that it will hedge at an appropriate time.
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 Rule 4.5 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 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 (OTC) 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.
FOREIGN REPURCHASE AGREEMENTS. Foreign repurchase agreements may include
agreements to purchase and sell foreign securities in exchange for fixed
U.S. dollar amounts, or in exchange for specified amounts of foreign
currency. Unlike typical U.S. repurchase agreements, foreign repurchase
agreements may not be fully collateralized at all times. The value of a
security purchased by a fund may be more or less than the price at which
the counterparty has agreed to repurchase the security. In the event of
default by the counterparty, the fund may suffer a loss if the value of the
security purchased is less than the agreed-upon repurchase price, or if the
fund is unable to successfully assert a claim to the collateral under
foreign laws. As a result, foreign repurchase agreements may involve higher
credit risks than repurchase agreements in U.S. markets, as well as risks
associated with currency fluctuations. In addition, as with other emerging
market investments, repurchase agreements with counterparties located in
emerging markets or relating to emerging markets may involve issuers or
counterparties with lower credit ratings than typical U.S. repurchase
agreements.
DELAYED-DELIVERY TRANSACTIONS. The fund may buy and sell
securities on a delayed-delivery or when-issued basis. These transactions
involve a commitment by the 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 the 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 the 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 to
cover its purchase obligations. When the 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.
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 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) 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 .
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, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute 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 periods ended January 31, 1995 and 1994, the fund's
portfolio turnover rates were 422 % and 153 %, respectively.
Because a high turnover rate increases transaction costs and may increase
taxable gains, FMR carefully weighs the anticipated benefits of short-term
investing against these consequences. An increased turnover rate is due
to a greater volume of shareholder purchase orders, short-term interest
rate volatility, and other special market conditions.
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 and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
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 procedures believed to be appropriate and equitable for 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
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.
PERFORMANCE
The fund may quote 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 return
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 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 distributions during the
period, dividing this figure by the fund's net asset value (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. For the fund's investments denominated in
foreign currencies, income and expenses are calculated first in their
respective currencies, and are then converted to U.S. dollars, either when
they are actually converted or at the end of the 30-day or one month
period, whichever is earlier. Capital gains and losses generally are
excluded from the calculation as are gains and losses from currency
exchange rate fluctuations.
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.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives.
However, the fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates the
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
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 total 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 total 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 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, 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 tables show the fund's yields and
total returns for periods ended January 31, 1995. Total return figures
include the effect of the $5.00 account closeout fee based on an average
size account .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30-Day One Life of One Life of
Yield Year Fund* Year Fund*
Spartan Long-Term
Government Bond 7.16 % -12.45 % 9.21 % -12.45 % 46.65 %
</TABLE>
* From September 28, 1990 (commencement of operations).
The following table shows the income and capital elements of the fund's
cumulative total return. The table compares the fund's return to the record
of the Standard & Poor's Composite Index of 500 Stocks (S&P
500 (registered trademark)), the Dow Jones Industrial Average (DJIA), and
the cost of living (measured by the Consumer Price Index, or CPI) over the
same period. The CPI information is as of the month end closest to the
initial investment date for each fund. 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 fixed-income investment
such as the fund. Figures for the S&P 500 and DJIA are based on the prices
of unmanaged groups of stocks and, unlike the fund's 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, 1995, a hypothetical $10,000 investment in Spartan Long-Term
Government Bond would have grown to $ 14,668 , assuming all
distributions were reinvested. This was a period of fluctuating interest
rates and bond prices and the figures below 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Spartan Long-Term Government Bond Fund INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended Value of Value of Value of Total S&P 500 DJIA Cost of
January 31 Initial Reinvested Reinvested Value Living**
$10,000 Dividend Capital Gain
Investment Distributions Distributions
1995 $ 10,530 $ 3,195 $ 943 $ 14,668 $ 17,811 $ 18,044 $ 11,326
1994 $ 12,740 $ 3,034 $ 979 $ 16,751 $ 17,718 $ 18,171 $ 11,017
1993 $ 12,130 $ 1,912 $ 301 $ 14,343 $ 15,697 $ 14,699 $ 10,746
1992 $ 11,600 $ 903 $ 85 $ 12,588 $ 14,192 $ 13,897 $ 10,407
1991* $ 11,040 $ 101 $ 0 $ 11,141 $ 11,566 $ 11,421 $ 10,143
</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
$ 14,594 . 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 $ 3,040 for
dividends and $ 890 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'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 stock,
bond, and money market mutual fund performance indices prepared by Lipper
or other organizations. When comparing these indices, it is important to
remember the risk and return characteristics of each type of investment.
For example, while stock mutual funds may offer higher potential returns,
they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally
do not offer the higher potential returns from stock mutual funds.
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. of Chicago, Illinois 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.
The fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, the
fund may offer greater liquidity or higher potential returns than CDs, the
fund does not guarantee your principal or your return, and fund shares are
not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's 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.
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(registered trademark), covers over
350 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 or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
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. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
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, 199 5 , FMR advised over $ 25 billion in
tax-free fund assets, $ 65 billion in money market fund assets,
$ 165 billion in equity fund assets, $ 35 billion in
international fund assets, and $ 20 billion in Spartan fund assets.
The fund may reference the growth and variety of money market mutual funds
and the adviser's innovation and participation in the industry. The equity
funds under management 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. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
In addition to performance rankings, each fund may compare its total
expense ratio to the average total expense ratio of similar funds tracked
by Lipper. A fund's total expense ratio is a significant factor in
comparing bond and money market investments because of its effect on yield.
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 1995: New Year's
Day (observed), Presidents' Day (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day. Although FMR expects the same holiday schedule 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 Securities and
Exchange Commission (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. In addition, trading in some of the fund's
portfolio securities may not occur on days when the fund is open for
business.
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.
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 generally will not qualify for the
dividends - received deduction available to corporate shareholders.
Short-term capital gains are distributed as dividend income, but do not
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
dividend 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.
As of January 31, 199 5 , the fund had a capital loss carryforward
aggregating approximately $ 3,935,000 . This loss carryforward,
all of which will expire on January 31, 2003, is
available to offset future capital gains.
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. In a number of states, corporate
franchise (income) tax laws do not exempt interest earned on U.S.
government securities whether such securities are held directly or through
a fund.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may
also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50% of the
fund's total assets are invested in securities of foreign issuers, the fund
may elect to pass through foreign taxes paid and thereby allow shareholders
to take a credit or deduction on their individual tax returns.
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. Generally, the fund will
elect to mark-to-market any PFIC shares. Unrealized gains will be
recognized as income for tax purposes and must be distributed to
shareholders as dividends.
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, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether the fund is suitable to their particular tax
situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company
organized in 1972. Through ownership of voting common stock and the
execution of a shareholders' voting agreement, Edward C. Johnson 3d,
Johnson family members, and various trusts for the benefit of the Johnson
family form a controlling group with respect to FMR Corp.
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 institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
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 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 is a member of 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 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, a Trustee and member of the
Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, One Harborside, 680 Steamboat Road, Greenwich, CT, Trustee,
is Executive-in-Residence (1995) at Columbia University Graduate School of
Business and a financial consultant. From 1987 to January 1995, Mr. Kirk
was a Professor at Columbia University Graduate School of Business. 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, Vice Chairman of the Board of Trustees of the Greenwich Hospital
Association, and as a Member of the Public Oversight Board of the American
Institute of Certified Public Accountants' SEC Practice Section (1995).
*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). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is 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).
CURTIS HOLLINGSWORTH, is manager and vice president of Spartan Long-Term
Government Bond, which he has managed since October 1993. Mr. Hollingsworth
also manages Fidelity Short-Intermediate Government, Institutional
Short-Intermediate Government, Spartan Limited Maturity Government,
and Spartan Short-Intermediate Government. Previously, he managed
Government Securities and Advisor Government Investment. Mr.
Hollingsworth joined Fidelity in 1983.
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President - Legal of FMR Corp., and Vice President and
Clerk of FDC.
STEPHEN P. JONAS, Treasurer (1995), is Treasurer and Vice President of
FMR (1993). Mr. Jonas is also Treasurer of FMR Texas Inc. (1994), Fidelity
Management & Research (U.K.) Inc. (1994), and Fidelity Management &
Research (Far East) Inc. (1994). Prior to becoming Treasurer of FMR, Mr.
Jonas was Senior Vice President, Finance - Fidelity Brokerage Services,
Inc. (1991-1992) and Senior Vice President, Strategic Business Systems -
Fidelity Investments Retail Marketing Company (1989-1991).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity Funds, Mr. Rush was
Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation
of each current non-interested trustee of the fund for his or her services
as trustee for the fiscal year ended January 31, 1995. Interested trustees
and officers are compensated by FMR.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Aggregate
Pension or
Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from
Benefits Accrued Retirement from from the Fund
the Fund as Part of
the Fund Complex*
Fund Expenses
Complex*
from the
Fund Complex*
Ralph F. Cox $ 31 $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 30 5,200 52,000 122,000
Richard J. Flynn 38 0 52,000 154,500
E. Bradley Jones 31 5,200 49,400 123,500
Donald J. Kirk 31 5,200 52,000 125,000
Gerald C. McDonough 31 5,200 52,000 125,000
Edward H. Malone 32 5,200 44,200 128,000
Marvin L. Mann 31 5,200 52,000 125,000
Thomas R. Williams 31 5,200 52,000 126,500
</TABLE>
* Information is as of December 31, 1994 for all 206 funds in the
complex.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program
As of January 31, 1995, the Trustees and officers of the fund
owned, in the aggregate, less than 1 % of the fund's total
outstanding shares.
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 fund and all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of
the fund 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 Trustees.
FMR is responsible for the payment of all expenses of the fund with
certain exceptions. Specific expenses payable by FMR include, without
limitation, expenses for the typesetting, printing, and mailing of proxy
materials to shareholders; legal expenses, and the fees of the custodian,
auditor and non-interested Trustees; costs of typesetting, printing, and
mailing prospectuses and statements of additional information, notices and
reports to shareholders; and the fund's proportionate share of insurance
premiums and Investment Company Institute dues. FMR also provides for
transfer agent and dividend disbursing service 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 of the trust who are not "interested
persons" of the trust or 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. The
management fee paid to FMR is reduced by an amount equal to the fees and
expenses of the non-interested Trustees.
For the services of FMR under the contract, the fund pays FMR a monthly
management fee at the annual rate of .65% of the average net
assets of the fund throughout the month. For the fiscal years ended
January 31, 199 5 , 199 4 , and 199 3 , FMR received
$409,492, $557,381, and $507,937, respectively , after reduction of fees
and expenses of the non-interested Trustees .
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase the fund's total returns and yield and repayment of
the reimbursement by the fund will lower its total returns and yield.
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 , and $2.00 checkwriting charge .
Shareholder transaction fees and charges collected by FMR are
indicated in the table below.
Years Ended Exchange Account Wire Checkwriting
January 31 Fees Closeout Fees Fees Charge
199 5 $ 8,755 $ 295 $ 90 $ 86
1994 10,505 180 175 96
1993 14,895 210 520 N/A
DISTRIBUTION AND SERVICE PLAN
The Trustees have approved a Distribution and Service Plan on behalf of the
fund (the Plan) pursuant to 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 a pproved on behalf of the fund under the Rule. The Plan, as
approved by the Trustees, allows 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 of management fees by the fund is 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 its 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.
Prior to approving the Plan, 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. Furthermore , 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 on September 18, 199 1 .
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. 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.
The fund may execute portfolio transactions with , and purchase
securities issued by , depository institutions that receive payments
under the Plan. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
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 net asset value per share and dividends, maintains the fund's
general accounting records, and administers the fund's securities lending
program. The costs 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 and 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.
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:
Spartan Adjustable Rate Government Fund; Fidelity Equity-Income
Fund; Fidelity Real Estate Investment Portfolio; Fidelity Utilities
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 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 value of
net asset value 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 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 L.L.P., 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 financial statements and financial highlights for the fiscal
year ended January 31, 199 5 are included in the fund's Annual
Report, which is a separate report supplied with this Statement of
Additional Information. The fund's financial statements and financial
highlights are incorporated herein by reference.
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
estimating the expected principal payments during 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:
FIDELITY UTILITIES 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
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page; The Fund at a Glance; Charter; Doing
Business with Fidelity
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g i............................. Charter
.
ii............................ *
..
5A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. Charter
c .............................. Transactions Details; 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 .............................. Cover Page; Charter
b .............................. Expenses; 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 UTILITIES 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 ............................ Description of the Trust
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR, Portfolio Transactions
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 - 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 a, b ............................ 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.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing, or a copy of
the Statement of Additional Information (SAI) dated March 22, 1995. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, call Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
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-395
Utilities seeks high total return through a combination of current income
and capital appreciation by investing mainly in the equity securities of
public utility companies.
FIDELITY
UTILITIES
FUND
PROSPECTUS
(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109MARCH 22,
1995
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,
ACCOUNT POLICIES AND TAXES
TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
EXCHANGE RESTRICTIONS
KEY FACTS
THE FUND AT A GLANCE
GOAL: High total return through a combination of current income and capital
appreciation. 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 may help
choose investments for the fund.
SIZE: As of January 31, 1995, the fund had over $ 1.1 b illion 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 seek a combination of growth and income
through an investment that focuses on public utility companies.
The value of the fund's investments and the income they generate will vary
from day to day, and generally reflect market conditions, interest rates,
and other company, political, or economic news both here and abroad. In the
short-term, stock prices can fluctuate dramatically in response to these
factors. Over time, however, stocks have shown greater growth potential
than other types of securities. The prices of bonds generally move in the
opposite direction from interest rates. Investments in foreign securities
may involve risks in addition to those of U.S. investments, including
increased political and economic risk, as well as exposure to currency
fluctuations. When you sell your shares, they may be worth more or less
than what you paid for them. By itself, the fund does not constitute a
balanced investment plan.
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 Fund is in the
GROWTH AND INCOME
category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(solid bullet) INCOME Seeks income by
investing in bonds.
(right arrow) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly
in stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy,
sell , or hold shares of a fund. See page for more
information about these fees.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Exchange fee None
Annual account maintenance fee
(for accounts under $2,500) $12.00
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 financial 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
.88 %.
Management fee .53 %
12b-1 fee None
Other expenses .34 %
Total fund operating expenses .87 %
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 $ 28
After 5 years $ 48
After 10 years $ 10
7
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 is included in the fund's Annual Report and has been
audited by Coopers & Lybrand L.L.P., independent accountants. Their report
on the financial statements and financial highlights is included in the
Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the fund's Statement
of Additional Information.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C>
16.Years ended
1988D 1989 1990 1991 1992 1993 1994 1995
January 31
17.Net asset
$ 10.00 $ 10.94 $ 11.10 $ 11.96 $ 11.74 $ 12.94 $ 13.94 $ 15.84
value,
beginning of period
18.Income from
Investment
Operations
19. Net
.06 .60 .72 .67 .63 .61 .50 .55
investment income
20. Net realized
.92 .11 1.21 .10 1.38 1.37 2.14 (1.58)
and unrealized
gain (loss) on
investments
21. Total from
.98 .71 1.93 .77 2.01 1.98 2.64 (1.03)
investment
operations
22.Less
Distributions
23. From net
(.04) (.52) (.76) (.69) (.63) (.60) (.52) (.54)
investment
income
24. From net
-- (.03) (.31) (.30) (.18) (.38) (.22) (.68)
realized gain
25. In excess of
-- -- -- -- -- -- -- (.12)
net
realized gain
26. Total
(.04) (.55) (1.07) (.99) (.81) (.98) (.74) (1.34)
distributions
27.Net asset
$ 10.94 $ 11.10 $ 11.96 $ 11.74 $ 12.94 $ 13.94 $ 15.84 $ 13.47
value, end of
period
28.Total return B
9.83% 6.75% 17.70 6.84% 17.70 15.92% 19.34% (6.38)%
% %
29.RATIOS AND SUPPLEMENTAL DATA
30.Net assets, end
$ 30,772 $ 129,3 $ 156,5 $ 220,0 $ 647,1 $ 1,002,3 $ 1,456,4 $ 1,171,1
of period (000
63 79 72 71 10 15 82
omitted)
31.Ratio of
2.00%A, 1.47% 1.02% .94% .95% .87% .86%C .87%C
expenses to
E
average net assets
32.Ratio of
2.00%A, 1.47% 1.02% .94% .95% .87% .87%C .88%C
expenses to
E
average net assets
before expense
reductions
33.Ratio of net
5.36%A 6.14% 6.19% 5.93% 5.11% 4.57% 3.39% 3.87%
investment income
to average net
assets
34.Portfolio
-- 10% 61% 43% 39% 73% 47% 98%
turnover rate
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED AND
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE
PERIODS SHOWN.
C FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A
PORTION OF THE FUND'S EXPENSES.
D NOVEMBER 27, 1987 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31,
1988.
E 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.
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 Pas Past Life
ended t 1 5 of
January 31, yea year fund
1995 r s A
Utilities -6.38 10.24 11.93
% % %
S&P Utilities -1.40 8.29 12.43
Index % % %
Consumer 2.80 3.36 3.75
Price % % %
Index
CUMULATIVE TOTAL RETURNS
Fiscal periods Pas Past Life
ended t 1 5 of
January 31, yea year fund
1995 r s A
Utilities -6.38 62.85 124.72
% % %
S&P Utilities -1.40 48.94 132.09
Index % % %
Consumer 2.80 17.97 30.24
Price % % %
Index
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, 1995, the
fund's total return was 124.72 %. That $10,000 would have grown to
$ 22,472 (the initial investment plus 124.72 % 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 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 7 199 1 1995
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: 24004.43
Row: 77, Col: 1, Value: 23019.4
Row: 78, Col: 1, Value: 22148.43
Row: 79, Col: 1, Value: 22709.15
Row: 80, Col: 1, Value: 22304.19
Row: 81, Col: 1, Value: 22128.33
Row: 82, Col: 1, Value: 22819.35
Row: 83, Col: 1, Value: 22992.11
Row: 84, Col: 1, Value: 22378.02
Row: 85, Col: 1, Value: 22362.18
Row: 86, Col: 1, Value: 21649.51
Row: 87, Col: 1, Value: 21788.05
Row: 88, Col: 1, Value: 22472.05
$
$22,472
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 the Standard & Poor's Composite
Index of 500 Stocks, a widely recognized, unmanaged index of common stock
prices. The S&P Utilities Index 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, which
currently reflects the performance of over 66 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.
YEAR-BY-YEAR TOTAL RETURNS
Calendar years 1988 1989 1990 1991 1992 1993 1994
Fidelity Utilities Fund 14.77 % 25.92 % 1.85 %
21.18 % 10.90 % 15.61
% -5.29 %
Competitive funds average 15.28 % 28.77 % -1.37 %
21.67 % 9.07
% 131.13 % -8.99 %
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: 14.77
Row: 4, Col: 2, Value: 15.28
Row: 5, Col: 1, Value: 25.92
Row: 5, Col: 2, Value: 28.77
Row: 6, Col: 1, Value: 1.85
Row: 6, Col: 2, Value: -1.37
Row: 7, Col: 1, Value: 21.18
Row: 7, Col: 2, Value: 21.67
Row: 8, Col: 1, Value: 10.9
Row: 8, Col: 2, Value: 9.07
Row: 9, Col: 1, Value: 15.61
Row: 9, Col: 2, Value: 13.13
Row: 10, Col: 1, Value: -5.29
Row: 10, Col: 2, Value: -8.99
(large solid box) Fidelity
Utilities Fund
(large hollow box) Competitive
funds
average
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 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 March 4, 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.), in London, England, and Fidelity Management & Research (Far
East) Inc. (FMR Far East), in Tokyo, Japan, assist FMR with foreign
investments.
John Muresianu is manager of Utilities, which he has managed since December
1992. Mr. Muresianu also manages Select(registered trademark) Utilities
Growth. Previously, he managed Select Natural Gas and served as a research
analyst following the natural gas and life insurance industries, as well as
Canadian stocks. Mr. Muresianu has also been a pension fund manager with
the company. He joined Fidelity in 1986.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (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 FMR, FMR Far East, and FMR U.K. Through
ownership of voting common stock, members of the Edward C. Johnson 3d
family form a controlling group with respect to FMR Corp. Changes may occur
in the Johnson family group, through death or disability, which would
result in changes in each individual family member's holding of stock. Such
changes could result in one or more family members becoming holders of over
25% of the stock. FMR Corp. has received an opinion of counsel that changes
in the composition of the Johnson family group under these circumstances
would not result in the termination of the fund's management or
distribution contracts and, accordingly, would not require a shareholder
vote to continue operation under those contracts.
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 HIGH TOTAL RETURN THROUGH A COMBINATION OF CURRENT INCOME
AND CAPITAL APPRECIATION. FMR normally invests at least 65% of the fund's
total assets in all types of securities of public utility companies. FMR
expects to focus on equity securities but may invest in all types of
securities in pursuit of its objective.
Public utility companies may include companies that provide electricity,
natural gas, water, public communications services, or sanitary services to
the public. Although these companies traditionally pay above average
dividends, the fund intends to focus on those companies whose securities
have the potential to increase in value. 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 foreign
securities of non-utility companies.
The value of the fund's domestic and foreign investments varies in response
to many factors. Stock values fluctuate in response to the activities of
individual companies, and general market and economic conditions. The value
of bonds fluctuates based on changes in interest rates and in the credit
quality of the issuer. Investments in foreign securities may involve risks
in addition to those of U.S. investments, including increased political and
economic risk, as well as exposure to currency fluctuations. 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. Also, as a mutual
fund, the fund seeks to spread investment risk by diversifying its holdings
among many companies. Of course, when you sell your shares of the fund,
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. The fund also reserves the right to invest without limitation in
preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.
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. A complete listing of the fund's policies
and limitations and more detailed information about the fund's investments
is contained in the fund's SAI. 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. Current holdings and recent investment strategies
are described in the fund's financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
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. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
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. In
general, bond prices rise when interest rates fall, and vice versa. 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.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR. The fund currently intends to limit its
investments in debt securities to those of A-quality or above.
EXPOSURE TO FOREIGN MARKETS. Foreign securities,
foreign currencies , and securities issued by U.S. entities with
substantial foreign operations may involve additional risks and
considerations . These include risks relating to political or
economic conditions in foreign countries, fluctuations in foreign
currencies, withholding or other taxes, operational risks, increased
regulatory burdens, and the potentially less stringent investor
protection and disclosure standards of foreign markets. Additionally,
governmental issue rs of foreign securities may be unwilling to
repay principal and interest when due, and may require that the conditions
for payment be renegotiated. All of t hese factors c an make
foreign investments, especially those in developing countries, more
volatile.
ASSET-BACKED AND MORTGAGE SECURITIES include interests in pools of
lower-rated debt securities, or consumer loans or mortgages, or complex
instruments 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. Some securities may have a structure that makes their reaction to
interest rates and other factors difficult to predict, making their value
highly volatile. These securities may also be subject to prepayment risk.
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.
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 some illiquid securities and some 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.
OTHER INSTRUMENTS may include securities of closed-end investment companies
and real estate-related investments.
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 high total return through a combination of current income
and capital appreciation. 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, 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 1995, the group fee rate was .3186 %. The individual fund
fee rate is .20%. The basic fee rate for fiscal 1995 was .5186 %.
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 did 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 1995 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 (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 issuers
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 a fee equal to 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
1995, the fund paid FSC fees equal to .31 % 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. A broker-dealer may use a portion of the
commissions paid by the fund to reduce the fund's custodian or transfer
agent fees.
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 1995 was 98 %. This
rate varies from year to year. High turnover rates increase transaction
costs and may increase taxable capital gains. FMR considers those 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:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid 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.
(solid bullet) Number of Fidelity mutual
funds: over 200
(solid bullet) Assets in Fidelity mutual
funds: over $250 billion
(solid bullet) Number of shareholder
accounts: over 22 million
(solid 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.
(solid 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.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid 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.
(solid 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.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(solid 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:
(small solid bullet) Mail in an application with a check, or
(small solid 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) (small solid bullet) Exchange from another (small solid 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.
(small solid 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) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to "Fidelity
check payable to Utilities Fund." Indicate
"Fidelity Utilities Fund." your fund account
Mail to the address number on your check
indicated on the and mail to the address
application. printed on your account
statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid 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) (small solid bullet) Call 1-800-544-7777 to (small solid bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (small solid bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify"Fidelity Utilities
Bank Routing Fund" and include your
#021001033, account number and
Account #00163053. your name.
Specify "Fidelity
Utilities Fund" and
include your new
account number and
your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid 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:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid 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:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid 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 (small solid bullet) Maximum check request:
except retirement $100,000.
(small solid bullet) For Money Line transfers to
All account types your bank account; minimum:
$10; maximum: $100,000.
(small solid 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 (small solid 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.
(small solid bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (small solid 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, (small solid bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid 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.
(small solid 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.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid 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.
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 periodic 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
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid 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:
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.
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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments and these taxes generally will reduce the fund's
distributions. However, an offsetting tax credit or deduction may be
available to you. If so, your tax statement will show more taxable income
or capital gains than were actually distributed by the fund, but will also
show the amount of the available offsetting credit or deduction.
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.
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. If quotations are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
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. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow 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 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:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid 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
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:
(small solid 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.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid 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.
(small solid 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.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts, accounts using regular investment plans,
or if total assets in Fidelity funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
maintained by FSC or FBSI which are registered under the same social
security number or which list the same social security number for the
custodian of a Uniform Gifts/Transfers to Minors Act account.
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:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid 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.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid 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.
(small solid 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.
(small solid 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.
(small solid 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 FUND
A FUND OF FIDELITY DEVONSHIRE TRUST
STATEMENT OF ADDITIONAL INFORMATION
MARCH 22, 1995
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 22, 1995). Please retain this
document for future reference. The fund's financial statements and
financial highlights, included in the Annual Report for the fiscal year
ended January 31, 1995 , are 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-395
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 purchase interests in real
estate investment trusts that are not readily marketable or interests in
real estate limited partnerships that are not listed on an exchange or
traded on the NASDAQ National Market System if, as a result, the sum of
such interests and other investments considered illiquid under limitation
(v) would exceed 10% of the fund's net assets.
(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 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.
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 United States 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.
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.
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
United States 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.
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, emerging market
securities, 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 was 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 it 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, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. 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. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well delays and costs to the fund in
connection with bankruptcy proceedings), it is the fund's current policy to
engage in repurchase agreement transactions with 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.
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).
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, overbuilding, and the management skill and
creditworthiness of the issuer. Real estate-related instruments may also be
affected by tax and regulatory requirements, such as those relating to the
environment.
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.
INTERFUND BORROWING PROGRAM. Pursuant to an exemptive order issued by
the SEC, the fund has received permission 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. 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
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.
FOREIGN INVESTMENTS. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not subject
to the disclosure and reporting requirements of the U.S. securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable
to those applicable to U.S. issuers. Further, economies of particular
countries or areas of the world may differ favorably or unfavorably from
the economy of the United States.
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.
Foreign markets may offer less protection to investors than U.S. markets.
It is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may expose the fund to increased risk
in the event of a failed trade or the insolvency of a foreign
broker-dealer, and may involve substantial delays. In addition, the costs
of foreign investing, including withholding taxes, brokerage commissions
and custodial costs, are generally higher than for U.S. investors. In
general, there is less overall governmental supervision and regulation of
securities exchanges, brokers, and listed companies than in the United
States. It may also be difficult to enforce legal rights in foreign
countries.
The fund may invest in foreign securities that impose restrictions on
transfer within the United States 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.
The fund may invest in American Depository Receipts and European Depository
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 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 conduct foreign currency
transactions 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. The fund will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to the fund at one rate, while offering a lesser
rate of exchange should the fund desire to resell that currency to the
dealer. Forward contracts are generally 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 for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by the fund. The fund may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes.
When the fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." The fund may 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.
The fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if the fund held investments denominated in
Deutschemarks, the fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if the fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause the fund to assume the risk of fluctuations in the
value of the currency it purchases.
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. Currency management strategies
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 currency management strategies will
be advantageous to the fund or that it will hedge at an appropriate time.
ASSET-BACKED SECURITIES. Asset-backed securities represent interests in
pools of consumer loans (generally unrelated to mortgage loans) and most
often are structured as pass-through securities. Interest and principal
payments ultimately depend upon payment of the underlying loans by
individuals, although the securities may be supported by letters of credit
or other credit enhancements. The value of asset-backed securities may also
depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the
credit enhancement.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
fund may invest in them if FMR determines they are consistent with the
fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
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 Rule 4.5 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 Composite Index of 500
Stocks (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 OTC 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.
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. If FMR grants investment management authority to the sub-advisers
(see the section entitled "Management Contract"), the sub-advisers are
authorized to place orders for the purchase and sale of portfolio
securities, and will do so in accordance with the policies described below.
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. Generally,
commissions for foreign investments traded 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 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, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute 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 5 and 199 4 ,
the fund's portfolio turnover rates were 98 % and 47 %,
respectively.
For fiscal 199 5 , 199 4 , and 199 3 , the fund paid
brokerage commissions of $ 3,660,956 , $ 1,810,658 , and
$ 1,360,362 , respectively. 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 5 , 199 4 , and
199 3 , the fund paid brokerage commissions of $ 607,881 ,
$427,299 , and $ 363,908 , respectively, to FBSI. During fiscal
199 5 , this amounted to approximately 16.6 % of the aggregate
brokerage commissions paid by the fund for transactions involving
approximately 32.53 % 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 fiscal 199 5 and 199 4 , no brokerage commissions
were paid to FBSL by the fund. During fiscal 1993, the fund paid
brokerage commissions of $7,468 to FPSL or 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 and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
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 procedures believed to be appropriate and equitable for 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
securities 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 two-fold 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.
PERFORMANCE
The fund may quote 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 return
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 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 (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. For the fund's investments denominated in
foreign currencies, income and expenses are calculated first in their
respective currencies, and are then converted to U.S. dollars, either when
they are actually converted or at the end of the 30-day or one month
period, whichever is earlier. Capital gains and losses generally are
excluded from the calculation as are gains and losses from currency
exchange rate fluctuations.
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.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives.
However, the fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates the
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
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 total 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 total 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 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 31, 199 5 , the 13-week and 39-week
long-term moving averages were $13.08 and $13.03 ,
respectively.
HISTORICAL FUND RESULTS. The following table shows the fund's total returns
for periods ended January 31, 199 5 .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Five Life of One Five Life of
Year Years Fund* Year Years Fund*
Utilities Fund -6.38 % 10.24 % 11.93 % -6.38 % 62.85 % 124.72 %
</TABLE>
* From November 27, 1987 (commencement of operations).
The following table shows the income and capital elements of the fund's
cumulative total return. The table compares the fund's return to the record
of the Standard & Poor's Composite Index of 500 Stocks (S&P 500(registered
trademark)), 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 CPI information is as of the month end closest to the
initial investment date for each fund. The S&P 500, DJIA, S&P Utilities,
and DJUA 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, 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. Figures for the S&P 500, S&P Utilities, DJIA, and DJUA are based
on the prices of unmanaged groups of stocks and, unlike the fund's 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) to
January 31, 199 5 , a hypothetical $10,000 investment in Utilities
would have grown to $ 22,472 , assuming all distributions were
reinvested. This was a period of fluctuating interest rates, bond prices,
and stock prices and the figures below 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Utilities Fund INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P S&P DJIA DJUA CPI**
Ended Initial Reinvested Reinvested Value 500 Utilities
January 31 $10,000 Dividend Capital Gain
Investment Income Distributions
Distributions
1995 $ 13,460 $ 5,862 $ 3,140 $ 22,472 $ 24,28 $ 23,209 $24,994 $ 18,156 $13,024
5
1994 15,840 5,928 2,237 24,004 24,158 23,526 25,170 19,782 12,669
1993 13,940 4,511 1,664 20,115 21,402 20,744 20,360 18,753 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 12,551 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
$ 18,516 . 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 $ 4,300 for
dividends and $ 2,220 for capital gains distributions. Tax
consequences of different investments have not been factored into the above
figures. During the period November 27, 1987 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 for the S&P 500 for the year ended January 31, 1995 was
2.81 %, 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, 1995 . The S&P yield is calculated differently from the
fund's yield. For example, 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 stock, bond, and money market mutual fund
performance indices prepared by Lipper or other organizations. When
comparing these indices, it is important to remember the risk and return
characteristics of each type of investment. For example, while stock mutual
funds may offer higher potential returns, they also carry the highest
degree of share price volatility. Likewise, money market funds may offer
greater stability of principal, but generally do not offer the higher
potential returns from stock mutual funds.
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.
The fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, the
fund may offer greater liquidity or higher potential returns than CDs, the
fund does not guarantee your principal or your return, and fund shares are
not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's 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 or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
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. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
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, 1995 , FMR advised over $ 25 billion in
tax-free fund assets, $ 70 billion in money market fund assets,
$ 155 billion in equity fund assets, $ 35 billion in
international fund assets, and $ 20 billion in Spartan fund assets.
The fund may reference the growth and variety of money market mutual funds
and the adviser's innovation and participation in the industry. The equity
funds under management 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. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
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 19 95 : New
Year's Day (observed), President's Day (observed), Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Although FMR expects the same holiday schedule 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
Securities and Exchange Commission (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. In addition, trading in some of the
fund's portfolio securities may not occur on days when the fund is open for
business.
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.
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. Short-term capital gains are
distributed as dividend income. 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.
As of January 31, 199 5 , the fund hereby designates approximately
$ 2,088,000 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 Fund. Fidelity Corporate
Trust: Adjustable Rate preferred Portfolio had a capital loss carryover of
approximately $25,514,000 (subject to certain limitations) available to
offset future capital gains in Fidelity Utilities Fund, to the extent
provided by regulations.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments may
also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50% of the
fund's total assets are invested in securities of foreign issuers, the fund
may elect to pass through foreign taxes paid and thereby allow shareholders
to take a credit or deduction on their individual tax returns.
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. Generally, the fund will
elect to mark-to-market any PFIC shares. Unrealized gains will be
recognized as income for tax purposes and must be distributed to
shareholders as dividends.
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, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether the fund is suitable to their particular tax
situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
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 institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
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 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 is a member of 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 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, a Trustee and member of the
Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, One Harborside, 680 Steamboat Road, Greenwich, CT,
Trustee, is Executive-in-Residence (1995) at Columbia University Graduate
School of Business and a financial consultant. From 1987 to January 1995,
Mr. Kirk was a Professor at Columbia University Graduate School of
Business. 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, Vice Chairman of the Board of
Trustees of the Greenwich Hospital Association, and as a Member of the
Public Oversight Board of the American Institute of Certified Public
Accountants' SEC Practice Section (1995).
*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 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) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield 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, 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),
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). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is 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).
WILLIAM J. HAYES, Vice President (1994), is Vice President of Fidelity's
equity funds; Senior Vice President of FMR; and Managing Director of FMR
Corp.
ROBERT H. MORRISON, Manager of Security Transactions of Fidelity's equity
funds is Vice President of FMR.
JOHN MURESIANU is manager and Vice President of Utilities, which he has
managed since December 1992. Mr. Muresianu also manages Select(registered
trademark) Utilities Growth. Previously, he managed Select Natural Gas and
served as a research analyst following the natural gas and life insurance
industries, as well as Canadian stocks. Mr. Muresianu has also been a
pension fund manager with the company. He joined Fidelity in 1986.
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
STEPHEN P. JONAS, Treasurer (1995), is Treasurer and Vice President of
FMR (1993). Mr. Jonas is also Treasurer of FMR Texas Inc. (1994), Fidelity
Management & Research (U.K.) Inc. (1994), and Fidelity Management &
Research (Far East) Inc. (1994). Prior to becoming Treasurer of FMR, Mr.
Jonas was Senior Vice President, Finance - Fidelity Brokerage Services,
Inc. (1991-1992) and Senior Vice President, Strategic Business Systems -
Fidelity Investments Retail Marketing Company (1989-1991).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity Funds, Mr. Rush was
Chief Compliance of Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation of
each current non-interested trustee of the fund for his or her services as
trustee for the fiscal year ended January 31, 1995 .
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Aggregate
Pension or
Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from
Benefits as Part of
Retirement from from the Fund
the Fund Fund Expenses
the Fund Complex*
Accrued from the Complex*
Fund Complex*
Ralph F. Cox $ 607 $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 582 5,200 52,000 122,000
Richard J. Flynn 750 0 52,000 154,500
E. Bradley Jones 600 5,200 49,400 123,500
Donald J. Kirk 609 5,200 52,000 125,000
Gerald C. McDonough 610 5,200 52,000 125,000
Edward H. Malone 623 5,200 44,200 128,000
Marvin L. Mann 609 5,200 52,000 125,000
Thomas R. Williams 616 5,200 52,000 126,500
</TABLE>
* Information is as of December 31, 1994 for the 206 funds in the
complex.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payment s is not secured or
funded. Trustees become eligible if, at the time of retirement, they have
served on the Board for at least five years. Currently, Messrs. Ralph S.
Saul, William R. Spaulding, Bertram H. Witham, and David L. Yunich, all
former non-interested Trustees, receive retirement benefits under the
program .
As of January 31, 1995, the Trustees and officers of the fund owned, in
the aggregate, less than 1% of the fund's total outstanding shares. Also,
as of that date, Charles Schwab & Co., Inc./Mutual Fund Department, San
Francisco, CA, was known by the fund to own of record or beneficially
approximately 5.8% of the fund's total outstanding shares.
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,
compensates all officers of the fund and 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
laws; 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 the typesetting, printing, and
mailing of its proxy materials to shareholders, legal expenses, and the
fees of the custodian, auditor, and non-interested Trustees. Although the
fund's current management contract provides that the fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders, the trust, on behalf of
the fund 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 and the fund's proportionate share of
insurance premiums and Investment Company Institute dues. 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 September
1, 1994, which was approved by shareholders on August 3, 1994.
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 below on the left . The schedule below o n the
right shows the effective fee rate at various asset levels, which
is the result of cumulatively applying the annualized rates on the
left . For example, the effective annual fee rate at $ 278 billion
of group net assets - their approximate level for January 1995 -
was .3186 %, which is the weighted average of the respective fee
rates for each level of group net assets up to $ 278 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>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
48 - 66 .3250 300 .3175
66 - 84 .3200 325 .3153
84 - 102 .3150 350 .3133
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 .2850
</TABLE>
Prior to September 1, 1994, the group fee rate was based on a schedule
with breakpoints ending at .3000% for average group assets in excess of
$174 billion. The group fee rate breakpoints shown above for average group
assets in excess of $138 billion and under $228 billion were voluntarily
adopted by FMR on January 1, 1992. The additional breakpoints shown above
for average group assets in excess of $228 billion were voluntarily adopted
by FMR on November 1, 1993. The fund's current management contract reflects
these extensions of the group fee rate schedule.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints. The revised group fee
rate schedule provides for lower management fee rates as FMR's assets under
management increase. The revised group fee rate schedule is identical to
the above schedule for average group assets under $210 billion. For average
group assets in excess of $210 billion, the group fee rate schedule
voluntarily adopted by FMR is as follows:
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
138 - $174 billion .3050% $150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
</TABLE>
350 .3113
375 .3090
400 .3067
The individual fund fee rate is .20%. Based on the average net assets of
the funds advised by FMR for January 1995, the annual basic fee would be
calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
. 3186 % + .20% = . 5186 %
</TABLE>
One twelfth (1/12) of this annual basic fee rate is applied to the
fund's net assets averaged for the most recent 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 (the Index) over the same
period. The fund's performance period commenced on December 1, 1993.
Starting with the twelfth month (November 1994), the performance adjustment
took effect. Each month subsequent to November 1994, a new month will be
added to the performance period until the performance period equals 36
months. Thereafter, the performance period consists of the most recent
month plus the previous 35 months. Each percentage point of difference,
calculated to the nearest .01%, (up to a maximum difference of (plus/minus)
7.50) is multiplied by a performance adjustment rate of .02%. Thus, the
maximum annualized adjustment rate is (plus/minus) .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 will be 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 Index is based on change in value and is adjusted for any
cash distributions from the companies whose securities compose the Index.
Because the adjustment to the basic fee is based on the fund's
performance compared to the investment record of the 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 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, 1995, 1994, and 1993, FMR
received $6,430,180, $7,340,380, and $4,208,341, respectively, for its
services as investment adviser to the fund. These fees, which include the
performance adjustment that went into effect November 1, 1994, were
equivalent to .53%, .53%, and .53%, respectively, of the average net assets
of the fund for each of those years. For fiscal 1995, the upward
performance adjustment amounted to $90,323.
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase the fund's total returns and yield and repayment of
the reimbursement by the fund will lower its total returns and yield.
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 distribution plan expenses and
custodian fees attributable to investments in foreign securities.
SUB-ADVISERS. FMR has entered into sub-advisory agreements with FMR U.K.
and FMR Far East . Pursuant to the sub-advisory agreements, FMR
may receive investment advice and research services outside the United
States from the sub-advisers. FMR may also 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.
Currently, FMR U.K. and FMR Far East each focus on issuers in countries
other than the United States such as those in Europe, Asia, and the Pacific
Basin.
FMR U.K. and FMR Far East , which were organized in 1986 are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays the
fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far East
fees 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.
For providing discretionary investment management and executing portfolio
transactions, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
monthly management fee rate (including any performance adjustment)
with respect to the fund's average net assets managed by the sub-adviser on
a discretionary basis.
For providing investment advice and research services, the fees paid to the
sub-advisers for fiscal 199 5 , 199 4 , and 199 3 were as
follows:
Fiscal Year FMR U.K. FMR Far East
199 5 $ 49,928.0 $ 45,690.0
199 4 $ 18,049.8 $ 28,583.9
199 3 $ 8,622.7 $ 12,018.0
DISTRIBUTION AND SERVICE PLAN
The Trustees have approved a Distribution and Service Plan on behalf of
the fund (the Plan) pursuant to 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 a fund except
pursuant to a plan approved on behalf of the fund under the Rule. The Plan,
as approved by the Trustees, allows 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 of management fees by the fund to FMR is
deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the Plan. The P lan 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 P lan
provides that FMR may use its resources, including its management fee
revenues, to make payments to third parties that assist in selling
shares of the fund, or to third parties, including banks, that render
shareholder support services.
No third party payments were made in fiscal 1995.
Prior to approving the Plan, 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 fund
shares may result. Furthermore, 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 Fidelity Utilities Fund on
November 17 , 199 3 .
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. 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.
The fund may execute portfolio transactions with , and purchase
securities issued by , depository institutions that receive payments
under the P lan. No preference for the instruments of such depository
institutions will be shown in the selection of investments.
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 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 , 199 5 , 199 4 , and
199 3 were $ 3,049,359 , $ 3,616,048 , and
$ 1,959,848 , 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 $3,220,921 and $3,679,010 for the
fiscal years ended January 31, 1995 and 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. The fee rates
for pricing and bookkeeping services 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 199 5 , 199 4 , and 199 3
were $ 523,195 , $ 574,301 , and $ 392,149 , respectively.
FSC also receives fees for administering the fund's securities lending
program. Securities lending fees are based on the number and duration of
individual securities loans. Securities lending fees for fiscal
199 5 , 199 4 , and 199 3 were $ 4,835 ,
$ 1,700 , and $2,545 , 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.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Utilities Fund, formerly known as 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 March 4, 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: Spartan
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 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 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 value of
net asset value 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 may 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 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 L.L.P., 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 financial statements and financial highlights for the fiscal
year ended January 31, 199 5 are included in the fund's Annual
Report, which is a separate report supplied with this Statement of
Additional Information. The fund's financial statements and financial
highlights are 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.
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 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.
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 categories.
FIDELITY MID-CAP STOCK FUND
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER PROSPECTUS SECTION
<TABLE>
<CAPTION>
<S> <C>
1................................... Cover Page
...
2a.................................. Expenses
..
b, Contents; The Fund at a Glance; Who May Want to
c............................... Invest
3a.................................. Financial Highlights
..
*
b...................................
c, d............................. Performance
4a i.............................. Charter
The Fund at a Glance; Investment Principles and
ii............................... Risks
Investment Principles and Risks
b...................................
Who May Want to Invest; Investment Principles and
c................................... Risks
5a.................................. Charter
..
b Cover Page; The Fund at a Glance; Charter; Doing
i.............................. Business with Fidelity
Charter
ii..............................
Expenses; Breakdown of Expenses
iii.............................
Charter
c..................................
Charter; Breakdown of Expenses
d..................................
Cover Page; Charter
e.................................
Expenses
f..................................
g i.............................. Charter
*
ii...............................
5A................................. Performance
.
6a Charter
i.................................
How to Buy Shares; How to Sell Shares; Transaction
ii................................ Details; Exchange Restrictions
Charter
iii................................
Charter
b..................................
Transaction Details; Exchange Restrictions
c..................................
*
d..................................
Doing Business with Fidelity; How to Buy Shares;
e.................................. How to Sell Shares; Investor Services
f, Dividends, Capital Gains, and Taxes
g..............................
7 Cover Page; Charter
a..................................
Expenses; 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................................... *
...
</TABLE>
* Not Applicable
FIDELITY MID-CAP STOCK FUND
CROSS REFERENCE SHEET
(continued)
FORM N-1A
ITEM NUMBER STATEMENT OF ADDITIONAL INFORMATION SECTION
<TABLE>
<CAPTION>
<S> <C>
10, Cover Page
11.............................
12.................................. Description of the Trust
..
13a - Investment Policies and Limitations
c............................
Portfolio Transactions
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 .............................. *
Distribution and Service Plan
f................................
*
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
..
</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.
To learn more about the fund and its investments, you can obtain a copy
of the fund's most recent financial report and portfolio listing, or a copy
of the Statement of Additional Information (SAI) dated March 22, 1995. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, call Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
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.
MCS-pro-395
Mid-Cap Stock is a growth fund. It seeks to increase the value of your
investment over the long term by investing mainly in equity securities of
companies with medium market capitalizations.
FIDELITY
MID-CAP
STOCK
FUND
PROSPECTUS
MARCH 22, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
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: Long-term growth of capital (increase in the value of the fund's
shares). As with any mutual fund, there is no assurance that the
fund will achieve its goal.
STRATEGY: Invests mainly in equity securities of companies with medium
market capitalizations.
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 may help
choose investments for the fund.
SIZE: As of January 31, 1995, the fund had over $138 million 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 to focus on medium capitalization
stocks in search of above average returns. A company's market
capitalization is the total market value of its outstanding common stock.
The value of the fund's investments will vary from day to day, and
generally reflect market conditions, interest rates, and other company,
political, and economic news. In the short-term, stock prices can fluctuate
dramatically in response to these factors. The securities of small, less
well-known companies may be more volatile than those of larger companies.
Over time, however, stocks have shown greater growth potential than other
types of securities. When you sell your shares, they may be
worth more or less than what you paid for them. By itself, the fund does
not constitute a balanced investment plan.
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. Mid-Cap
Stock is in the GROWTH
category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(solid bullet) INCOME Seeks income by
investing in bonds.
(solid bullet) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(right arrow) 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 page for more information about these fees.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Exchange fee None
Annual account maintenance fee
(for accounts under $2,500) $12.00
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 financial 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
1.63%. All numbers are annaulized.
Management fee .62%
12b-1 fee None
Other expenses .99%
Total fund operating expenses 1.61
%
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 $ 16
After 3 years $ 51
After 5 years $ 88
After 10 years $ 19
1
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 is included in the fund's Annual Report and has
been audited by Coopers & Lybrand L.L.P., independent accountants. Their
report on the financial statements and financial highlights is included in
the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the fund's Statement
of Additional Information.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S> <C>
35.Year ended January 31 1995C
36.Net asset value, beginning of period $ 10.00
37.Income from Investment Operations
38. Net investment income .00
39. Net realized and unrealized gain (loss) on investments .92
40. Total from investment operations .92
41.Less Distributions
42. From net realized gain (.14)
43.Total Distributions $ (.14)
44.Net asset value, end of period $ 10.78
45.Total returnB 9.27%
46.RATIOS AND SUPPLEMENTAL DATA
47.Net assets, end of period (000 omitted) $ 138,167
48.Ratio of expenses to average net assets 1.61%A
49.Ratio of expenses to average net assets before expense reductions 1.63%A
50.Ratio of net investment income to average net assets (.03)%
A
51.Portfolio turnover rate 190%A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN AND FOR PERIODS LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
C FROM MARCH 29, 1994 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31,
1995.
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
table below shows the fund's performance over the past fiscal period
compared to two measures: investing in a broad selection of stocks ( S&P
MidCap 400 (registered trademark)), and not investing at all (inflation,
or CPI).
CUMULATIVE TOTAL RETURNS
Fiscal period Life
ended
of
January 31, 1995 fund
A
Mid-Cap Stock 9.27
%
S&P MidCap -2.47
400 %
Consumer Price 2.11
Index %
A FROM MARCH 29, 1994
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. Average annual total returns covering
periods of less than one year assume that performance will remain constant
for the rest of the year.
S&P MIDCAP 400(registered trademark) is the Standard & Poor's MidCap 400
Index, a widely recognized, unmanaged index of mid - cap common stock
prices. The S&P MidCap 400 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.
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 ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF FUTURE
PERFORMANCE.
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.
(checkmark)
THE FUND IN DETAIL
CHARTER
MID-CAP STOCK 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 March 4, 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.), in London, England, and Fidelity Management & Research
(Far East) Inc. (FMR Far East), in Tokyo, Japan, assist FMR with
foreign investments.
Jennifer Uhrig manages Mid-Cap Stock, which she has managed since
commencement. Previously, Ms. Uhrig managed Select Retail, Select
Developing Communication, and Select Telecommunications. Ms. Uhrig joined
Fidelity in 1987.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation ( 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 FMR, FMR Far East, and FMR U.K.
Through ownership of voting common stock, members of the Edward C.
Johnson 3d family form a controlling group with respect to FMR Corp.
Changes may occur in the Johnson family group, through death or
disability, which would result in changes in each individual family
member's holding of stock. Such changes could result in one or more family
members becoming holders of over 25% of the stock. FMR Corp. has received
an opinion of counsel that changes in the composition of the Johnson family
group under these circumstances would not result in the termination of the
fund's management or distribution contracts and, accordingly, would not
require a shareholder vote to continue operation under those contracts.
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 LONG-TERM GROWTH OF CAPITAL by investing primarily in equity
securities of companies with medium market capitalizations. FMR
normally invests at least 65% of the fund's total assets in these
securities. The fund has the flexibility, however, to invest the balance
in other market capitalizations and security types.
Medium market capitalization companies are those whose market
capitalization falls within the capitalization range of the S&P MidCap 400
at the time of the fund's investment. Companies whose capitalization falls
outside this range after purchase continue to be considered
medium-capitalized for purposes of the 65% policy. As of January 31,
199 5 , the S&P MidCap 400 included companies with capitalizations of
between approximately $ 49 million and $ 10 billion.
Investing in medium capitalization stocks may involve greater risk
than investing in large capitalization stocks, since they can be subject to
more abrupt or erratic movements. However, they tend to involve less risk
than stocks of small capitalization companies, which may have more limited
product lines, markets, or financial resources.
The value of the fund's domestic and foreign investments varies in
response to many factors. Stock values fluctuate in response to the
activities of individual companies, and general market and economic
conditions. Investments in foreign securities may involve risks in addition
to those of U.S. investments, including increased political and economic
risk, as well as exposure to currency fluctuations.
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. Also,
as a mutual fund, the fund seeks to spread investment risk by diversifying
its holdings among many companies and industries. Of course, when you
sell your shares of the fund , 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. The fund also reserves the right to invest without limitation
in preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.
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. A complete listing of the fund's policies
and limitations and more detailed information about the fund's investments
is contained in the fund's SAI. 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. Current holdings and recent investment strategies
are described in the fund's financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
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. Although equity
securities have a history of long-term growth in value, their prices
fluctuate based on changes in a company's financial condition and on
overall market and economic conditions. Smaller companies are especially
sensitive to these factors.
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. In
general, bond prices rise when interest rates fall, and vice versa.
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 , or they may
already be in default. 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 on page 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 1995, and are presented as a percentage of
total security investments. These percentages are historical and do not
necessarily indicate the fund's current or future debt holdings.
FISCAL 1995 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 1.55% AA 1.55%
Upper-medium grade A A
Medium grade Baa -- BBB --
LOWER QUALITY
Moderately speculative Ba -- BB --
Speculative B -- B --
Highly speculative Caa -- CCC --
Poor quality Ca -- CC --
Lowest quality, no interest C C
In default, in arrears -- D --
1.55% 1.55%
A FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF
THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT. THE DOLLAR-WEIGHTED AVERAGE
OF DEBT SECURITIES NOT RATED DIRECTLY OR INDIRECTLY BY MOODY'S OR S&P
AMOUNTED TO 0%. THIS MAY INCLUDE SECURITIES RATED BY OTHER NATIONALLY
RECOGNIZED RATING SERVICES, AS WELL AS UNRATED SECURITIES. REFER
TO THE
FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE
DISCUSSION
OF THESE RATINGS.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR. The fund currently intends to limit its
investments in lower than Baa-quality debt securities to 35% of its
assets.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign
currencies, and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These include
risks relating to political or economic conditions in foreign countries,
fluctuations in foreign currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and the potentially less stringent
investor protection and disclosure standards of foreign markets.
Additionally, governmental issuers of foreign securities may be unwilling
to repay principal and interest when due, and may require that the
conditions for payment be renegotiated. All of these factors can 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, 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.
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 some illiquid securities and some 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.
OTHER INSTRUMENTS may include securities of closed-end investment
companies and real estate-related investments.
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 long-term growth of capital. 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 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 MidCap 400.
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 1995, the group fee rate was .3186 %. The individual fund
fee rate is .30%. The basic fee rate for fiscal 1995 was .6186%.
THE PERFORMANCE ADJUSTMENT rate is calculated monthly by comparing the
fund's performance to that of the S&P MidCap 400 over the most recent
36-month period. The performance adjustment took effect on March 1, 1995.
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 ".20%.
The total management fee rate for fiscal 1995 was .62% (annualized).
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 MidCap
400 (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 issuers
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 a fee equal to 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. I n fiscal
1995, the fund paid FSC fees equal to .09 % of its average net assets
on an annualized basis.
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. A broker-dealer may use a portion of the
commissions paid by the fund to reduce the fund's custodian or transfer
agent fees.
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 annualized portfolio turnover rate for fiscal 1995 was
190 %. 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:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid 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.
(solid bullet) Number of Fidelity mutual
funds: over 210
(solid bullet) Assets in Fidelity mutual
funds: over $250 billion
(solid bullet) Number of shareholder
accounts: over 22 million
(solid 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.
(solid 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.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid 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.
(solid 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.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(solid 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:
(small solid bullet) Mail in an application with a check, or
(small solid 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) (small solid bullet) Exchange from another (small solid 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.
(small solid 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) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to "Fidelity
check payable to Mid-Cap Stock Fund."
"Fidelity Mid-Cap Stock Indicate your fund
Fund." Mail to the account number on
address indicated on your check and mail to
the application. the address printed on
your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid 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) (small solid bullet) Call 1-800-544-7777 to (small solid bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (small solid bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(small solid bullet) Wire within 24 hours to: #021001033,
Bankers Trust Account #00163053.
Company, Specify "Fidelity
Bank Routing Mid-Cap Stock Fund"
#021001033, and include your
Account #00163053. account number and
Specify "Fidelity your name.
Mid-Cap Stock Fund"
and include your new
account number and
your name.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid 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:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid 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:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid 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 (small solid bullet) Maximum check request:
except retirement $100,000.
(small solid bullet) For Money Line transfers to
All account types your bank account; minimum:
$10; maximum: $100,000.
(small solid 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 (small solid 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.
(small solid bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (small solid 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, (small solid bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid 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.
(small solid 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:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid 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 periodic 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
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid 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 and
December. Capital gains are 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:
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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on
the fund and its investments and these taxes generally will reduce the
fund's distributions. However, an offsetting tax credit or deduction may be
available to you. If so, your tax statement will show more taxable income
or capital gains than were actually distributed by the fund, but will also
show the amount of the available offsetting credit or deduction.
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.
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. If quotations are not
readily available, or if the values have been materially affected by
events occurring after the closing of a foreign market, assets are
valued by a method that the Board of Trustees believes accurately reflects
fair value.
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. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow 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 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:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid 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 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:
(small solid 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.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid 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.
(small solid 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.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts, accounts using regular investment plans,
or if total assets in Fidelity funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
maintained by FSC or FBSI which are registered under the same social
security number or which list the same social security number for the
custodian of a Uniform Gifts/Transfers to Minors Act account.
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:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid 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.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid 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.
(small solid 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.
(small solid 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.
(small solid 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 MID-CAP STOCK FUND
A FUND OF FIDELITY DEVONSHIRE TRUST
STATEMENT OF ADDITIONAL INFORMATION
MARCH 22, 1995
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 22, 1995). Please retain this
document for future reference. The fund's financial statements and
financial highlights, included in the Annual Report for the fiscal year
ended January 31, 1995, are 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 Corp. (FDC)
TRANSFER AGENT
Fidelity Service Co. (FSC)
MCS -ptb- 395
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 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 considered 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;
(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.
(9) The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
investment objectives, policies, and limitations as the fund.
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 purchase interests in real
estate investment trusts that are not readily marketable or interests
in real estate limited partnerships that are not listed on an
exchange or traded on the NASDAQ National Market System if, as a
result, the sum of such interests and other investments considered illiquid
under limitation (iv) would exceed 10% of the fund's net assets.
(vi) The fund does not currently intend to lend assets other than
securities to other parties, except by (i) 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 (ii) 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 purchase warrants, valued at the
lower of cost or market, in excess of 5% of the fund's net assets. Warrants
acquired by the fund in units or attached to securities are not subject to
this restriction.
(x) The fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund.
For the fund's limitations on futures and options transactions, see the
section entitled "Limitations on Futures and Options Transactions"
beginning on page 8 .
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.
LOWER- QUALITY 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- quality securities that defaulted
rose significantly above prior levels, although the default rate decreased
in 1992 and 1993 .
The market for lower- quality debt securities may be thinner and less
active than that for higher- quality debt securities, which can
adversely affect the prices at which the former are sold. If market
quotations are not available, lower- quality 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- quality debt securities and the fund's ability to dispose of
these securities.
Since the risk of default is higher for lower- quality 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 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 to 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 United States 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. For example,
if the fund agreed to pay fixed rates in exchange for floating rates while
holding fixed-rate bonds, the swap would tend to decrease the fund's
exposure to long-term 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.
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.
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 could 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 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
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.
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
United States 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.
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, emerging market
securities, 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 was 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 it 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 sell that security back to
the original seller at an agreed-upon price. 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. While
it does not presently appear possible to eliminate all risks from these
transactions (particularly the possibility that the value of the
underlying security will be less than the resale price, as well
as delays and costs to the fund in connection with bankruptcy
proceedings ), it is the fund's current policy to engage in
repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the 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.
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 a 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).
REAL ESTATE-RELATED INSTRUMENTS include real estate investment
trusts, commercial and residential mortgage-backed securities, and real
estate financings. Real estate-related instruments are sensitive to factors
such as real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, overbuilding, and the management skill and
creditworthiness of the issuer. Real estate-related instruments may also be
affected by tax and regulatory requirements, such as those relating to the
environment.
SHORT SALES "AGAINST THE BOX." If the fund enters into a short sale against
the box, it will be required to set aside securities equivalent in kind and
amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such
securities while the short sale is outstanding. The fund will incur
transaction costs, including interest expenses, in connection with opening,
maintaining, and closing short sales against the box.
INTERFUND BORROWING PROGRAM. Pursuant to an exemptive order issued by the
SEC, the fund has received permission 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. Loans may be called on
one day's notice. A fund will lend through the program only when the
returns are higher than those available 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. A 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.
FOREIGN INVESTMENTS. Investing in securities issued by companies or
other issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not subject
to the disclosure and reporting requirements of the U.S. securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable
to those applicable to U.S. issuers. Further, economies of particular
countries or areas of the world may differ favorably or unfavorably from
the economy of the United States.
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.
Foreign markets may offer less protection to investors than U.S.
markets. It is anticipated that in most cases the best available market for
foreign securities will be on exchanges or in over-the-counter markets
located outside of the United States. Foreign stock markets, while growing
in volume and sophistication, are generally not as developed as those in
the United States, and securities of some foreign issuers (particularly
those located in developing countries) may be less liquid and more volatile
than securities of comparable U.S. issuers. Foreign security trading
practices, including those involving securities settlement where fund
assets may be released prior to receipt of payment, may expose the fund to
increased risk in the event of a failed trade or the insolvency of a
foreign broker-dealer, and may involve substantial delays. In addition, the
costs of foreign investing, including withholding taxes, brokerage
commissions and custodial costs, are generally higher than for U.S.
investors. In general, there is less overall governmental supervision and
regulation of securities exchanges, brokers, and listed companies than in
the United States. It may also be difficult to enforce legal rights in
foreign countries.
The fund may invest in foreign securities that impose restrictions on
transfer within the United States 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.
The fund may invest in American Depository Receipts and European
Depository 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 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 conduct foreign currency
transactions 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. The fund will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to the fund at one rate, while offering a lesser
rate of exchange should the fund desire to resell that currency to the
dealer. Forward contracts are generally 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 for any purpose consistent
with its investment objective. The following discussion summarizes the
principal currency management strategies involving forward contracts that
could be used by the fund. The fund may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes.
When the fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." The fund may 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.
The fund may enter into forward contracts to shift its investment
exposure from one currency into another. This may include shifting exposure
from U.S. dollars to a foreign currency, or from one foreign currency to
another foreign currency. For example, if the fund held investments
denominated in Deutschemarks, the fund could enter into forward contracts
to sell Deutschemarks and purchase Swiss Francs. This type of strategy,
sometimes known as a "cross-hedge," will tend to reduce or eliminate
exposure to the currency that is sold, and increase exposure to the
currency that is purchased, much as if the fund had sold a security
denominated in one currency and purchased an equivalent security
denominated in another. Cross-hedges protect against losses resulting from
a decline in the hedged currency, but will cause the fund to assume the
risk of fluctuations in the value of the currency it purchases.
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 currency management strategies will depend on FMR's
skill in analyzing and predicting currency values. Currency management
strategies 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 currency management
strategies will be advantageous to the fund or that it will hedge at an
appropriate time.
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 Rule 4.5 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 Composite Index of 500
Stocks (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 (OTC) 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
( 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.
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. If FMR grants investment management authority to the
sub-advisers (see the section entitled "Management Contract"), the
sub-advisers are authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies
described below. 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. Generally, commissions for foreign investments traded 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 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, unless certain
requirements are satisfied. Pursuant to such requirements, the Board of
Trustees has authorized FBSI to execute 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 period March 29, 1994 (commencement of operations)
through January 31 , 1995, the fund's portfolio turnover rate was
190% (annualized) . Because a high turnover rate increases transaction
costs and may increase taxable gains, FMR carefully weighs the anticipated
benefits of short-term investing against these consequences.
For fiscal 1995, the fund paid brokerage commissions of $251,433. The
fund pays both commissions and spreads in connection with the placement of
portfolio transactions; FBSI is paid on a commission basis. During fiscal
1995, the fund paid brokerage commissions of $123,577 to FBSI. During
fiscal 1995, this amounted to approximately 49% of the aggregate brokerage
commissions paid by the fund for transactions involving approximately 57%
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.
There were no fees paid to FBSL in fiscal 1995.
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 and
accounts are managed by the same investment adviser, particularly when
the same security is suitable for the investment objective of more than one
fund or account .
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 procedures believed to be appropriate and equitable
for 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 securities 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 two-fold 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.
PERFORMANCE
The fund may quote 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
return 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.
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 total 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. Average annual returns covering periods of less than one year
are calculated by determining the fund's total return for the period,
extending that return for a full year (assuming that return remains
constant over the year), and quoting the result as an annual return. 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 total 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 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 27 , 1995, the 13-week and
39-week long-term moving averages were $10.66 and $10.32, respectively.
HISTORICAL FUND RESULTS. The fund's cumulative total return for
the period March 29, 1994 (commencement of operations) through January 31,
1995 is 9.27%.
The following table shows the income and capital elements of the fund's
cumulative total return. The table compares the fund's return to the record
of the Standard and Poor's MidCap 400 Index (S&P MidCap 400(registered
trademark)), the Standard and Poor's Composite Index of 500 Stocks (S&P
500(registered trademark)), the Dow Jones Industrial Average (DJIA), and
the cost of living (measured by the Consumer Price Index, or CPI) over the
same period. The CPI information is as of the month end closest to the
initial investment date for each fund. The S&P MidCap 400, 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 medium capitalization stock
prices, 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 any of the
indices, and its investment portfolio may or may not be similar in
composition to the indices. Figures for the S&P MidCap 400, S&P 500, and
DJIA are based on the prices of unmanaged groups of stocks and, unlike the
fund's returns, do not include the effect of paying brokerage commissions
and other costs of investing.
During the period from March 29, 1994 (commencement of
operations) to January 31 , 1995, a hypothetical $10,000 investment
in Mid-Cap Stock would have grown to $10,927, assuming all distributions
were reinvested. This was a period of fluctuating stock prices and the
figures that follow 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FIDELITY MID-CAP STOCK FUND INDICES
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Value of Value of Value of Total S&P S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value MidCap Living**
January 31 $10,000 Dividend Capital Gain 400
Investment Distributions Distributions
1995* $ 10,780 $ 0 $ 147 $ 10,927 $ 9,753 $ 10, 472 $ 10,455 $ 10,211
</TABLE>
* From March 29, 1994 (commencement of operations).
** From month-end closest to initial investment date.
Explanatory Notes: With an initial investment of $10,000 made on
March 29, 1994 , 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
$10,140. 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 $140 for capital gains
distributions. No dividends were paid during the period. Tax consequences
of different investments have not been factored into the above figures.
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 stock, bond, and money market mutual
fund performance indices prepared by Lipper or other organizations. When
comparing these indices, it is important to remember the risk and return
characteristics of each type of investment. For example, while stock mutual
funds may offer higher potential returns, they also carry the highest
degree of share price volatility. Likewise, money market funds may offer
greater stability of principal, but generally do not offer the higher
potential returns from stock mutual funds.
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.
The fund may be compared in advertising to Certificates of Deposit (CDs)
or other investments issued by banks or other depository institutions.
Mutual funds differ from bank investments in several respects. For example,
the fund may offer greater liquidity or higher potential returns than CDs,
the fund does not guarantee your principal or your return, and fund shares
are not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's 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 or other
goals ; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions , fund management,
portfolio composition, investment philosophy, investment techniques,
the desirability of owning a particular mutual fund, and Fidelity
services and products . 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 , 1995, FMR advised over $25 billion in tax-free
fund assets, $70 billion in money market fund assets, $155 billion in
equity fund assets, $35 billion in international fund assets, and $20
billion in Spartan fund assets. The fund may reference the growth and
variety of money market mutual funds and the adviser's innovation and
participation in the industry. The equity funds under management 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. FMR, its subsidiaries, and affiliates
maintain a worldwide information and communications network for the purpose
of researching and managing investments abroad.
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 1995 :
New Year's Day (observed), President ' s Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day. Although FMR expects the same holiday schedule 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. In
addition, trading in some of the fund's portfolio securities may not occur
on days when the fund is open for business.
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 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.
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. Short-term capital gains are
distributed as dividend income. 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.
As of January 31, 1995, the fund hereby designates approximately $13,000
as a capital gain dividend for the purpose of the dividend-paid
deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign governments
may also impose taxes on other payments or gains with respect to foreign
securities. If, at the close of its fiscal year, more than 50%
of the fund's total assets are invested in securities of foreign
issuers, the fund may elect to pass through foreign taxes paid and thereby
allow shareholders to take a credit or deduction on their individual tax
returns.
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. Generally, the fund will
elect to mark-to-market any PFIC shares. Unrealized gains will be
recognized as income for tax purposes and must be distributed to
shareholders as dividends.
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, and shares may be subject to
state and local personal property taxes. Investors should consult their tax
advisers to determine whether the fund is suitable to their particular tax
situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company
organized in 1972. Through ownership of voting common stock and the
execution of a shareholders' voting agreement, Edward C. Johnson 3d,
Johnson family members, and various trusts for the benefit of the Johnson
family form a controlling group with respect to FMR Corp.
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 institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example, all
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
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., 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., 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 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 is a member of 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 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, a Trustee and member of the
Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, One Harborside, 680 Steamboat Road, Greenwich, CT,
Trustee, is Executive-in-Residence (1995) at Columbia University Graduate
School of Business and a financial consultant. From 1987 to January 1995,
Mr. Kirk was a Professor at Columbia University Graduate School of
Business. 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, Vice Chairman of the Board of
Trustees of the Greenwich Hospital Association, and as a member of the
Public Oversight Board of the American Institute of Certified Public
Accountants' SEC Practice Section (1995).
*PETER S. LYNCH, Trustee (1990) is Vice Chairman and Director of FMR
(1992). Prior to May 31, 1990, he was a Director of FMR 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) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield 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, 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),
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). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is 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).
WILLIAM J. HAYES, Vice President (1994), is Vice President of Fidelity's
equity funds; Senior Vice President of FMR; and Managing Director of FMR
Corp.
ROBERT H. MORRISON, Manager of Security Transactions of Fidelity's
equity funds, is Vice President of FMR.
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President - Legal of FMR Corp., and Vice President and
Clerk of FDC.
STEPHEN P. JONAS, Treasurer (1995), is Treasurer and Vice President of
FMR (1993). Mr. Jonas is also Treasurer of FMR Texas Inc. (1994), Fidelity
Management & Research (U.K.) Inc. (1994), and Fidelity Management &
Research (Far East) Inc. (1994). Prior to becoming Treasurer of FMR, Mr.
Jonas was Senior Vice President, Finance - Fidelity Brokerage Services,
Inc. (1991-1992) and Senior Vice President, Strategic Business Systems -
Fidelity Investments Retail Marketing Company (1989-1991).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR
(1994). Prior to becoming Assistant Treasurer of the Fidelity funds, Mr.
Rush was Chief Compliance of Officer of FMR Corp. (1993-1994); Chief
Financial Officer of Fidelity Brokerage Services, Inc. (1990-1993); and
Vice President, Assistant Controller, and Director of the Accounting
Department - First Boston Corp. (1986-1990).
The following table sets forth information describing the compensation
of each current non-interested Trustee of the fund for his or her services
as trustee for the fiscal period ended January 31, 1995. Interested
Trustees and officers of the fund are compensated by FMR.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Non-Interested Trustees Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits Accrued Retirement from from the Fund
the Fund as Part of Fund the Fund Complex*
Expenses from the Complex*
Fund Complex*
Ralph F. Cox $ 23 $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 20 5,200 52,000 122,000
Richard J. Flynn 28 0 52,000 154,500
E. Bradley Jones 23 5,200 49,400 123,500
Donald J. Kirk 23 5,200 52,000 125,000
Gerald C. McDonough 23 5,200 52,000 125,000
Edward H. Malone 23 5,200 44,200 128,000
Marvin L. Mann 25 5,200 52,000 125,000
Thomas R. Williams 23 5,200 52,000 126,500
</TABLE>
* Information is as December 31, 1994 for all 206 funds in the
complex.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payment is not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
On January 31 , 1995, the Trustees and officers of the fund owned,
in the aggregate, less than 1% of the fund's total outstanding shares.
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,
compensates all officers of the fund and all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of the
fund 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 Trustees.
In addition to the management fee payable to FMR and the fees payable to
FSC, the fund pays all of its expenses, without limita tion, that are not
assumed by those parties. The fund pays for the typesetting, printing, and
mailing of its proxy materials to shareholders, legal expenses, and the
fees of the custodian, auditor and non-interested Trustees. Although the
fund's current management contract provides that the fund will pay for
typesetting, printing, and mailing prospectuses, statements of additional
information, notices, and reports to shareholders, the trust, on behalf of
the fund 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, and the fund's proportionate share of
insurance premiums and Investment Company Institute dues. The fund is
also liable for such non-recurring 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 its officers and Trustees with respect to
litigation.
FMR is the fund's manager pursuant to a management contract dated February
17, 1994, which was approved by FMR, then the sole shareholder, on February
24, 1994. 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 MidCap 400 Index (S&P MidCap 400).
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 below on the left. The schedule below on the right
shows the effective annual group fee rate at various asset levels,
which is the result of cumulatively applying the annualized rates on the
left . For example, the effective annual fee rate at $ 279 billion
of group net assets - their approximate level for January 1995 - was
.3186%, which is the weighted average of the respective fee rates for each
level of group net assets up to $279 billion .
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Effective
Group Annualized Net Annual
Assets Rate Assets 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 .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
On August 1, 1994, FMR voluntarily revised the group fee rate schedule, and
added new breakpoints. The revised group fee rate schedule provides for
lower management fee rates as FMR's assets under management increase. The
revised group fee rate schedule is identical to the above schedule for
average group assets under $210 billion. For average group assets in
excess of $210 billion, the group fee rate schedule voluntarily adopted by
FMR is as follows:
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
138 - $174 billion .3050% $150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
</TABLE>
350 .3113
375 .3090
400 .3067
The individual fund fee rate is .30%. Based on the average group net
assets of the funds advised by FMR for January 1995 , the annual
basic fee rate would be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Basic Fee Rate
</TABLE>
. 3186 % + .30% = . 6186 %
One - twelfth of this annual basic fee rate is applied
to the fund's net assets averaged for the most recent
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 MidCap 400 (the Index) over the same
period. The fund's performance period commenced on April 1, 1994.
Starting with the twelfth month, the performance adjustment takes effect.
Each month subsequent to the twelfth month, a new month is added to the
performance period until the performance period equals 36 months.
Thereafter, the performance period consists of the most recent month plus
the previous 35 months. Each percentage point of difference ,
calculated to the nearest 1.0% (up to a maximum difference of "
10.00 ) is multiplied by a performance adjustment rate of .02%. Thus,
the maximum annualized adjustment rate is " .20%. 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 will be 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 Index is based on change in value and is adjusted for
any cash distributions from the companies whose securities compose the
Index.
Because the adjustment to the basic fee is based on the fund's performance
compared to the investment record of the 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 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 period ended January 31, 1995, FMR received
$ 321,245 for its services as investment adviser to the fund. The
basic fee was equivalent to . 62 % (annualized) of the fund's average
net assets for this period.
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase the fund's total returns and repayment of the
reimbursement by the fund will lower its total returns.
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 distribution plan expenses and
custodian fees attributable to investments in foreign securities.
SUB-ADVISERS. FMR has entered into sub-advisory agreements with FMR
U.K. and FMR Far East. Pursuant to the sub-advisory agreements , FMR
may receive investment advice and research services outside the United
States from the sub-advisers. FMR may also 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.
Currently, FMR U.K. and FMR Far East each focus on issuers in countries
other than the United States such as those in Europe, Asia, and the Pacific
Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays the
fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far East
fees 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.
For providing discretionary investment management and executing
portfolio transactions, FMR pays FMR U.K. and FMR Far East a fee equal to
50% of its monthly management fee rate (including any performance
adjustment) with respect to the fund's average net assets managed by the
sub-adviser on a discretionary basis.
For providing investment advice and research services, the fees paid to
FMR U.K. and FMR Far East for fiscal 1995 were $119 and $117,
respectively.
For providing discretionary investment management and executing
portfolio transactions, there were no fees paid to FMR U.K. and FMR Far
East for fiscal 1995.
DISTRIBUTION AND SERVICE PLAN
The Trustees have approved a Distribution and Service Plan on
behalf of the fund (the Plan) pursuant to 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 approved on
behalf of the fund under the Rule. The Plan, as approved by the
Trustees allow s 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 of management fees by the fund to FMR is
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 its 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.
Prior to approving the Plan, the Trustees carefully considered all
pertinent factors relating to the implementation of the Plan , 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 fund 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 FMR, the then sole shareholder of the fund, on
February 24, 1994.
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. 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.
The fund may execute portfolio transactions with , and
purchase securities issued by , depository institutions that receive
payments under the Plan. No preference for the instruments of such
depository institutions will be shown in the selection of investments.
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 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 period ended January 31, 1995 were $364,889. 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 $374,864.
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. The fee rates
for pricing and bookkeeping services 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 1995 were $45,699.
FSC also receives fees for administering the fund's securities lending
program. Securities lending fees are based on the number and duration of
individual securities loans. There were no securities lending fees for
fiscal 1995.
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.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. Fidelity Mid-Cap Stock 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 March 4 , 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: Spartan 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 Utilitie s F und. 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 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 value of
net asset value 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
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 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 L.L.P. , 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 financial statements and financial highlights for the fiscal
period ended January 31, 1995 are included in the fund's Annual Report,
which is a separate report supplied with this Statement of Additional
Information. The fund's financial statements and financial highlights are
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 rate 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 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
d .............................. Performance
4 a i............................. Charter
ii........................... The Fund at a Glance; Investment Principles and
Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment Principles
and Risks
5 a .............................. Charter
b i............................. Cover Page; The Fund at a Glance; Charter; Doing
Business with Fidelity
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g i............................. Charter
.
ii............................ *
..
5A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell Shares;
Transaction Details; Exchange Restrictions
iii.......................... Charter
b ............................. Charter
c .............................. Transactions Details; 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 .............................. Cover Page; Charter
b .............................. Expenses; How to Buy Shares; Transaction Details
c .............................. Sales Charge Reductions and Waivers
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 ............................ Description of the Trust
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a i ............................ FMR, Portfolio Transactions
ii ............................ Trustees and Officers
iii ............................ Management Contract
b ............................ Management Contract
c, d ............................ Contracts with Companies Affiliated with FMR
e ............................ *
f ............................ *
g ............................ *
h ............................ Description of the Trust
i ............................ Contracts with Companies Affiliated with FMR
17 a - 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 a, b ............................ 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.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing, or a copy of
the Statement of Additional Information (SAI) dated March 22, 1995. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, call Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
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.
EQU-pro-395
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-INCOM
E
FUND
PROSPECTUS
MARCH 22, 1995(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
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
KEY FACTS
THE FUND AT A GLANCE
GOAL: Reasonable income. The fund also considers 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 may help
choose investments for the fund.
SIZE: As of January 31, 1995, the fund had over $ 7.4 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 value of the fund's investments and the income they generate will vary
from day to day, and generally reflect market conditions, interest rates,
and other company, political, or economic news both here and abroad. In the
short-term, stock prices can fluctuate dramatically in response to these
factors. Over time, however, stocks have shown greater growth potential
than other types of securities. The prices of bonds generally move in the
opposite direction from interest rates. Investments in foreign securities
may involve risks in addition to those of U.S. investments, including
increased political and economic risk, as well as exposure to currency
fluctuations. When you sell your shares, they may be worth more or less
than what you paid for them. By itself, the fund does not constitute a
balanced investment plan.
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. Equity-Income is
in the GROWTH AND INCOME
category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(solid bullet) INCOME Seeks income by
investing in bonds.
(right arrow) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell, or
hold shares of a fund. See pages and through for an
explanation of how and when these charges apply. Lower sales charges may
be available for accounts over $250,000.
Maximum sales charge on purchases
after December 31, 1995
(as a % of offering price) 2.00%
Maximum sales charge on
reinvested distributions None
Deferred sales charge on redemptions None
Exchange fee None
Annual account maintenance fee
(for accounts under $2,500) $12.00
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 financial 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
.70 %.
Management fee .44 %
12b-1 fee None
Other expenses .25 %
Total fund operating expenses .69 %
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 $ 27
After 3 years $ 42
After 5 years $ 58
After 10 years $ 10
4
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 (for
example, the fund's 2% sales
charge). 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 is included in the fund's Annual Report and has been
audited by Coopers & Lybrand L.L.P., independent accountants. Their
report on the financial statements and financial highlights is included in
the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the fund's Statement
of Additional Information.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
52.Years ended
1986 1987 1988 1989 1990 1991 1992 1993C 1994 1995
January 31
53.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
beginning of
period
54.Income
from
Investment
Operations
55. Net
1.91 1.73 1.54 1.62 1.71 1.46 1.18 1.11D 1.11 1.02
investment
income
56. Net
2.67 4.87 (2.73) 3.39 (.36) (2.48) 4.21 3.27 5.48 (2.12)
realized and
unrealized
gain (loss)
on
investments
57. Total from
4.58 6.60 (1.19) 5.01 1.35 (1.02) 5.39 4.38 6.59 (1.10)
investment
operations
58.Less
Distributions
59. From net
(1.70) (1.70) (1.51) (1.51) (1.75) (1.55) (1.20) (1.08) (1.15) (.98)
investment income
60. From net
(.52) (3.08) (3.92) -- (1.16) (.30) -- -- (.12) (2.22)
realized gain
61. Total
(2.22) (4.78) (5.43) (1.51) (2.91) (1.85) (1.20) (1.08) (1.27) (3.20)
distributions
62.Net asset
$ 28.1 $ 29.9 $ 23.3 $ 26.8 $ 25.2 $ 22.3 $ 26.5 $ 29.8 $ 35.1 $ 30.8
value, end of
1 3 1 1 5 8 7 7 9 9
period
63.Total
18.85 25.66 (4.32) 22.15 4.70% (3.94) 24.61 16.92 22.52 (3.01)
returnA,B
% % % % % % % % %
64.RATIOS AND SUPPLEMENTAL DATA
65.Net assets,
$ 2,36 $ 3,81 $ 3,68 $ 4,40 $ 4,75 $ 3,94 $ 4,42 $ 5,12 $ 6,94 $ 7,43
end of period
2 8 4 0 2 1 1 3 3 9
(000 omitted)
66.Ratio of
.66% .65% .66% .63% .71% .70% .68% .67% .66% .69%E
expenses to
average net
assets
67.Ratio of
.66% .65% .66% .63% .71% .70% .68% .67% .66% .70%E
expenses to
average net
assets before
expense
reductions
68.Ratio of net
7.10% 5.80% 5.50% 6.50% 6.10% 6.18% 4.81% 4.02% 3.55% 3.37%
investment
income to
average net
assets
69.Portfolio
118% 110% 120% 68% 92% 107% 111% 84% 70% 50%
turnover rate
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C AS OF FEBRUARY 1, 1993 THE FUND DISCONTINUED USE OF EQUALIZATION
ACCOUNTING.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR HAS DIRECTED CERTAIN 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 displays calendar-year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods Pas Past Past
ended t 1 5 10
January 31, yea year year
1995 r s s
Equity-Income -3.01 10.71 11.76
% % %
Equity-Income -4.95 10.26 11.53
(load adj.A) % % %
S&P 500 .53 10.79 13.83
% % %
Consumer 2.80 3.36 3.60
Price % % %
Index
CUMULATIVE TOTAL RETURNS
Fiscal periods Pas Past Past
ended t 1 5 10
January 31, yea year year
1995 r s s
Equity-Income -3.01 66.31 203.96
% % %
Equity-Income -4.95 62.99 197.88
(load adj.A) % % %
S&P 500 .53 66.90 265.09
% % %
Consumer 2.80 17.97 42.46
Price % % %
Index
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, 1985. From that date through January 31, 1995, the
fund's total return, including the effect of paying the 2% sales charge,
was 197.88 %. That $10,000 would have grown to $ 29,788 (the
initial investment plus 197.88 % 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 vary widely, while
the returns at left show
long-term growth.
(checkmark)
$10,000 OVER TEN YEARS
Fiscal years 1985 1990 1995
Row: 1, Col: 1, Value: 9800.0
Row: 2, Col: 1, Value: 9807.620000000001
Row: 3, Col: 1, Value: 9774.449999999999
Row: 4, Col: 1, Value: 9770.51
Row: 5, Col: 1, Value: 10290.55
Row: 6, Col: 1, Value: 10433.29
Row: 7, Col: 1, Value: 10485.2
Row: 8, Col: 1, Value: 10497.18
Row: 9, Col: 1, Value: 10238.35
Row: 10, Col: 1, Value: 10574.24
Row: 11, Col: 1, Value: 11023.43
Row: 12, Col: 1, Value: 11399.13
Row: 13, Col: 1, Value: 11647.74
Row: 14, Col: 1, Value: 12389.45
Row: 15, Col: 1, Value: 13080.27
Row: 16, Col: 1, Value: 13017.86
Row: 17, Col: 1, Value: 13057.98
Row: 18, Col: 1, Value: 13235.95
Row: 19, Col: 1, Value: 12757.6
Row: 20, Col: 1, Value: 13479.64
Row: 21, Col: 1, Value: 12846.8
Row: 22, Col: 1, Value: 13399.4
Row: 23, Col: 1, Value: 13536.41
Row: 24, Col: 1, Value: 13345.16
Row: 25, Col: 1, Value: 14636.16
Row: 26, Col: 1, Value: 15066.49
Row: 27, Col: 1, Value: 15331.43
Row: 28, Col: 1, Value: 15137.16
Row: 29, Col: 1, Value: 15047.9
Row: 30, Col: 1, Value: 15467.66
Row: 31, Col: 1, Value: 15929.46
Row: 32, Col: 1, Value: 16380.64
Row: 33, Col: 1, Value: 16016.58
Row: 34, Col: 1, Value: 13204.96
Row: 35, Col: 1, Value: 12620.1
Row: 36, Col: 1, Value: 13126.67
Row: 37, Col: 1, Value: 14003.79
Row: 38, Col: 1, Value: 14658.62
Row: 39, Col: 1, Value: 14481.79
Row: 40, Col: 1, Value: 14682.5
Row: 41, Col: 1, Value: 14852.81
Row: 42, Col: 1, Value: 15694.54
Row: 43, Col: 1, Value: 15663.76
Row: 44, Col: 1, Value: 15349.87
Row: 45, Col: 1, Value: 15802.06
Row: 46, Col: 1, Value: 16082.35
Row: 47, Col: 1, Value: 15926.63
Row: 48, Col: 1, Value: 16079.01
Row: 49, Col: 1, Value: 17106.28
Row: 50, Col: 1, Value: 16953.15
Row: 51, Col: 1, Value: 17282.07
Row: 52, Col: 1, Value: 17926.53
Row: 53, Col: 1, Value: 18353.98
Row: 54, Col: 1, Value: 18410.36
Row: 55, Col: 1, Value: 19606.7
Row: 56, Col: 1, Value: 19845.97
Row: 57, Col: 1, Value: 19604.62
Row: 58, Col: 1, Value: 18563.96
Row: 59, Col: 1, Value: 18812.38
Row: 60, Col: 1, Value: 19081.06
Row: 61, Col: 1, Value: 17910.66
Row: 62, Col: 1, Value: 17939.03
Row: 63, Col: 1, Value: 17951.28
Row: 64, Col: 1, Value: 17276.58
Row: 65, Col: 1, Value: 18389.11
Row: 66, Col: 1, Value: 18314.64
Row: 67, Col: 1, Value: 18053.21
Row: 68, Col: 1, Value: 16651.65
Row: 69, Col: 1, Value: 15446.79
Row: 70, Col: 1, Value: 15137.71
Row: 71, Col: 1, Value: 16087.04
Row: 72, Col: 1, Value: 16405.79
Row: 73, Col: 1, Value: 17205.32
Row: 74, Col: 1, Value: 18412.3
Row: 75, Col: 1, Value: 18680.23
Row: 76, Col: 1, Value: 18773.63
Row: 77, Col: 1, Value: 19754.35
Row: 78, Col: 1, Value: 18890.44
Row: 79, Col: 1, Value: 19898.77
Row: 80, Col: 1, Value: 20347.79
Row: 81, Col: 1, Value: 20248.3
Row: 82, Col: 1, Value: 20559.19
Row: 83, Col: 1, Value: 19746.07
Row: 84, Col: 1, Value: 21229.62
Row: 85, Col: 1, Value: 21439.41
Row: 86, Col: 1, Value: 22093.0
Row: 87, Col: 1, Value: 21795.17
Row: 88, Col: 1, Value: 22529.57
Row: 89, Col: 1, Value: 22749.88
Row: 90, Col: 1, Value: 22487.77
Row: 91, Col: 1, Value: 23047.91
Row: 92, Col: 1, Value: 22586.62
Row: 93, Col: 1, Value: 22768.55
Row: 94, Col: 1, Value: 23001.39
Row: 95, Col: 1, Value: 23758.13
Row: 96, Col: 1, Value: 24345.19
Row: 97, Col: 1, Value: 25066.9
Row: 98, Col: 1, Value: 25671.13
Row: 99, Col: 1, Value: 26515.46
Row: 100, Col: 1, Value: 26464.68
Row: 101, Col: 1, Value: 26938.62
Row: 102, Col: 1, Value: 27264.15
Row: 103, Col: 1, Value: 27682.28
Row: 104, Col: 1, Value: 28612.42
Row: 105, Col: 1, Value: 28571.36
Row: 106, Col: 1, Value: 29061.6
Row: 107, Col: 1, Value: 28597.16
Row: 108, Col: 1, Value: 29532.98
Row: 109, Col: 1, Value: 30711.16
Row: 110, Col: 1, Value: 29873.34
Row: 111, Col: 1, Value: 28574.31
Row: 112, Col: 1, Value: 29200.22
Row: 113, Col: 1, Value: 29572.14
Row: 114, Col: 1, Value: 29177.61
Row: 115, Col: 1, Value: 29999.0
Row: 116, Col: 1, Value: 31048.56
Row: 117, Col: 1, Value: 30324.84
Row: 118, Col: 1, Value: 30609.45
Row: 119, Col: 1, Value: 29351.66
Row: 120, Col: 1, Value: 29604.81
Row: 121, Col: 1, Value: 29788.03
$
$29,788
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 Composite Index
of 500 Stocks, 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 Equity Income Funds Average,
which currently reflects the performance of over 99 mutual funds
with similar objectives. This average, which assumes reinvestment of
distributions, is published by Lipper Analytical Services, Inc.
Y 70. 71. EAR-BY-YEAR TOTAL RETURNS
Calendar years 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
Equity-Income 25.06 % 17.07 % -1.64 % 22.49 %
18.67 % -14.02 % 29.40 % 14.68
% 21.31 % 0.24 %
Competitive funds average 26.10 % 16.98 % -2.58 %
16.55% 22.36 % -6.61 % 27.09 %
9.64 % 13.38 % -2.54 %
Percentage (%)
Row: 1, Col: 1, Value: 25.06
Row: 1, Col: 2, Value: 26.1
Row: 2, Col: 1, Value: 17.07
Row: 2, Col: 2, Value: 16.98
Row: 3, Col: 1, Value: -1.64
Row: 3, Col: 2, Value: -2.58
Row: 4, Col: 1, Value: 22.49
Row: 4, Col: 2, Value: 16.55
Row: 5, Col: 1, Value: 18.67
Row: 5, Col: 2, Value: 22.36
Row: 6, Col: 1, Value: -14.02
Row: 6, Col: 2, Value: -6.609999999999999
Row: 7, Col: 1, Value: 29.4
Row: 7, Col: 2, Value: 27.09
Row: 8, Col: 1, Value: 14.68
Row: 8, Col: 2, Value: 9.639999999999999
Row: 9, Col: 1, Value: 21.31
Row: 9, Col: 2, Value: 13.38
Row: 10, Col: 1, Value: 0.24
Row: 10, Col: 2, Value: -2.54
(large solid box) Equity-Inco
me
(large hollow box) 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.
THE FUND IN DETAIL
CHARTER
EQUITY-INCOME 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 March 4, 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.), in London, England, and Fidelity Management & Research (Far
East) Inc. (FMR Far East), in Tokyo, Japan, assist FMR with foreign
investments.
Stephen Petersen is manager of Equity-Income, which he has managed since
August 1993. Mr. Petersen is also senior vice president of Fidelity
Management Trust Co. Previously, he was vice president and manager of
several trust accounts. Mr. Petersen joined Fidelity in October 1980.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (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 FMR, FMR Far East, and FMR U.K. Through
ownership of voting common stock, members of the Edward C. Johnson 3d
family form a controlling group with respect to FMR Corp. Changes may occur
in the Johnson family group, through death or disability, which would
result in changes in each individual family member's holding of stock. Such
changes could result in one or more family members becoming holders of over
25% of the stock. FMR Corp. has received an opinion of counsel that changes
in the composition of the Johnson family group under these circumstances
would not result in the termination of the fund's management or
distribution contracts and, accordingly, would not require a shareholder
vote to continue operation under those contracts.
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. The fund has the flexibility, however, to
invest the balance in all types of domestic and foreign securities,
including bonds. The fund seeks 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 value of the fund's domestic and foreign investments varies in response
to many factors. Stock values fluctuate in response to the activities of
individual companies, and general market and economic conditions. The value
of bonds fluctuates based on changes in interest rates and in the credit
quality of the issuer. Investments in foreign securities may involve risks
in addition to those of U.S. investments, including increased political and
economic risk, as well as exposure to currency fluctuations. 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. Also, as a mutual
fund, the fund seeks to spread investment risk by diversifying its holdings
among many companies and industries. Of course, when you sell your shares
of the fund, 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. The fund also reserves the right to invest without limitation in
preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.
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. A complete listing of the fund's policies
and limitations and more detailed information about the fund's investments
is contained in the fund's SAI. 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. Current holdings and recent investment strategies
are described in the fund's financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
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. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
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.
72.FISCAL 1995 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 .92% AA .85%
Upper-medium grade A A
Medium grade Baa .59% BBB .81%
LOWER QUALITY
Moderately speculative Ba 2.26% BB 2.23%
Speculative B 4.10% B 2.11%
Highly speculative Caa .06% CCC .07%
Poor quality Ca .07% CC --
Lowest quality, no interest C C
In default, in arrears -- -- D .07%
8.00% 6.14%
A FOR SOME FOREIGN GOVERNMENT OBLIGATIONS, FMR ASSIGNS THE RATINGS OF
THE
SOVEREIGN CREDIT OF THE ISSUING GOVERNMENT. THE DOLLAR-WEIGHTED AVERAGE
OF DEBT SECURITIES NOT RATED DIRECTLY OR INDIRECTLY BY MOODY'S OR S&P
AMOUNTED TO 3.90%. 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
3.22%
OF THE FUND'S SECURITY INVESTMENTS. REFER TO THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION FOR A MORE COMPLETE DISCUSSION OF THESE
RATINGS.
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. In
general, bond prices rise when interest rates fall, and vice versa. 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, or they may
already be in default. 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 on page 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 1995, and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate the fund's current or future debt holdings.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is unrated but judged to
be of equivalent quality by FMR. The fund currently intends to limit its
investments in lower than Baa-quality debt securities to 20% of its
assets.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign
currencies, and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These include
risks relating to political or economic conditions in foreign countries,
fluctuations in foreign currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and the potentially less stringent
investor protection and disclosure standards of foreign markets.
Additionally, governmental issuers of foreign securities may be unwilling
to repay principal and interest when due, and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in developing countries, more
volatile.
ASSET-BACKED AND MORTGAGE SECURITIES include interests in pools of
lower-rated debt securities, or consumer loans or mortgages, or complex
instruments 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. Some securities may have a structure that makes their reaction to
interest rates and other factors difficult to predict, making their value
highly volatile. These securities may also be subject to prepayment risk.
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 some illiquid securities and some 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.
OTHER INSTRUMENTS may include securities of closed-end investment companies
and real estate-related investments.
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 1995, the group fee rate was .3186 %. The individual fund
fee rate is currently .12%. This rate will increase on December 1, 1995,
1996, 1997, and 1998, to .14%, .16%, .18%, and .20%, respectively. The
total management fee rate for fiscal 1995 was .44 %.
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on issuers
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 a fee equal to 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
1995, the fund paid FSC fees equal to .23 % 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. A broker-dealer may use a portion of the
commissions paid by the fund to reduce the fund's custodian or transfer
agent fees.
The fund's portfolio turnover rate for fiscal 1995 was 50 %. 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)
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:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid 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.
(solid bullet) Number of Fidelity mutual
funds: over 210
(solid bullet) Assets in Fidelity mutual
funds: over $260 billion
(solid bullet) Number of shareholder
accounts: over 22 million
(solid 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.
(solid 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.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid 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.
(solid 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.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(solid 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:
(small solid bullet) Mail in an application with a check, or
(small solid 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
UNDERSTANDING
SHARE PRICE
Let's say you invest $2,500 at
an offering price of $10. Of
the $10 offering price, 2%
($.20) is the sales charge,
and 98% ($9.80) represents
the NAV. The value of your
initial investment will be
$2,450 (250 shares worth
$9.80 each), and you will
have paid a sales charge of
$50.
(checkmark)
Row: 1, Col: 1, Value: 25.0
Row: 1, Col: 2, Value: 75.0
Row: 1, Col: 3, Value: 75.0
Row: 1, Col: 4, Value: 75.0
Row: 1, Col: 5, Value: 75.0
Row: 1, Col: 6, Value: 75.0
Row: 1, Col: 7, Value: 75.0
Row: 1, Col: 8, Value: 75.0
Row: 1, Col: 9, Value: 75.0
Row: 1, Col: 10, Value: 75.0
Row: 1, Col: 11, Value: 75.0
Row: 1, Col: 12, Value: 75.0
Row: 1, Col: 13, Value: 75.0
Row: 1, Col: 14, Value: 75.0
Row: 1, Col: 15, Value: 75.0
Row: 1, Col: 16, Value: 75.0
Row: 1, Col: 17, Value: 75.0
Row: 1, Col: 18, Value: 75.0
Row: 1, Col: 19, Value: 75.0
Row: 1, Col: 20, Value: 75.0
Row: 1, Col: 21, Value: 75.0
Row: 1, Col: 22, Value: 75.0
Row: 1, Col: 23, Value: 75.0
Row: 1, Col: 24, Value: 75.0
Row: 1, Col: 25, Value: 75.0
Row: 1, Col: 26, Value: 75.0
Row: 1, Col: 27, Value: 75.0
Row: 1, Col: 28, Value: 75.0
Row: 1, Col: 29, Value: 75.0
Row: 1, Col: 30, Value: 75.0
Row: 1, Col: 31, Value: 75.0
Row: 1, Col: 32, Value: 75.0
Row: 1, Col: 33, Value: 75.0
Row: 1, Col: 34, Value: 75.0
$2,500 Investment
2% sales charge = $50
Value of Investment = $2,450
<TABLE>
<CAPTION>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
Phone 1-800-544-777 (phone_graphic) (small solid bullet) Exchange from another (small solid 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.
(small solid 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) (small solid bullet) Complete and sign the (small solid 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 your check and mail to
the application. the address printed on
your account statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid 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) (small solid bullet) Call 1-800-544-7777 to (small solid bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (small solid bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(small solid 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Automatically (automatic_graphic) (small solid bullet) Not available. (small solid 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:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid 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:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid 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 (small solid bullet) Maximum check request:
except retirement $100,000.
(small solid bullet) For Money Line transfers to
All account types your bank account; minimum:
$10; maximum: $100,000.
(small solid 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 (small solid 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.
(small solid bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (small solid 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, (small solid bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid 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.
(small solid 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:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid 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. 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 periodic 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
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid 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:
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.
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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments and these taxes generally will reduce the fund's
distributions. However, an offsetting tax credit or deduction may be
available to you. If so, your tax statement will show more taxable income
or capital gains than were actually distributed by the fund, but will also
show the amount of the available offsetting credit or deduction.
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 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.
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. If quotations are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
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. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow 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 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:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid 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
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:
(small solid 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.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid 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.
(small solid 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.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500 (including any amount paid
as a sales charge), subject to an annual maximum charge of $60.00 per
shareholder. It is expected that accounts will be valued on the second
Friday in November of each year. Accounts opened after September 30 will
not be subject to the fee for that year. The fee, which is payable to the
transfer agent, is designed to offset in part the relatively higher costs
of servicing smaller accounts. The fee will not be deducted from retirement
accounts, accounts using regular investment plans, or if total assets in
Fidelity funds exceed $50,000. Eligibility for the $50,000 waiver is
determined by aggregating Fidelity mutual fund accounts maintained by FSC
or FBSI which are registered under the same social security number or which
list the same social security number for the custodian of a Uniform
Gifts/Transfers to Minors Act account.
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% 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:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid 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.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid 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.
(small solid 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.
(small solid 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.
(small solid 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.
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.
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 regular 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 invest through a non-prototype pension or profit-sharing plan
that maintains all of its mutual fund assets in Fidelity mutual funds,
provided the plan executes a Fidelity non-prototype sales charge waiver
request form confirming its qualification.
11. 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. Except for correspondents of National Financial Services
Corporation, this waiver is available only for shares purchased directly
from Fidelity, and is unavailable if the RIA is part of an organization
principally engaged in the brokerage business.
1.12. 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 unavailable 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), (9), and (11) 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 22, 1995
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 22, 1995). Please retain this
document for future reference. The fund's financial statements and
financial highlights, included in the Annual Report for the fiscal year
ended January 31, 1995, are 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 Company (FSC)
EQU-ptb-395
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 purchase interests in real estate
investment trusts that are not readily marketable or interests in real
estate limited partnerships that are not listed on an exchange or traded on
the NASDAQ National Market System if, as a result, the sum of such
interests and other investments considered illiquid under limitation (iv)
would exceed 10% of the fund's net assets.
(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 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 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 .
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.
LOWER-QUALITY 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-quality securities that defaulted rose significantly above prior
levels, although the default rate decreased in 1992 and 1993.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality 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-quality debt
securities and the fund's ability to dispose of these securities.
Since the risk of default is higher for lower-quality 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 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 to 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 United States 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.
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 could 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
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
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.
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
United States 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.
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, emerging market
securities, 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 was 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 it 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 sell that security back to the
original seller at an agreed-upon price. 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. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well as delays and costs to the fund
in connection with bankruptcy proceedings), it is the fund's current policy
to engage in repurchase agreement transactions with parties whose
creditworthiness has been reviewed and found satisfactory by FMR.
REVERSE REPURCHASE AGREEMENTS In a reverse repurchase agreement, the 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.
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 a 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).
ASSET-BACKED SECURITIES. Asset-backed securities represent interests in
pools of consumer loans (generally unrelated to mortgage loans) and most
often are structured as pass-through securities. Interest and principal
payments ultimately depend upon payment of the underlying loans by
individuals, although the securities may be supported by letters of credit
or other credit enhancements. The value of asset-backed securities may also
depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the
credit enhancement.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
fund may invest in them if FMR determines they are consistent with the
fund's investment objective and policies.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, overbuilding, and the management skill and
creditworthiness of the issuer. Real estate-related instruments may also be
affected by tax and regulatory requirements, such as those relating to the
environment.
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 a 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.
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 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.
FOREIGN INVESTMENTS. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not subject
to the disclosure and reporting requirements of the U.S. securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable
to those applicable to U.S. issuers. Further, economies of particular
countries or areas of the world may differ favorably or unfavorably from
the economy of the United States.
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.
Foreign markets may offer less protection to investors than U.S. markets.
It is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may expose the fund to increased risk
in the event of a failed trade or the insolvency of a foreign
broker-dealer, and may involve substantial delays. In addition, the costs
of foreign investing, including withholding taxes, brokerage commissions
and custodial costs, are generally higher than for U.S. investors. In
general, there is less overall governmental supervision and regulation of
securities exchanges, brokers, and listed companies than in the United
States. It may also be difficult to enforce legal rights in foreign
countries.
The fund may invest in foreign securities that impose restrictions on
transfer within the United States 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.
The fund may invest in American Depository Receipts and European Depository
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 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 conduct foreign currency
transactions 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. The fund will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to the fund at one rate, while offering a lesser
rate of exchange should the fund desire to resell that currency to the
dealer. Forward contracts are generally 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 for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by the fund. The fund may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes.
When the fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." The fund may 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.
The fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if the fund held investments denominated in
Deutschemarks, the fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if the fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause the fund to assume the risk of fluctuations in the
value of the currency it purchases.
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 currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management strategies
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 currency management strategies will
be advantageous to the fund or that it will hedge at an appropriate time.
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 Rule 4.5 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 Composite Index of 500
Stocks (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 (OTC) 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.
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. If FMR grants investment management authority to the sub-advisers
(see the section entitled "Management Contract"), the sub-advisers are
authorized to place orders for the purchase and sale of portfolio
securities, and will do so in accordance with the policies described below.
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. Generally,
commissions for foreign investments traded 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 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, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute 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 periods ended January 31, 1995 and 1994, the fund's
portfolio turnover rates were 50 % and 70 %, respectively.
Because a high turnover rate increases transaction costs and may increase
taxable gains, FMR carefully weighs the anticipated benefits of short-term
investing against these consequences.
For fiscal 1995, 1994, and 1993, the fund paid brokerage commissions of
$ 7,635,159 , $8,506,009, and $8,007,233, respectively. The fund pays
both commissions and spreads in connection with the placement of portfolio
transactions; FBSI is paid on a commission basis. During fiscal 1995, 1994,
and 1993, the fund paid brokerage commissions of $ 1,983,524 ,
$2,077,489, and $2,244,133, respectively, to FBSI. During fiscal 1995, this
amounted to approximately 26 % of the aggregate brokerage commissions
paid by the fund for transactions involving approximately 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 year ended January 31, 1993 the fund paid $11,566 in
brokerage commissions to FBSL. There were no fees paid to F B SL
in fiscal 1995 and 1994.
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 and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
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 procedures believed to be appropriate and equitable for 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
securities 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 two-fold 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.
PERFORMANCE
The fund may quote 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 return
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 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. For the fund's investments denominated in
foreign currencies, income and expenses are calculated first in their
respective currencies, and are then converted to U.S. dollars, either when
they are actually converted or at the end of the 30-day or one month
period, whichever is earlier. Capital gains and losses generally are
excluded from the calculation as are gains and losses from currency
exchange rate fluctuations.
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.
In calculating the fund's yield, the fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing the fund's yield.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives.
However, the fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates the
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
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 total 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 total 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 may be quoted on a
before-tax or after-tax basis and may be quoted with or without taking the
fund's 2% maximum 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 27 , 1995, the 13-week and 39-week
long-term moving averages were $30.72 and $30.98, respectively.
HISTORICAL FUND RESULTS. The following table shows the fund's total returns
for periods ended January 31, 1995. Total return figures include the effect
of the fund's 2% sales charge.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
One Five Ten One Five Ten
Year Years Year s Year Years Years
Equity-Income Fund -4.95% 10.26% 11.53% -4.95% 62.99% 197.88%
</TABLE>
The following table shows the income and capital elements of the fund's
cumulative total return. The table compares the fund's return to the record
of the Standard and Poor's Composite Index of 500 Stocks (S&P
500(registered trademark)), the Dow Jones Industrial Average (DJIA), and
the cost of living (measured by the Consumer Price Index, or CPI) over the
same period. The CPI information is as of the month end closest to the
initial investment date for each fund. 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, do not include
the effect of paying brokerage commissions and other costs of investing.
During the ten year period ended January 31, 1995, a hypothetical $10,000
investment in Equity-Income would have grown to $ 29,788 , after
deducting the fund's 2% sales charge and assuming all distributions were
reinvested. This was a period of fluctuating interest rates, bond prices,
and stock prices and the figures below 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Value of Value of Value of Total S&P 500 DJIA Cost of
Ended Initial Reinvested Reinvested Value Living
January 31 $10,000 Dividend Capital Gain
Investment Distributions Distributions
1995 $ 11,756$ 10,527 $ 7,505 $ 29,788 $ 36,509 $ 41,955 $ 14,246
1994 $ 13,393$ 11,017 $ 6,302 $ 30,711 $ 36,317 $ 42,251 $ 13,858
1993 $ 11,368$ 8,443 $ 5,256 $ 25,067 $ 32,175 $ 34,176 $ 13,517
1992 $ 10,112$ 6,652 $ 4,676 $ 21,439 $ 29,090 $ 32,311 $ 13,090
1991 $ 8,517 $ 4,750 $ 3,938 $ 17,205 $ 23,707 $ 26,555 $ 12,758
1990 $ 9,610 $ 4,120 $ 4,181 $ 17,911 $ 21,874 $ 24,187 $ 12,076
1989 $ 10,203$ 3,236 $ 3,667 $ 17,106 $ 19,109 $ 21,068 $ 11,479
1988 $ 8,871 $ 1,944 $ 3,188 $ 14,004 $ 15,912 $ 16,993 $ 10,967
1987 $ 11,391$ 1,591 $ 1,654 $ 14,636 $ 16,460 $ 18,153 $ 10,540
1986 $ 10,698$ 725 $ 225 $ 11,648 $ 12,291 $ 12,759 $ 10,389
</TABLE>
Explanatory Notes: With an initial investment of $10,000 made on January
31, 1985, assuming the 2% load had been in effect the net amount invested
in fund shares was $9,800. 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 $ 25,754 . 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 $ 5,378 for dividends and $ 4,308 for capital gains
distributions. Tax consequences of different investments have not been
factored into the above figures.
The yield for the S&P 500 for the year ended January 31, 1995 was
2.83 %, 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 31,1995. The S&P yield is calculated differently from the fund's
yield. For example, 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 stock, bond, and money market mutual fund
performance indices prepared by Lipper or other organizations. When
comparing these indices, it is important to remember the risk and return
characteristics of each type of investment. For example, while stock mutual
funds may offer higher potential returns, they also carry the highest
degree of share price volatility. Likewise, money market funds may offer
greater stability of principal, but generally do not offer the higher
potential returns from stock mutual funds.
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.
The fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, the
fund may offer greater liquidity or higher potential returns than CDs, the
fund does not guarantee your principal or your return, and fund shares are
not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's 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 or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
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. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
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, 1995, FMR advised over $ 25 billion in tax-free
fund assets, $ 70 billion in money market fund assets, $ 155
billion in equity fund assets, $ 35 billion in international fund
assets, and $ 20 billion in Spartan fund assets. The fund may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management 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. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Pursuant to Rule 22d-1 under the Investment Company Act of 1940 (the 1940
Act), FDC exercises its right to waive the fund's front-end 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, FDC has
chosen to waive the fund's sales charge in certain instances because of
efficiencies involved in those sales of shares. The sales charge will not
apply:
1. to shares purchased in connection with 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 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. to shares purchased by a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code) investing $100,000 or more;
5. to shares purchased 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. to shares purchased by 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. to shares purchased by a current or former Trustee or officer of
a Fidelity fund or a current or retired officer, director, or regular
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. to shares purchased by 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;
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);
11. to shares purchased as part of a pension or profit-sharing plan
as defined in Section 401(a) of the Internal Revenue Code that maintains
all of its mutual fund assets in Fidelity mutual funds, provided the plan
executes a Fidelity non-prototype sales charge waiver request form
confirming its qualification;
12. to shares purchased by a registered investment adviser (RIA) for
his or her discretionary accounts, provided he or she executes 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, unless purchased through a
brokerage firm which is a correspondent of National Financial Services
Corporation (NFSC). The waiver is unavailable, however, if the RIA is part
of an organization principally engaged in the brokerage business, unless
the brokerage firm in the organization is an NFSC correspondent; or
13. to shares purchased by a trust institution or bank trust
department for its non-discretionary, non-retirement fiduciary accounts,
provided it executes 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 unavailable if the trust
department or institution is part of an organization not principally
engaged in banking or trust activities.
The fund's sales charge may be reduced to reflect sales charges previously
paid in connection with investments in other Fidelity funds.
The fund's sales charge may be reduced to reflect sales charges previously
paid, or that would have been paid absent a reduction for some purchases
made directly with Fidelity as noted in the prospectus, in connection with
investments in other Fidelity funds. This includes reductions for
investments in prototype-like retirement plans sponsored by FMR or FMR
Corp., which are listed above.
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 1995: New Year's
Day (observed), President's Day , Good Friday, Memorial Day ,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Although
FMR expects the same holiday schedule 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
Securities and Exchange Commission (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. In addition, trading in some of the
fund's portfolio securities may not occur on days when the fund is open for
business.
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.
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. As a consequence, FMR may
adjust the fund's income distributions to reflect the effect of currency
fluctuations. Short-term capital gains are distributed as dividend income.
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.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Foreign
governments may also impose taxes on other payments or gains with respect
to foreign securities. If, at the close of its fiscal year, more than 50%
of the fund's total assets are invested in securities of foreign issuers,
the fund may elect to pass through foreign taxes paid and thereby allow
shareholders to take a credit or deduction on their individual tax returns.
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. Generally, the fund will
elect to mark-to-market any PFIC shares. Unrealized gains will be
recognized as income for tax purposes and must be distributed to
shareholders as dividends.
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, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether the fund is suitable to their particular tax
situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
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 institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example,
all personal trades in most securities require pre-clearance, and
participation in initial public offerings is prohibited. In addition,
restrictions on the timing of personal investing in relation to trades by
Fidelity funds and on short-term trading have been adopted.
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. , 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. , 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 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 is a member of 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 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. , and RPM,
Inc. (manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments, a Trustee and member
of the Executive Committee of the Cleveland Clinic Foundation, a Trustee
and member of the Executive Committee of University School (Cleveland), and
a Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, One Harborside , 68 0 Steamboat Road, Greenwich,
CT, Trustee, is Executive-in-Residence (1995) at Columbia University
Graduate School of Business and a financial consultant. From 1987 to
January 1995, Mr. Kirk was a Professor at Columbia University Graduate
School of Business. 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, Vice Chairman of the
Board of Trustees of the Greenwich Hospital Association, and as a Member of
the Public Oversight Board of the American Institute of Certified Public
Accountants' SEC Practice Section (1995).
*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 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. (chemical s ) and Morrison Knudsen Corporation
(engineering and construction). In addition, he serves as a Trustee of
Boston College, Massachusetts Eye & Ear Infirmary, Historic
Deerfiel d 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 , 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 ), 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). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is 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).
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
STEPHEN P. JONAS, Treasurer (1995), is Treasurer and Vice President of
FMR (1993). Mr. Jonas is also Treasurer of FMR Texas Inc. (1994), Fidelity
Management & Research (U.K.) Inc. (1994), and Fidelity Management &
Research (Far East) Inc. (1994). Prior to becoming Treasurer of FMR, Mr.
Jonas was Senior Vice President, Finance - Fidelity Brokerage Services,
Inc. (1991-1992) and Senior Vice President, Strategic Business Systems -
Fidelity Investments Retail Marketing Company (1989-1991).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity funds, Mr. Rush was
Chief Compliance of Officer of FMR Corp. (1993-1994); Chief Financial
Officer of Fidelity Brokerage Services, Inc. (1990-1993); and Vice
President, Assistant Controller, and Director of the Accounting Department
- - First Boston Corp. (1986-1990).
WILLIAM J. HAYES, Vice President (1994), is Vice President of Fidelity's
equity funds; Senior Vice President of FMR; and Managing Director of FMR
Corp.
ROBERT H. MORRISON, Manager of Security Transactions of Fidelity's equity
funds , is Vice President of FMR.
STEPHEN PETERSEN is manager and Vice President of Equity-Income,
which he has managed since August 1993. Mr. Petersen is also senior vice
president of Fidelity Management Trust Co. Previously, he was vice
president and manager of several trust accounts. Mr. Petersen joined
Fidelity in October 1980.
The following table sets forth information describing the compensation
of each current non-interested Trustee of the fund for his or her services
as trustee for the fiscal year ended January 31, 1995. Interested Trustees
and officers of the fund are compensated by FMR.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Non-Interested Trustees Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits Accrued Retirement from from the Fund
the Fund as Part of
the Fund Complex*
Fund Expenses
Complex*
from the
Fund Complex*
Ralph F. Cox $ 3,401 $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 3,239 5,200 52,000 122,000
Richard J. Flynn 4,204 0 52,000 154,500
E. Bradley Jones 3,360 5,200 49,400 123,500
Donald J. Kirk 3,402 5,200 52,000 125,000
Gerald C. McDonough 3,401 5,200 52,000 125,000
Edward H. Malone 3,483 5,200 44,200 128,000
Marvin L. Mann 3,402 5,200 52,000 125,000
Thomas R. Williams 3,442 5,200 5 2, 0 00 126,500
</TABLE>
* Information is as December 31, 1994 for all 206 funds in the
complex.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program.
On January 31 , 1995, the Trustees and officers of the fund owned,
in the aggregate, less than 1% of the fund's total outstanding shares.
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,
compensates all officers of the fund and all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of the
fund 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 s ; developing management and shareholder services for the fund;
and furnishing reports, evaluations, and analyses on a variety of subjects
to the 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 the typesetting,
printing, and mailing of its proxy material s 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
shareholders, the trust , on behalf of the fund, has entered into
a revised transfer agent agreement with FSC, pursuant to which FSC bears
the cost s 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 . The fund is also liable for such
non - recurring 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 its 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 below on the left. The schedule below o n the
right shows the effective annual group fee rate at various asset levels,
which is the result of cumulatively applying the annualized rates on
the left . For example, the effective annual fee rate at
$ 279 billion of group net assets - th e approximate
level for January 1995 was .3186 %, which is the weighted average of
the respective fee rates for each level of group net assets up to
$ 279 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
48 - 66 .3250 300 .3175
66 - 84 .3200 325 .3153
84 - 102 .3150 350 .3133
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 .2850
Under the fund's current management contract with FMR, the group fee rate
is based on a schedule with breakpoints ending at .3000% for average group
assets in excess of $174 billion. Prior to December 1, 1993, the group fee
rate breakpoints shown above for average group assets in excess of $138
billion and under $228 billion were voluntarily adopted by FMR, and went
into effect on January 1, 1992. The additional breakpoints shown above for
average group assets in excess of $228 billion were voluntarily adopted by
FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints. The revised group fee
rate schedule provides for lower management fee rates as FMR's assets under
management increase. The revised group fee rate schedule is identical to
the above schedule for average group assets under $210 billion. For average
group assets in excess of $210 billion, the group fee rate schedule
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Annualized Group Net Effective Annual
Assets Rate Assets Fee Rate
$ 138 - 174 billion .3050% $150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
350 .3113
375 .3090
400 .3067
The individual fund fee rate is currently .12%. Based on the average
group net assets of funds advised by FMR for January 1995, the annual
management fee rate would be calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Group Fee Rate Individual Fund Fee Rate Management Fee Rate
. 3186 % + .12% = . 4386 %
</TABLE>
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.
One-twelfth of this annual management fee rate is applied to the fund's
net assets for the most recent month, giving a dollar amount, which is the
fee for that month.
During the fiscal years ended January 31, 1995, 1994, and 1993, FMR
received $31,212,610, $23,042,012, and $17,439,154, respectively, for its
services as investment adviser to the fund. These fees were equivalent to
.44%, .38%, and .37%, 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, November 1, 1993, and August 1,
1994.
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase the fund's total returns and yield and repayment of
the reimbursement by the fund will lower its total returns and yield.
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. FMR has entered into sub-advisory agreements with FMR U.K.,
and FMR Far East. Pursuant to the sub-advisory agreements, FMR may receive
investment advice and research services outside the United States from the
sub-advisers. FMR may also 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.
Currently, FMR U.K. and FMR Far East each focus on issuers in countries
other than the United States such as those in Europe, Asia, and the Pacific
Basin.
FMR U.K. and FMR Far East , which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays the
fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far East
fees 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.
For providing discretionary investment management and executing portfolio
transactions, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
monthly management fee rate with respect to the fund's average net
assets managed by the sub-adviser on a discretionary basis.
For providing investment advice and research services, the fees paid to the
sub-advisers for fiscal 1995, 1994, and 1993 were as follows:
Fiscal Year FMR U.K. FMR Far East
1995 $ 477,437 $ 504,917
1994 $ 222,045 $ 349,914
1993 $ 81,865 $ 71,190
For providing discretionary investment management and executing portfolio
transactions, there were no fees paid to the sub-advisers for
fiscal 1995 and 1994 .
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 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 $95.00 and
monetary transaction charges of $20.00 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 $30.00, and a charge of
$6.00 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, 1995, 1994, and 1993 were
$ 15,809,087 , $14,205,268, and $11,497,940, respectively.
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. The fee rates
for pricing and bookkeeping service s 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 1995, 1994, and 1993 were $ 805,298 , $798,031,
and $796,052, 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.
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 1994 and 1993 amounted to $1,297,169 and $1,834,585,
respectively. There were no sales charge revenues paid to FDC for fiscal
1995. Effective December 1, 1993, FMR voluntarily waiv ed
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 March 4, 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: Spartan Adjustable Rate Government Fund,
Fidelity Equity-Income Fund, Fidelity Real Estate Investment Portfolio,
Spartan Long-Term Government Bond Fund, Fidelity Utilities 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 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 value of
net asset value 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 L.L.P., 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 financial statements and financial highlights for the fiscal
year ended January 31, 1995 are included in the fund's Annual Report, which
is a separate report supplied with this Statement of Additional
Information. The fund's financial statements and financial highlights are
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 issued 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 rate 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 .............................. Financial Highlights
b .............................. *
c, d .............................. Performance
4 a i............................. Charter
ii........................... The Fund at a Glance; Investment
Principles and Risks
b .............................. Investment Principles and Risks
c .............................. Who May Want to Invest; Investment
Principles and Risks
5 a .............................. Charter
b i............................. Cover Page: The Fund at a Glance;
Charter; Doing Business with
Fidelity
ii........................... Charter
iii.......................... Expenses; Breakdown of Expenses
c .............................. Charter
d .............................. Charter; Breakdown of Expenses
e .............................. Cover Page; Charter
f .............................. Expenses
g i............................. Charter
.
ii............................ *
..
5 A .............................. Performance
6 a i............................. Charter
ii........................... How to Buy Shares; How to Sell
Shares; Transaction Details;
Exchange Restrictions
iii.......................... Charter
b ............................. *
c .............................. Transaction Details; 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 .............................. Cover Page; Charter
b .............................. Expenses; 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 ............................ Description of Trust
13 a - c ............................ Investment Policies and Limitations
d ............................ Portfolio Transactions
14 a - c ............................ Trustees and Officers
15 a, b ............................ *
c ............................ Trustees and Officers
16 a - i ............................ FMR, Portfolio Transactions
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, 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 a ............................ 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.
To learn more about the fund and its investments, you can obtain a copy of
the fund's most recent financial report and portfolio listing, or a copy of
the Statement of Additional Information (SAI) dated March 22, 1995. The SAI
has been filed with the Securities and Exchange Commission (SEC) and is
incorporated herein by reference (legally forms a part of the prospectus).
For a free copy of either document, call Fidelity at 1-800-544-8888.
Mutual fund shares are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.
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-395
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
MARCH 22, 1995 (FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON,
MA 02109
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: Above-average income and long-term capital growth consistent with
reasonable risk. 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 may help
choose investments for the fund.
SIZE: As of January 31, 1995, the fund had over $ 490 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 equity
securities in the real estate industry.
The value of the fund's investments will be affected by conditions in the
real estate industry. Real estate is a cyclical industry that is sensitive
to interest rates, economic conditions (both nationally and locally),
property tax rates, and other factors. In the short-term, the fund's
investments in stocks can fluctuate dramatically in response to these
factors, as well as market, economic, or company news. The securities of
small, less-well known companies may be more volatile than those of larger
companies. Over time, however, stocks have shown greater growth potential
than other types of securities. When you sell your shares, they may be
worth more or less than what you paid for them. By itself, the fund does
not constitute a balanced investment plan.
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. Real
Estate Investment is in the
GROWTH AND INCOME
category.
(solid bullet) MONEY MARKET Seeks
income and stability by
investing in high-quality,
short-term investments.
(solid bullet) INCOME Seeks income by
investing in bonds.
(right arrow) GROWTH AND INCOME
Seeks long-term growth and
income by investing in stocks
and bonds.
(solid bullet) GROWTH Seeks long-term
growth by investing mainly in
stocks.
(checkmark)
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell, or
hold shares of a fund. See page for more information about these fees.
Maximum sales charge on purchases and
reinvested distributions None
Deferred sales charge on redemptions None
Exchange fee None
Annual Account Maintenance Fee $12.00
(for accounts under $2,500)
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 financial 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
1.06 %.
Management fee .62 %
12b-1 fee None
Other expenses .41 %
Total fund operating expenses 1.03
%
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 $ 11
After 3 years $ 33
After 5 years $ 57
After 10 years $ 12
6
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 is included in the fund's Annual Report and has been
audited by Coopers & Lybrand L.L.P. , independent accountants. Their
report on the financial statements and financial highlights is included in
the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the fund's Statement
of Additional Information.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
71.Years
1987D 1988 1989 1990 1991 1992 1993 1994 1995
ended January
31
72.Net asset
$ 10.00 $ 10.38 $ 9.18 $ 9.01 $ 9.38 $ 9.03 $ 11.60 $ 13.22 $ 13.68
value,
beginning of
period
73.Income
from
Investment
Operations
74. Net
.04 .65 .65 .74 .77 .43 .68C .54 .67
investment
income
75. Net
.34 (1.25) (.23) .17 (.61) 2.63 1.37 .52 (1.10)
realized and
unrealized
gain (loss)
on
investments
76. Total from
.38 (.60) .42 .91 .16 3.06 2.05 1.06 (.43)
investment
operations
77.Less
Distributions
78. From net
- -- (.60) (.59) (.54) (.51) (.49) (.43) (.60) (.63)
investment
income
79.Net asset
$ 10.38 $ 9.18 $ 9.01 $ 9.38 $ 9.03 $ 11.60 $ 13.22 $ 13.68 $ 12.62
value, end
of period
80.Total returnE
3.80% (5.85) 4.68% 10.17 2.05% 35.00 18.26 8.10% (3.23)
B % % % % %
81.RATIOS AND SUPPLEMENTAL DATA
82.Net assets,
$ 86,12 $ 71,42 $ 62,84 $ 50,03 $ 44,53 $ 76,39 $ 246,6 $ 430,6 $ 490,0
end of period
5 9 0 3 0 6 23 05 83
(000 omitted)
83.Ratio of
1.50% 1.50% 1.28% 1.39% 1.47% 1.24% 1.16% 1.13% 1.03%
expenses to
A,B F F
average net
assets
84.Ratio of
1.50% 1.50% 1.28% 1.39% 1.47% 1.24% 1.16% 1.17% 1.06%
expenses to
A,B F F
average net
assets before
expense
reductions
85.Ratio of net
7.17% 6.26% 6.87% 7.11% 8.45% 5.84% 5.81% 4.34% 5.67%
investment
A
income to
average net
assets
86.Portfolio
6%A 89% 42% 70% 49% 84% 82% 110% 75%
turnover rate
</TABLE>
A ANNUALIZED
B EXPENSES LIMITED IN ACCORDANCE WTIH A STATE EXPENSES LIMITATION. TOTAL
RETURN WOULD HAVE BEEN LOWER HAD THE LIMTATION 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 DURING THE PERIODS SHOWN.
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 7 displays calendar-year performance.
AVERAGE ANNUAL TOTAL RETURNS
Fiscal periods Pas Past Life
ended t 1 5 of
January 31, yea year fund
1995 r s A
Real Estate -3.23 11.25 8.27
% % %
S&P 500 .53 10.79 11.82
% % %
Consumer 2.80 3.36 3.85
Price % % %
Index
CUMULATIVE TOTAL RETURNS
Fiscal periods Pas Past Life
ended t 1 5 of
January 31, yea year fund
1995 r s A
Real Estate -3.23 70.43 92.09
% % %
S&P 500 .53 66.90 150.32
% % %
Consumer 2.80 17.97 36.14
Price % % %
Index
A FROM NOVEMBER 17, 1986
EXAMPLE: Let's say, hypothetically, that an investor put $10,000 in the
fund on November 17, 1986. From that date through January 31, 1995, the
fund's total return was 92.09 %. That $10,000 would have grown to
$ 19,209 (the initial investment plus 92.09 % 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 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 1986 1991 1995
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
Row: 89, Col: 1, Value: 20822.04
Row: 90, Col: 1, Value: 20077.33
Row: 91, Col: 1, Value: 20355.37
Row: 92, Col: 1, Value: 20794.37
Row: 93, Col: 1, Value: 20173.05
Row: 94, Col: 1, Value: 20128.74
Row: 95, Col: 1, Value: 20040.14
Row: 96, Col: 1, Value: 19801.85
Row: 97, Col: 1, Value: 19011.56
Row: 98, Col: 1, Value: 18340.57
Row: 99, Col: 1, Value: 20091.59
Row: 100, Col: 1, Value: 19208.78
$
$19,209
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 Composite Index
of 500 Stocks, 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 Real Estate Funds Average,
which currently reflects the performance of over 10 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 1994
Real Estate -7.68% 10.36% 13.77% -8.70% 39.19% 19.51% 12.5
1% 2.04 %
Competitive funds average -7.68% 15.60% 10.57% -16.89% 33.12% 12.7
4% 22.63% -3.05 %
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: -7.68
Row: 3, Col: 2, Value: -7.68
Row: 4, Col: 1, Value: 10.36
Row: 4, Col: 2, Value: 15.6
Row: 5, Col: 1, Value: 13.77
Row: 5, Col: 2, Value: 10.57
Row: 6, Col: 1, Value: -8.699999999999999
Row: 6, Col: 2, Value: -16.89
Row: 7, Col: 1, Value: 39.19
Row: 7, Col: 2, Value: 33.12
Row: 8, Col: 1, Value: 19.51
Row: 8, Col: 2, Value: 12.74
Row: 9, Col: 1, Value: 12.51
Row: 9, Col: 2, Value: 22.63
Row: 10, Col: 1, Value: 2.04
Row: 10, Col: 2, Value: -3.05
(large solid box) Real Estate
(large hollow box) 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.
THE FUNDS IN DETAIL
CHARTER
REAL ESTATE INVESTMENT 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 March 4, 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.), in London, England, and Fidelity Management & Research (Far
East) Inc. (FMR Far East), in Tokyo, Japan, 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.
Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.
Fidelity Distributors Corporation (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 FMR, FMR Far East, and FMR U.K. Through
ownership of voting common stock, members of the Edward C. Johnson 3d
family form a controlling group with respect to FMR Corp. Changes may occur
in the Johnson family group, through death or disability, which would
result in changes in each individual family member's holding of stock. Such
changes could result in one or more family members becoming holders of over
25% of the stock. FMR Corp. has received an opinion of counsel that changes
in the composition of the Johnson family group under these circumstances
would not result in the termination of the fund's management or
distribution contracts and, accordingly, would not require a shareholder
vote to continue operation under those contracts.
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. The fund has the flexibility to invest the balance in all
types of domestic and foreign securities. The fund seeks 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 assets, income, and 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 value of the fund's domestic and foreign investments varies in response
to many factors. Stock values fluctuate in response to the activities of
individual companies, and general market and economic conditions. The
securities of smaller, less well-known companies may be particularly
volatile. Bond values fluctuate based on changes in interest
rates and in the credit quality of the issuer. Investments in foreign
securities may involve risks in addition to those of U.S. investments,
including increased political and economic risk, as well as exposure to
currency fluctuations. 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. Also, as a mutual fund, the fund seeks to spread investment
risk by diversifying its holdings among many companies. Of course, when you
sell your shares of the fund, 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. The fund also reserves the right to invest without limitation in
preferred stocks and investment-grade debt instruments for temporary,
defensive purposes.
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. A complete listing of the fund's policies
and limitations and more detailed information about the fund's investments
is contained in the fund's SAI. 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. Current holdings and recent investment strategies
are described in the fund's financial reports which are sent to
shareholders twice a year. For a free SAI or financial report, call
1-800-544-8888.
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. Although equity securities
have a history of long-term growth in value, their prices fluctuate based
on changes in a company's financial condition and on overall market and
economic conditions. Smaller companies are especially sensitive to these
factors.
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. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates.
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, or they may
already be in default. 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 on page 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 1995, and are presented as a percentage of total security
investments. These percentages are historical and do not necessarily
indicate the fund's current or future debt holdings.
FISCAL 1995 DEBT HOLDINGS, BY RA90.TING
MOODY'S STANDARD & POOR'S
INVESTORS SERVICE, INC. CORPORATION
Rating Average A Rating Averag
eA
INVESTMENT GRADE
Highest quality Aaa AAA
High quality Aa 0.0% AA 0.0%
Upper-medium grade A A
Medium grade Baa 0.0% BBB 0.6%
LOWER QUALITY
Moderately speculative Ba 0.0% BB 0.0 %
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 %
0.1 % 0.6 %
A THE DOLLAR-WEIGHTED AVERAGE OF DEBT SECURITIES NOT RATED DIRECTLY OR
INDIRECTLY BY MOODY'S OR S&P AMOUNTED TO 1.4 %. 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 SECURITY INVESTMENTS.
REFER TO
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION FOR A MORE COMPLETE
DISCUSSION OF THESE RATINGS.
RESTRICTIONS: Purchase of a debt security is consistent with the fund's
debt quality policy if it is rated at or above the stated level by Moody's
or rated in the equivalent categories by S&P, or is
unrated but judged to be of equivalent quality by FMR. The fund
currently intends to limit its investments in lower than Baa-quality debt
securities to 35% of its assets.
EXPOSURE TO FOREIGN MARKETS. Foreign securities, foreign
currencies, and securities issued by U.S. entities with substantial foreign
operations may involve additional risks and considerations. These include
risks relating to political or economic conditions in foreign countries,
fluctuations in foreign currencies, withholding or other taxes, operational
risks, increased regulatory burdens, and the potentially less stringent
investor protection and disclosure standards of foreign markets.
Additionally, governmental issuers of foreign securities may be unwilling
to repay principal and interest when due, and may require that the
conditions for payment be renegotiated. All of these factors can make
foreign investments, especially those in developing countries, more
volatile.
ASSET-BACKED AND MORTGAGE SECURITIES include interests in pools of
lower-rated debt securities, or consumer loans or mortgages, or complex
instruments 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. Some securities may have a structure that makes their reaction to
interest rates and other factors difficult to predict, making their value
highly volatile. These securities may also be subject to prepayment risk.
REAL ESTATE-RELATED INSTRUMENTS include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
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 some illiquid securities and some 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.
OTHER INSTRUMENTS may include securities of closed-end investment
companies.
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 in the real estate industry. The fund seeks
to provide a yield that exceeds the composite yield of 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 in the next column.
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 1995, the group fee rate was .3186 %. The individual fund
fee rate is .30%. The total management fee rate for fiscal 1995 was
.62 %.
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)
FMR HAS SUB-ADVISORY AGREEMENTS with FMR U.K. and FMR Far East. These
sub-advisers provide FMR with investment research and advice on issuers
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 a fee equal to 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
1995, the fund paid FSC fees equal to .40 % 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. A broker-dealer may use a portion of the
commissions paid by the fund to reduce the fund's custodian or transfer
agent fees.
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 1995 was 75 %. This
rate varies from year to year.
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:
(small solid bullet) For mutual funds, 1-800-544-8888
(small solid 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.
(solid bullet) Number of Fidelity mutual
funds: over 210
(solid bullet) Assets in Fidelity mutual
funds: over $250 billion
(solid bullet) Number of shareholder
accounts: over 22 million
(solid 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.
(solid 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.
(solid bullet) ROLLOVER IRAS retain special tax advantages for certain
distributions from employer-sponsored retirement plans.
(solid 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.
(solid 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.
(solid bullet) 403(B) CUSTODIAL ACCOUNTS are available to employees of most
tax-exempt institutions, including schools, hospitals, and other charitable
organizations.
(solid 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:
(small solid bullet) Mail in an application with a check, or
(small solid 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) (small solid bullet) Exchange from another (small solid 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.
(small solid 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) (small solid bullet) Complete and sign the (small solid bullet) Make your check
application. Make your payable to "Fidelity Real
check payable to Estate Investment
"Fidelity Real Estate Portfolio." Indicate your
Investment fund account number
Portfolio."Mail to the on your check and mail
address indicated on to the address printed
the application. on your account
statement.
(small solid bullet) Exchange by mail: call
1-800-544-6666 for
instructions.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
In Person (hand_graphic) (small solid bullet) Bring your application (small solid 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) (small solid bullet) Call 1-800-544-7777 to (small solid bullet) Not available for
set up your account retirement accounts.
and to arrange a wire (small solid bullet) Wire to:
transaction. Not Bankers Trust
available for retirement Company,
accounts. Bank Routing
(small solid 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) (small solid bullet) Not available. (small solid 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:
(small solid bullet) You wish to redeem more than $100,000 worth of shares,
(small solid bullet) Your account registration has changed within the last
30 days,
(small solid bullet) The check is being mailed to a different address than
the one on your account (record address),
(small solid bullet) The check is being made payable to someone other than
the account owner, or
(small solid 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:
(small solid bullet) Your name,
(small solid bullet) The fund's name,
(small solid bullet) Your fund account number,
(small solid bullet) The dollar amount or number of shares to be redeemed,
and
(small solid 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 (small solid bullet) Maximum check request:
except retirement $100,000.
(small solid bullet) For Money Line transfers to
All account types your bank account; minimum:
$10; maximum: $100,000.
(small solid 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 (small solid 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.
(small solid bullet) The account owner should
Trust complete a retirement
distribution form. Call
1-800-544-6666 to request
one.
Business or (small solid 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, (small solid bullet) At least one person
Conservator, authorized by corporate
Guardian resolution to act on the
account must sign the letter.
(small solid bullet) Include a corporate
resolution with corporate seal
or a signature guarantee.
(small solid bullet) Call 1-800-544-6666 for
instructions.
Wire (wire_graphic) All account types (small solid 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.
(small solid 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.
STATEMENTS AND REPORTS that Fidelity sends to you include the following:
(small solid bullet) Confirmation statements (after every transaction,
except reinvestments, that affects your account balance or your account
registration)
(small solid bullet) Account statements (quarterly)
(small solid 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.
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 periodic 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
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly or (small solid bullet) For a new account, complete the
quarterly appropriate section on the fund
application.
(small solid bullet) For existing accounts, call
1-800-544-6666 for an application.
(small solid 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DIRECT DEPOSIT
TO SEND ALL OR A PORTION OF YOUR PAYCHECK OR GOVERNMENT CHECK TO A FIDELITY FUNDA
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Every pay (small solid bullet) Check the appropriate box on the fund
period application, or call 1-800-544-6666 for an
authorization form.
(small solid bullet) Changes require a new authorization
form.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY AUTOMATIC EXCHANGE SERVICE
TO MOVE MONEY FROM A FIDELITY MONEY MARKET FUND TO ANOTHER FIDELITY FUND
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, (small solid bullet) To establish, call 1-800-544-6666 after
bimonthly, both accounts are opened.
quarterly, or (small solid 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:
17. 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.
18. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested, but you will be sent a check for each dividend
distribution.
19. CASH OPTION. You will be sent a check for your dividend and capital
gain distributions.
20. 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.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
fund and its investments, and these taxes generally will reduce the fund's
distributions. However, an offsetting tax credit or deduction may be
available to you. If so, your tax statement will show more taxable income
or capital gains than were actually distributed by the fund, but will also
show the amount of the available offsetting credit or deduction.
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.
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. If quotations are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets are valued by a
method that the Board of Trustees believes accurately reflects fair value.
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. Fidelity may only be
liable for losses resulting from unauthorized transactions if it does not
follow 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 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:
(small solid bullet) All of your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
(small solid bullet) Fidelity does not accept cash.
(small solid bullet) When making a purchase with more than one check, each
check must have a value of at least $50.
(small solid bullet) The fund reserves the right to limit the number of
checks processed at one time.
(small solid 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
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.
2.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:
(small solid 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.
(small solid bullet) Fidelity Money Line redemptions generally will be
credited to your bank account on the second or third business day after
your phone call.
(small solid 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.
(small solid 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.
FIDELITY RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of $12.00
from accounts with a value of less than $2,500, subject to an annual
maximum charge of $60.00 per shareholder. It is expected that accounts will
be valued on the second Friday in November of each year. Accounts opened
after September 30 will not be subject to the fee for that year. The fee,
which is payable to the transfer agent, is designed to offset in part the
relatively higher costs of servicing smaller accounts. The fee will not be
deducted from retirement accounts, accounts using regular investment plans,
or if total assets in Fidelity funds exceed $50,000. Eligibility for the
$50,000 waiver is determined by aggregating Fidelity mutual fund accounts
maintained by FSC or FBSI which are registered under the same social
security number or which list the same social security number for the
custodian of a Uniform Gifts/Transfers to Minors Act account.
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:
(small solid bullet) The fund you are exchanging into must be registered
for sale in your state.
(small solid bullet) You may only exchange between accounts that are
registered in the same name, address, and taxpayer identification number.
(small solid bullet) Before exchanging into a fund, read its prospectus.
(small solid 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.
(small solid bullet) Exchanges may have tax consequences for you.
(small solid 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.
(small solid 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.
(small solid 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.
(small solid 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 REAL ESTATE INVESTMENT PORTFOLIO
A FUND OF FIDELITY DEVONSHIRE TRUST
STATEMENT OF ADDITIONAL INFORMATION
MARCH 22, 1995
This Statement is not a prospectus but should be read in conjunction with
the fund's current Prospectus (dated March 22, 1995). Please retain this
document for future reference. The fund's financial statements and
financial highlights included in the Annual Report for the fiscal year
ended January 31, 1995, are 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-395
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"
on page . For the fund's limitations on short sales, see the section
entitled "Short Sales" on page .
DEFINITION OF A COMPANY "PRINCIPALLY ENGAGED" IN THE REAL ESTATE BUSINESS.
FMR determines a company to be principally engaged in the real
estate industry if at least 50% of its assets (marked to market), gross
income, or net profits are attributable to ownership, construction,
management, or sale of residential, commercial or industrial real estate.
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-RELATED INSTRUMENTS. include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings. Real estate-related instruments are sensitive to factors such
as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the management
skill and creditworthiness of the issuer. Real estate-related instruments
may also be affected by tax and regulatory requirements, such as those
relating to the environment.
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 Boards 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, emerging market
securities, 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 was 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 it 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, a fund purchases a
security and simultaneously commits to sell that security back to the
original seller at an agreed-upon price. 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. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security
will be less than the resale price, as well as delays and costs to the fund
in connection with bankruptcy proceedings), it is the fund's current policy
to engage in repurchase transactions with 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 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.
LOWER-QUALITY 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-quality securities that defaulted rose significantly above prior
levels, although the default rate decreased in 1992 and 1993.
The market for lower-quality debt securities may be thinner and less active
than that for higher-quality debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not
available, lower-quality 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-quality debt
securities and the fund's ability to dispose of these securities.
Since the risk of default is higher for lower-quality 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 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 to 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 could 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
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
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 (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. Investing in securities issued by companies or other
issuers whose principal activities are outside the United States may
involve significant risks in addition to the risks inherent in U.S.
investments. The value of securities denominated in foreign currencies and
of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about foreign
issuers' financial condition and operations, particularly those not subject
to the disclosure and reporting requirements of the U.S. securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable
to those applicable to U.S. issuers. Further, economies of particular
countries or areas of the world may differ favorably or unfavorably from
the economy of the United States.
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.
Foreign markets may offer less protection to investors than U.S. markets.
It is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. issuers. Foreign security trading practices,
including those involving securities settlement where fund assets may be
released prior to receipt of payment, may expose a fund to increased risk
in the event of a failed trade or the insolvency of a foreign
broker-dealer, and may involve substantial delays. In addition, the costs
of foreign investing, including withholding taxes, brokerage commissions
and custodial costs, are generally higher than for U.S. investors. In
general, there is less overall governmental supervision and regulation of
securities exchanges, brokers, and listed companies than in the United
States. It may also be difficult to enforce legal rights in foreign
countries.
The fund may invest in foreign securities that impose restrictions on
transfer within the United States 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.
The fund may invest in American Depository Receipts and European Depository
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 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 conduct foreign currency
transactions 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. The fund will convert currency on a spot basis from time to time,
and investors should be aware of the costs of currency conversion. Although
foreign exchange dealers generally do not charge a fee for conversion, they
do realize a profit based on the difference between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to the fund at one rate, while offering a lesser
rate of exchange should the fund desire to resell that currency to the
dealer. Forward contracts are generally 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 for any purpose consistent with
its investment objective. The following discussion summarizes the principal
currency management strategies involving forward contracts that could be
used by the fund. The fund may also use swap agreements, indexed
securities, and options and futures contracts relating to foreign
currencies for the same purposes.
When the fund agrees to buy or sell a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars, of the amount of foreign currency involved in the
underlying security transaction, the fund will be able to protect itself
against an adverse change in foreign currency values between the date the
security is purchased or sold and the date on which payment is made or
received. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge." The fund may 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.
The fund may enter into forward contracts to shift its investment exposure
from one currency into another. This may include shifting exposure from
U.S. dollars to a foreign currency, or from one foreign currency to another
foreign currency. For example, if the fund held investments denominated in
Deutschemarks, the fund could enter into forward contracts to sell
Deutschemarks and purchase Swiss Francs. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is
purchased, much as if the fund had sold a security denominated in one
currency and purchased an equivalent security denominated in another.
Cross-hedges protect against losses resulting from a decline in the hedged
currency, but will cause the fund to assume the risk of fluctuations in the
value of the currency it purchases.
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 funds 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 currency management strategies will depend on FMR's skill
in analyzing and predicting currency values. Currency management strategies
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, a 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 currency management strategies will
be advantageous to the fund or that it will hedge at an appropriate time.
ASSET-BACKED SECURITIES. Asset-backed securities represent interests in
pools of consumer loans (generally unrelated to mortgage loans) and most
often are structured as pass-through securities. Interest and principal
payments ultimately depend upon payment of the underlying loans by
individuals, although the securities may be supported by letters of credit
or other credit enhancements. The value of asset-backed securities may also
depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the
credit enhancement.
MORTGAGE-BACKED SECURITIES. The fund may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed
security may be an obligation of the issuer backed by a mortgage or pool of
mortgages or a direct interest in an underlying pool of mortgages. Some
mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
fund may invest in them if FMR determines they are consistent with the
fund's investment objective and policies.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment
risk. Prepayment, which occurs when unscheduled or early payments are made
on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns.
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 Rule 4.5 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 Composite Index of 500
Stocks (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.
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. If FMR grants investment management authority to the sub-advisors
(see the section entitled "Management Contract"), the sub-advisors are
authorized to place orders for the purchase and sale of portfolio
securities and will do so in accordance with the policies described below.
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. Generally,
commissions for foreign investments traded 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 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, unless certain requirements
are satisfied. Pursuant to such requirements, the Board of Trustees has
authorized FBSI to execute 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 periods ended January 31, 1995 and 1994, the fund's
portfolio turnover rates were 75 % and 110%, respectively. Because a
high turnover rate increases transaction costs and may increase taxable
gains, FMR carefully weighs the anticipated benefits of short-term
investing against these consequences.
For fiscal 1995, 1994, and 1993, the fund paid brokerage commissions of
$1,319,083 , $1,505,683, and $391,489, respectively. The fund pays
both commissions and spreads in connection with the placement of portfolio
transactions; FBSI is paid on a commission basis. During fiscal 1995, 1994,
and 1993, the fund paid brokerage commissions of $448,328 , $355,703,
and $76,672, respectively, to FBSI. During fiscal 1995, this amounted to
approximately 33.99 % of the aggregate brokerage commissions paid by
the fund for transactions involving 40.95 % 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 the low commission rates charged by FBSI.
There were no fees paid to FBSL in fiscal 1995, 1994 , or
1993.
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 and accounts
are managed by the same investment adviser, particularly when the same
security is suitable for the investment objective of more than one fund or
account.
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 procedures believed to be appropriate and equitable for 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.
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
securities 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 two-fold 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.
PERFORMANCE
The fund may quote 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 return
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 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
(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. For the fund's investments
denominated in foreign currencies, income and expenses are calculated first
in their respective currencies, and are then converted to U.S. dollars,
either when they are actually converted or at the end of the 30-day or one
month period, whichever is earlier. Capital gains and losses generally are
excluded from the calculation as are gains and losses from currency
exchange rate fluctuations.
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.
In calculating the fund's yield, the fund may from time to time use a
portfolio security's coupon rate instead of its yield to maturity in order
to reflect the risk premium on that security. This practice will have the
effect of reducing the fund's yield.
Yield information may be useful in reviewing the fund's performance and in
providing a basis for comparison with other investment alternatives.
However, the fund's yield fluctuates, unlike investments that pay a fixed
interest rate over a stated period of time. When comparing investment
alternatives, investors should also note the quality and maturity of the
portfolio securities of respective investment companies they have chosen to
consider.
Investors should recognize that in periods of declining interest rates the
fund's yield will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the fund's yield will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net
new money to the fund from the continuous sale of its shares will likely be
invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of
rising interest rates, the opposite can be expected to occur.
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 net asset
value (NAV) over a stated period. Average annual total 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 total 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 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 31, 1995, the 13-week and 39-week moving
averages were $12.53 and $12.66 , respectively.
HISTORICAL FUND RESULTS. The following table shows the fund's total returns
for periods ended January 31, 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Average Annual Total Returns Cumulative Total Returns
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
One Five Life of One Five Life of
Year Years Fund* Year Years Fund*
-3.23 % 11.25 % 8.27 % -3.23 % 70.43 % 92.09 %
</TABLE>
* From November 17, 1986 (commencement of operations).
The following table shows the income and capital elements of the fund's
cumulative total return. The table compares the fund's return to the record
of the Standard and Poor's Composite Index of 500 Stocks (S&P
500(registered trademark)), the Dow Jones Industrial Average (DJIA), and
the cost of living (measured by the Consumer Price Index, or CPI) over the
same period. The CPI information is as of the month end closest to the
initial investment date for each fund. 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, 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
the period ended January 31, 1995, a hypothetical $10,000 investment in
Fidelity Real Estate Investment Portfolio would have grown to
$ 19,209 , assuming all distributions were reinvested. This was a
period of fluctuating interest rates, bond prices, and stock prices and the
figures below 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**
1995 $ 12,620 $ 6,589 $ 0 $ 19,209 $ 25,032
$ 26,801 $ 13,614
1994 13,680 6,170 0 19,850 24,900 26,990 13,243
1993 13,220 5,142 0 18,362 22,060 21,832 12,917
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
* From 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
$ 15,503 . 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 $ 4,390 for
dividends and $ 0 for capital gains distributions. Tax consequences
of different investments have not been factored into the above figures.
The yield for the S&P 500 for the year ended January 31, 1995 was
2.81 %, 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, 1995. The S&P yield is calculated differently from the fund's
yield. For example, 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 stock, bond, and money market mutual fund
performance indices prepared by Lipper or other organizations. When
comparing these indices, it is important to remember the risk and return
characteristics of each type of investment. For example, while stock mutual
funds may offer higher potential returns, they also carry the highest
degree of share price volatility. Likewise, money market funds may offer
greater stability of principal, but generally do not offer the higher
potential returns from stock mutual funds.
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.
The fund may be compared in advertising to Certificates of Deposit (CDs) or
other investments issued by banks or other depository institutions. Mutual
funds differ from bank investments in several respects. For example, the
fund may offer greater liquidity or higher potential returns than CDs, the
fund does not guarantee your principal or your return, and fund shares are
not FDIC insured.
Fidelity may provide information designed to help individuals understand
their investment goals and explore various financial strategies. Such
information may include information about current economic, market, and
political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance, and
goal setting; questionnaires designed to help create a personal financial
profile; worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return; and action plans offering
investment alternatives. Materials may also include discussions of
Fidelity's 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 or other
goals; charitable giving; and the Fidelity credit card. In addition,
Fidelity may quote or reprint financial or business publications and
periodicals, including model portfolios or allocations, as they relate to
current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques, the desirability
of owning a particular mutual fund, and Fidelity services and products.
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. In advertising, the fund
may also discuss or illustrate examples of interest rate sensitivity.
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, 1995, FMR advised over $ 25 billion in tax-free
fund assets, $ 65 billion in money market fund assets, $ 155
billion in equity fund assets, $ 39 billion in international fund
assets, and $ 20 billion in Spartan fund assets. The fund may
reference the growth and variety of money market mutual funds and the
adviser's innovation and participation in the industry. The equity funds
under management 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. FMR, its
subsidiaries, and affiliates maintain a worldwide information and
communications network for the purpose of researching and managing
investments abroad.
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 1995: New Year's
Day (observed), Presidents Day , Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day. Although FMR expects the same holiday schedule 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 Securities and
Exchange Commission (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. In addition, trading in some of the fund's
portfolio securities may not occur on days when the fund is open for
business.
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 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.
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. Short-term capital gains are
distributed as dividend income. 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.
As of January 31, 1995, the fund had a capital loss carryforward
aggregating approximately $9,421,256, which will expire on January 31,
2003, and is available to offset future capital gains.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities typically at a rate
between 10% and 35%. Foreign governments may also impose taxes on other
payments or gains 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. Generally, the fund will
elect to mark-to-market any PFIC shares. Unrealized gains will be
recognized as income for tax purposes and must be distributed to
shareholders as dividends.
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, and shares may be subject to state and
local personal property taxes. Investors should consult their tax advisers
to determine whether the fund is suitable to their particular tax
situation.
FMR
All of the stock of FMR is owned by FMR Corp., its parent company organized
in 1972. Through ownership of voting common stock and the execution of a
shareholders' voting agreement, Edward C. Johnson 3d, Johnson family
members, and various trusts for the benefit of the Johnson family form a
controlling group with respect to FMR Corp.
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 institutional customers and funds sold
through intermediaries; and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization.
All Fidelity investment personnel may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the funds, establishes procedures for
personal investing and restricts certain transactions. For example,
personal trades in most securities require pre-clearance, and participation
in initial public offerings is prohibited. In addition, restrictions on the
timing of personal investing in relation to trades by Fidelity funds and on
short-term trading have been adopted.
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., 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., 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 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 is a member of 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., and RPM, Inc.
(manufacturer of chemical products, 1990). In addition, he serves as a
Trustee of First Union Real Estate Investments, a Trustee and member of the
Executive Committee of the Cleveland Clinic Foundation, a Trustee and
member of the Executive Committee of University School (Cleveland), and a
Trustee of Cleveland Clinic Florida.
DONALD J. KIRK, One Harborside, 680 Steamboat Road, Greenwich, CT, Trustee,
is Executive-in-Residence (1995) at Columbia University Graduate School of
Business and a financial consultant. From 1987 to January 1995, Mr. Kirk
was a Professor at Columbia University Graduate School of Business. 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, Vice Chairman of the Board of Trustees of the Greenwich Hospital
Association, and as a Member of the Public Oversight Board of the American
Institute of Certified Public Accountants' SEC Practice Section (1995).
*PETER S. LYNCH, Trustee (1990) is Vice Chairman and Director of FMR
(1992). Prior to May 31, 1990, he was a Director of FMR 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) and Morrison Knudsen Corporation (engineering and
construction). In addition, he serves as a Trustee of Boston College,
Massachusetts Eye & Ear Infirmary, Historic Deerfield 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, 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),
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). In
addition, he serves as a Trustee of Corporate Property Investors, the EPS
Foundation at Trinity College, the Naples Philharmonic Center for the Arts,
and Rensselaer Polytechnic Institute, and he is 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., and AppleSouth, Inc. (restaurants, 1992).
WILLIAM J. HAYES, Vice President (1994), is Vice President of Fidelity's
equity funds; Senior Vice President of FMR; and Managing Director of FMR
Corp.
ROBERT H. MORRISON, Manager of Security Transactions of Fidelity's
equity funds, is Vice President of FMR.
BARRY GREENFIELD, Vice President of the fund (1990), is an employee of FMR.
ARTHUR S. LORING, Secretary, is Senior Vice President (1993) and General
Counsel of FMR, Vice President-Legal of FMR Corp., and Vice President and
Clerk of FDC.
STEPHEN P. JONAS, Treasurer (1995), is Treasurer and Vice President of
FMR (1993). Mr. Jonas is also Treasurer of FMR Texas Inc. (1994), Fidelity
Management & Research (U.K.) Inc. (1994), and Fidelity Management &
Research (Far East) Inc. (1994). Prior to becoming Treasurer of FMR, Mr.
Jonas was Senior Vice President, Finance - Fidelity Brokerage Services,
Inc. (1991-1992) and Senior Vice President, Strategic Business Systems -
Fidelity Investments Retail Marketing Company (1989-1991).
JOHN H. COSTELLO, Assistant Treasurer, is an employee of FMR.
LEONARD M. RUSH, Assistant Treasurer (1994), is an employee of FMR (1994).
Prior to becoming Assistant Treasurer of the Fidelity funds, Mr. Rush was
Chief Compliance Officer of FMR Corp. (1993-1994); Chief Financial Officer
of Fidelity Brokerage Services, Inc. (1990-1993); and Vice President,
Assistant Controller, and Director of the Accounting Department - First
Boston Corp. (1986-1990).
The following table sets forth information describing the compensation of
each current non-interested trustee of the fund for his or her services as
trustee for the fiscal year ended January 31, 1995.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
from Benefits as part of Retirement from from the Fund
the Fund the
the Fund Complex*
fund's expenses
Complex*
Accrued from the
Fund Complex*
Ralph F. Cox $ 243 $ 5,200 $ 52,000 $ 125,000
Phyllis Burke Davis 232 5,200 52,000 122,000
Richard J. Flynn 299 0 52,000 154,500
E. Bradley Jones 240 5,200 49,400 123,500
Donald J. Kirk 244 5,200 52,000 125,000
Gerald C. McDonough 244 5,200 52,000 125,000
Edward H. Malone 249 5,200 44,200 128,000
Marvin L. Mann 242 5,200 52,000 125,000
Thomas R. Williams 246 5,200 5 2, 0 00 126,500
</TABLE>
* Information is as of December 31, 1994 for the 206 funds in the
complex.
Under a retirement program adopted in July 1988, the non-interested
Trustees, upon reaching age 72, become eligible to participate in a
retirement program under which they receive payments during their lifetime
from a fund based on their basic trustee fees and length of service. The
obligation of a fund to make such payments are not secured or funded.
Trustees become eligible if, at the time of retirement, they have served on
the Board for at least five years. Currently, Messrs. Ralph S. Saul,
William R. Spaulding, Bertram H. Witham, and David L. Yunich, all former
non-interested Trustees, receive retirement benefits under the program
As of January 31, 1995, 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, was known by the fund to own of record or
beneficially approximately 10.4% of the fund's total outstanding
shares.
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
compensates all officers of the fund and all Trustees who are
"interested persons" of the trust or of FMR, and all personnel of the
fund 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 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 of its proxy material s to shareholders, legal
expenses, and the fees of the custodian, auditor and non-interested
Trustees. Although the fund's current management contract provides
that the fund will pay for typesetting, printing, and mailing prospectuses,
statements of additional information, notices and reports to shareholders,
the Trust , on behalf of the fund 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 .
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 its 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 below on the left. The schedule below on the right,
the effective annual group fee rate at various levels, which is
the result of cumulatively applying the annualized rates below. For
example, the effective annual fee rate at $279 billion of
group net assets - the approximate level for January 1995 - was
.3186 %, which is the weighted average of the respective fee rates
for each level of group net assets up to $279 billion.
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Average Group Effective
Group Annualized Net Annual
Assets Rate Assets Fee Rate
0 - $ 3 billion .5200% $ 0.5 billion .5200%
3 - 6 .4900 25 .4238
6 - 9 .4600 50 .3823
9 - 12 .4300 75 .3626
12 - 15 .4000 100 .3512
15 - 18 .3850 125 .3430
18 - 21 .3700 150 .3371
21 - 24 .3600 175 .3325
24 - 30 .3500 200 .3284
30 - 36 .3450 225 .3253
36 - 42 .3400 250 .3223
42 - 48 .3350 275 .3198
48 - 66 .3250 300 .3175
66 - 84 .3200 325 .3153
84 - 102 .3150 350 .3133
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 .2850
Under the fund's current management contract with FMR, the group fee rate
is based on a schedule with breakpoints ending at .3000% for average group
assets in excess of $174 billion. Prior to March 24, 1993, the group fee
rate breakpoints shown above for average group assets in excess of $138
billion and under $228 billion were voluntarily adopted by FMR, and went
into effect on January 1, 1992. The additional breakpoints shown above for
average group assets in excess of $228 billion were voluntarily adopted by
FMR on November 1, 1993.
On August 1, 1994, FMR voluntarily revised the prior extensions to the
group fee rate schedule, and added new breakpoints. The revised group fee
rate schedule provides for lower management fee rates as FMR's assets under
management increase. The revised group fee rate schedule is identical to
the above schedule for average group assets under $210 billion. For average
group assets in excess of $210 billion, the group fee rate schedule
voluntarily adopted by FMR is as follows:
GROUP FEE RATE SCHEDULE EFFECTIVE ANNUAL FEE RATES
Effective
Average Group Annualized Group Net Annual
Assets Rate Assets Fee Rate
138 - $174 billion .3050% $150 billion .3371%
174 - 210 .3000 175 .3325
210 - 246 .2950 200 .3284
246 - 282 .2900 225 .3249
282 - 318 .2850 250 .3219
318 - 354 .2800 275 .3190
354 - 390 .2750 300 .3163
Over 390 .2700 325 .3137
350 .3113
375 .3090
400 .3067
The individual fund fee rate is .30%. Based on the average net assets of
funds advised by FMR for January 31, 1995, 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
.3186 % + .30% = .6186 %
</TABLE>
One twelfth (1/12) of this annual management fee rate is then applied to
the fund's net assets averaged for the most recent
month, giving a dollar amount , which is the fee for that month.
During the fiscal years ended January 31, 1995, 1994, and 1993, FMR
received $3,108,374 , $2,615,114, and $625,316, respectively, for its
services as investment adviser to the fund. These fees were equivalent to
.62 %, .63%, and .64%, respectively, of the average net assets of the
fund for each of those years.
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, and extraordinary expenses). FMR retains the ability to be
repaid for these expense reimbursements in the amount that expenses fall
below the limit prior to the end of the fiscal year. Expense reimbursements
by FMR will increase the fund's total returns and yield and repayment of
the reimbursement by the fund will lower its total returns and yield.
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 distribution plan expenses and
custodian fees attributable to investments in foreign securities.
SUB-ADVISERS. On behalf of the fund, FMR has entered into
sub-advisory agreements with FMR U.K. and FMR Far East. Pursuant to the
sub-advisory agreements, FMR may receive investment advice and research
services outside the United States from the sub-advisers. On behalf of
the fund, FMR may also 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.
Currently, FMR U.K. and FMR Far East each focus on issuers in countries
other than the United States such as those in Europe, Asia, and the Pacific
Basin.
FMR U.K. and FMR Far East, which were organized in 1986, are wholly
owned subsidiaries of FMR. Under the sub-advisory agreements FMR pays the
fees of FMR U.K. and FMR Far East. For providing non-discretionary
investment advice and research services, FMR pays FMR U.K. and FMR Far East
fees 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.
For providing discretionary investment management and executing portfolio
transactions, FMR pays FMR U.K. and FMR Far East a fee equal to 50% of its
monthly management fee rate with respect to the fund's average net
assets managed by the sub-adviser on a discretionary basis.
For providing investment advice and research services, the fees paid to the
sub-advisers for fiscal 1995, 1994, and 1993 were as follows:
Fiscal Year FMR U.K. FMR Far East
1995 $ 238 $ 334
1994 $ 914 $ 1,465
1993 $ 13 $ 49
DISTRIBUTION AND SERVICE PLAN
The Trustees have app roved a distribution and service plan on behalf
of the fund (the P lan) pursuant to 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 a pproved on behalf of the fund under the
Rule. The Plan, as approved by t h e fund's Board of
Trustees , allow s the fund and FMR to incur certain expenses
that might be considered to constitute indirect payment by the fund of
distribution expenses.
Under the P lan, if the payment of management fees by the fund to FMR
is deemed to be indirect financing by the fund of the distribution of its
shares, such payment is authorized by the P lan. The P lan 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 P lan
provides that FMR may use its resources, including its management fee
revenues, to make payments to third parties that assist 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.
Prior to approving the Plan , the Trustees carefully considered all
pertinent factors relating to the implementation of the P lan prior
to its approval, and have determined that there is a reasonable likelihood
that the P lan will benefit the fund and its shareholders. In
particular, the Trustees noted that the P lan 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 P lan 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.
Furthermore , certain shareholder support services may be provided
more effectively under the P lan by local entities with whom
shareholders have other relationships.
The Plan was approved by shareholders 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. 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.
The fund may execute portfolio transactions with , and purchase
securities issued by , depository institutions that receive payments
under the P lan. No preference for the instruments of such
depository institutions will be shown in the selection of investments.
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.
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 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, 1995, 1994, and 1993, were
$1,557,384 , $1,566,265, and $328,617, 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
$1,718,267 for the fiscal year ended January 31, 1995.
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. The fee rates
for pricing and bookkeeping fees 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 1995, 1994, and 1993, were $297,387, $251,620, and
$60,243, respectively.
FSC also receives fees for administering the fund's securities lending
program. Securities lending fees are based on the number and duration of
individual securities loans. There were no securities lending fees paid
in 1995.
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.
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 March 4, 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 Fund, Spartan Long-Term Government
Bond Fund, Fidelity Mid-Cap Stock Fund, and Spartan 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 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 of net
asset value 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 L.L.P., One Post Office Square, Boston,
Massachusetts, serves as the trust's independent accountant. The auditor
examines financial statements for the funds and provides other audit, tax,
and related services.
FINANCIAL STATEMENTS
The fund's financial statements and financial highlights for the fiscal
year ended January 31, 1995, are included in the fund's Annual Report,
which is a separate report supplied with this Statement of Additional
Information. The fund's financial statements and financial highlights are
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 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
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)(1) Financial Statements for Fidelity Utilities Fund for the fiscal year
ended January 31, 1995 are incorporated herein by reference to the fund's
Statement of Additional Information and were filed on March 15, 1995 for
Fidelity Devonshire Trust (File No. 2-24389) pursuant to Rule 30d-1 under
the Investment Company Act of 1940 and are incorporated herein by
reference.
(2) Financial Statements for Fidelity Equity Income Fund for the fiscal
year ended January 31, 1995 are incorporated herein by reference to the
fund's Statement of Additional Information and were filed on March 15, 1995
for Fidelity Devonshire Trust (File No. 2-24389) pursuant to Rule 30d-1
under the Investment Company Act of 1940 and are incorporated herein by
reference.
(3) Financial Statements for Spartan Long-Term Government Bond Fund for
the fiscal year ended January 31, 1995 are incorporated herein by reference
to the fund's Statement of Additional Information and were filed on March
15, 1995 for Fidelity Devonshire Trust (File No. 2-24389) pursuant to Rule
30d-1 under the Investment Company Act of 1940 and are incorporated herein
by reference.
(4) Financial Statements for Fidelity Mid-Cap Stock Fund for the fiscal
year ended January 31, 1995 are incorporated herein by reference to the
fund's Statement of Additional Information and were filed on March 15, 1995
for Fidelity Devonshire Trust (File No. 2-24389) pursuant to Rule 30d-1
under the Investment Company Act of 1940 and are incorporated herein by
reference.
(5) Financial Statements for Fidelity Real Estate Investment Portfolio for
the fiscal year ended January 31, 1995 are incorporated herein by reference
to the fund's Statement of Additional Information and were filed on March
15, 1995 for Fidelity Devonshire Trust (File No. 2-24389) pursuant to Rule
30d-1 under the Investment Company Act of 1940 and are incorporated herein
by reference.
(b) Exhibits:
1. (a) Amended and Restated Declaration of Trust dated March 17, 1994 is
incorporated herein by reference to Exhibit 1(a) to Post-Effective
Amendment No. 83.
2. (a) Bylaws of the Trust, as amended, are incorporated herein by
reference to Exhibit 2(a) to Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
3. Not applicable.
4. Not applicable.
5. (a) Management Contract dated September 1, 1994 between Fidelity
Utilities Fund and Fidelity Management & Research Company isfiled herein as
Exhibit 5(a).
(b) Management Contract dated December 1, 1993 between Fidelity
Equity-Income Fund and Fidelity Management & Research Company is
incorporated by reference to Exhibit 5(b) to Post-Effective Amendment No.
81.
(c) Management Contract dated April 1, 1993 between Fidelity Real Estate
Investment Portfolio and Fidelity Management & Research Company is
incorporated by reference to Exhibit 5(c) to Post-Effective Amendment No.
81.
(d) Management Contract dated July 19, 1990 between Spartan Long-Term
Government Bond Fund and Fidelity Management & Research Company is filed
herein as Exhibit 5(d).
(e) Form of Management Contract between Spartan Adjustable Rate Government
Fund and Fidelity Management & Research Company was filed as Exhibit 5(e)
to Post-Effective Amendment No. 83.
(f) Management Contract dated February 17, 1994 between Fidelity Mid-Cap
Stock Fund and Fidelity Management & Research Company is incorporated
herein by reference to Exhibit 5(f) to Post-Effective Amendment No. 85.
(g) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (U.K.) Inc., on behalf of Fidelity
Equity-Income Fund, is incorporated by reference to Exhibit 5(g) to
Post-Effective Amendment No. 81.
(h) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (Far East) Inc., on behalf of Fidelity
Equity-Income Fund, is incorporated by reference to Exhibit 5(h) to
Post-Effective Amendment No. 81.
(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
incorporated by reference to Exhibit 5(i) to Post-Effective Amendment No.
81.
(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
incorporated by reference to Exhibit 5(j) to Post-Effective Amendment No.
81.
(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 Fund, is incorporated by reference to
Exhibit 5(k) to Post-Effective Amendment No. 81.
(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 Fund, is incorporated by reference to
Exhibit 5(l) to Post-Effective Amendment No. 81.
(m) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (U.K.) Inc., on behalf of Fidelity
Mid-Cap Stock Fund, is incorporated herein by reference to Exhibit 5(m) to
Post-Effective Amendment No. 84.
(n) Sub-Advisory Agreement between Fidelity Management & Research Company
and Fidelity Management & Research (Far East) Inc., on behalf of Fidelity
Mid-Cap Stock Fund, is incorporated herein by reference to Exhibit 5(n) to
Post-Effective Amendment No. 84.
6. (a) General Distribution Agreement dated April 1, 1987 between Fidelity
Equity-Income Fund and Fidelity Distributors Corporation is filed herein as
Exhibit 6(a).
(b) General Distribution Agreement dated April 1, 1987 between Fidelity
Real Estate Investment Portfolio and Fidelity Distributors Corporation is
filed herein as Exhibit 6(b).
(c) General Distribution Agreement dated April 1, 1987 between Fidelity
Utilities Fund and Fidelity Distributors Corporation is filed herein as
Exhibit 6(c).
(d) General Distribution Agreement dated July 19, 1990 between Spartan
Long-Term Government Bond Fund and Fidelity Distributors Corporation is
filed herein as Exhibit 6(d).
(e) Amendment to the General Distribution Agreement dated January 1, 1988
between Fidelity Utilities Fund, Fidelity Equity-Income Fund and Fidelity
Real Estate Investment Portfolio and Fidelity Distributors Corporation is
filed herein as Exhibit 6(e).
(f) Form of General Distribution Agreement between Spartan Adjustable Rate
Government Fund and Fidelity Distributors Corporation was filed as Exhibit
6(h) to Post-Effective Amendment No. 70.
(g) General Distribution Agreement dated February 17, 1994 between Fidelity
Mid-Cap Stock Fund and Fidelity Distributors Corporation is incorporated
herein by reference to Exhibit 6(h) to Post-Effective Amendment No. 85.
7. Retirement Plan for Non-Interested Person Trustees, Directors or
General Partners, is incorporated herein by reference to Exhibit 7 to
Fidelity Union Street Trust's (File No. 2-50318) Post-Effective Amendment
No. 87.
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 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. Not applicable.
10. Not applicable.
11. Consent of Coopers & Lybrand L.L.P. 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 Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
(b) Fidelity Defined Contribution Retirement Plan and Trust Agreement is
incorporated herein by reference to Exhibit 14(b) to Post-Effective
Amendment No. 67.
(c) Fidelity Defined Benefit Pension Plan and Trust is incorporated herein
by reference to Exhibit 14(c) to Post-Effective Amendment No. 67.
(d) Fidelity Group Individual Retirement Account Custodial Agreement and
Disclosure Statement, 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 Fidelity Union
Street Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(f) Fidelity Master Plan for Savings and Investments 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 is incorporated
herein by reference to Exhibit 14(g) to Post-Effective Amendment No. 67.
(h) Fidelity Institutional Individual Retirement Account Custodial
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(d) to Fidelity Union Street Trust's (File
No. 2-50318) Post-Effective Amendment No. 87.
(i) National Financial Services Corporation Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(h) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(j) Fidelity Portfolio Advisory Services Individual Retirement Account
Custodial Agreement and Disclosure Statement, as currently in effect, is
incorporated herein by reference to Exhibit 14(i) to Fidelity Union Street
Trust's (File No. 2-50318) Post-Effective Amendment No. 87.
(k) Fidelity Investments Section 403(b)(7) Individual Custodial Account
Agreement and Disclosure Statement, as currently in effect, is incorporated
herein by reference to Exhibit 14(j) to Fidelity Union Street Trust's (File
No. 2-50318) Post-Effective Amendment No. 87.
(l) National Financial Services Corporation Defined Contribution Retirement
Plan and Trust Agreement, as currently in effect, is incorporated herein by
reference to Exhibit 14(k) to Fidelity Union Street Trust's (File No.
2-50318) Post-Effective Amendment No. 87.
(m) The CORPORATEplan for Retirement Profit Sharing/401(K) Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(l)
to Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
(n) The CORPORATEplan for Retirement Money Purchase Pension Plan, as
currently in effect, is incorporated herein by reference to Exhibit 14(m)
to Fidelity Union Street Trust's (File No. 2-50318) Post-Effective
Amendment No. 87.
15. (a) Distribution and Service Plan for Spartan Long-Term Government Bond
Fund is filed herein as Exhibit 15(a).
(b) Distribution and Service Plan for Spartan Adjustable Rate Government
Fund is incorporated herein by reference to Exhibit 15(b) to Post-Effective
Amendment No. 83.
(c) Distribution and Service Plan for Fidelity Utilities Fund is
incorporated herein by reference to Exhibit 15(c) to Post-Effective
Amendment No. 81.
(d) Distribution and Service Plan for Fidelity Mid-Cap Stock Fund is
incorporated herein by reference to Exhibit 15(d) to Post-Effective
Amendment No. 84.
(e) Distribution and Service Plan for Fidelity Real Estate Investment
Portfolio isfiled herein as Exhibit 15(e).
16. (a) A schedule for computation of performance quotations for Fidelity
Real Estate Investment Portfolio is filed herein as Exhibit 16(a).
(b) A schedule for computation of Fidelity Real Estate Investment
Portfolio's moving averages is filed herein as Exhibit 16(b).
17. Financial Data Schedules for the funds are filed herein as Exhbit 27.
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, 1995
Title of Class: Shares of Beneficial Interest
Name of Series Number of Record Holders
Spartan Adjustable Rate Government Fund 0
Fidelity Mid-Cap Stock Fund 13,809
Fidelity Equity-Income Fund 786,983
Fidelity Real Estate Investment Portfolio 49,134
Fidelity Utilities Fund 91,420
Spartan Long-Term Government Bond Fund 2,072
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 and Director of FMR.
Robert Beckwitt Vice President of FMR and of funds advised by FMR.
David Breazzano Vice President of FMR (1993) and of a fund advised by
FMR.
Stephan Campbell Vice President of FMR (1993).
Dwight Churchill Vice President of FMR (1993).
William 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.
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.
Michael S. Gray Vice President of FMR and of funds advised by FMR.
Lawrence Greenberg Vice President of FMR (1993).
Barry A. Greenfield Vice President of FMR and of a fund advised by FMR.
William J. Hayes Senior Vice President of FMR; Equity Division Leader.
Robert Haber Vice President of FMR and of funds advised by FMR.
Richard Haberman Senior Vice President of FMR (1993).
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.
Stephen P. Jonas Treasurer and Vice President of FMR (1993) and Treasurer
of the funds advised by FMR (1995); Treasurer of FMR
Texas Inc. (1993), Fidelity Management & Research (U.K.)
Inc. (1993), and Fidelity Management & Research (Far
East) Inc. (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
Division 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.
Malcolm W. MacNaught III Vice President of FMR (1993).
Robert H. Morrison Vice President of FMR and Director of Equity Trading.
David Murphy Vice President of FMR and of funds advised by FMR.
Andrew Offit Vice President of FMR (1993).
Judy Pagliuca Vice President of FMR (1993).
Jacques Perold Vice President of FMR.
Anne Punzak Vice President of FMR and of funds advised by FMR.
Lee Sandwen Vice President of FMR (1993).
Patricia A. Satterthwaite Vice President of FMR (1993) and of a fund advised by
FMR.
Thomas T. Soviero Vice President of FMR (1993).
Robert E. Stansky Senior Vice President of FMR (1993) and of funds advised
by FMR.
Gary L. Swayze Vice President of FMR and of funds advised by FMR; and
Tax-Free Fixed-Income Group Leader.
Thomas Sweeney Vice President of FMR (1993).
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.
Rick Spillane Senior Vice President and Director of Operations and
Compliance of FMR U.K. (1993).
Stephen P. Jonas Treasurer of FMR U.K. (1993), Fidelity Management &
Research (Far East) Inc. (1993), and FMR Texas Inc. (1993);
Treasurer and Vice President of FMR (1993); and Treasurer of
the funds advised by FMR (1995).
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).
Stephen P. Jonas Treasurer of FMR Far East (1993), Fidelity Management
& Research (U.K.) Inc. (1993), and FMR Texas Inc.
(1993); Treasurer and Vice President of FMR (1993);
and Treasurer of the funds advised by FMR (1995).
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.
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
custodian 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
Fidelity Mid-Cap Stock Fund); Brown Brothers Harriman & Co., 40 Water
Street, Boston, MA. (Fidelity Utilities 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 Spartan Adjustable Rate Government Fund, which
need not be certified, within six months of the fund's effectiveness,
unless permitted by the SEC to extend this period.
The Registrant undertakes for Spartan Adjustable Rate Government Fund and
Fidelity Mid-Cap Stock Fund: (1) to call a meeting of shareholders for the
purpose of voting upon the questions of removal of a 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 Fund, Spartan Long-Term
Government Bond Fund, Spartan Adjustable Rate Government Fund, and Fidelity
Mid-Cap Stock Fund, provided the information required by Item 5A is
contained in the annual report, undertakes to furnish each person to whom a
prospectus has been delivered, upon their request and without charge, a
copy of the Registrant's latest 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. 86 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 20th day
of March 1995.
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 20, 1995
Edward C. Johnson 3d (Principal Executive Officer)
</TABLE>
/s/Stephen P. Jonas Treasurer March 20, 1995
Stephen P. Jonas
/s/J. Gary Burkhead Trustee March 20, 1995
J. Gary Burkhead
/s/Ralph F. Cox * Trustee March 20, 1995
Ralph F. Cox
/s/Phyllis Burke Davis * Trustee March 20, 1995
Phyllis Burke Davis
/s/Richard J. Flynn * Trustee March 20, 1995
Richard J. Flynn
/s/E. Bradley Jones * Trustee March 20, 1995
E. Bradley Jones
/s/Donald J. Kirk * Trustee March 20, 1995
Donald J. Kirk
/s/Peter S. Lynch * Trustee March 20, 1995
Peter S. Lynch
/s/Edward H. Malone * Trustee March 20, 1995
Edward H. Malone
/s/Marvin L. Mann_____* Trustee March 20, 1995
Marvin L. Mann
/s/Gerald C. McDonough* Trustee March 20, 1995
Gerald C. McDonough
/s/Thomas R. Williams * Trustee March 20, 1995
Thomas R. Williams
(dagger) Signatures affixed by J. Gary Burkhead pursuant to a power of
attorney dated December 15, 1994 and filed herewith.
* Signature affixed by Robert C. Hacker pursuant to a power of attorney
dated December 15, 1994 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 Annuity Fund Fidelity Income Fund
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 Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
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 Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust 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
</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.
Djinis, 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 fifteenth day of December, 1994.
/s/Edward C. Johnson 3d /s/Donald J. Kirk
Edward C. Johnson 3d Donald J. Kirk
/s/J. Gary Burkhead /s/Peter S. Lynch
J. Gary Burkhead Peter S. Lynch
/s/Ralph F. Cox /s/Marvin L. Mann
Ralph F. Cox Marvin L. Mann
/s/Phyllis Burke Davis /s/Edward H. Malone
Phyllis Burke Davis 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
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 Annuity Fund Fidelity Institutional Trust
Fidelity Advisor Series I Fidelity Investment Trust
Fidelity Advisor Series II Fidelity Magellan Fund
Fidelity Advisor Series III Fidelity Massachusetts Municipal Trust
Fidelity Advisor Series IV Fidelity Money Market Trust
Fidelity Advisor Series V Fidelity Mt. Vernon Street Trust
Fidelity Advisor Series VI Fidelity Municipal Trust
Fidelity Advisor Series VII Fidelity New York Municipal Trust
Fidelity Advisor Series VIII Fidelity Puritan Trust
Fidelity California Municipal Trust Fidelity School Street Trust
Fidelity Capital Trust Fidelity Securities Fund
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 Corporate Trust Fidelity U.S. Investments-Bond Fund, L.P.
Fidelity Court Street Trust Fidelity U.S. Investments-Government Securities
Fidelity Destiny Portfolios Fund, L.P.
Fidelity Deutsche Mark Performance Fidelity Union Street Trust
Portfolio, L.P. Fidelity Yen Performance Portfolio, L.P.
Fidelity Devonshire Trust Spartan U.S. Treasury Money Market
Fidelity Exchange Fund Fund
Fidelity Financial Trust Variable Insurance Products Fund
Fidelity Fixed-Income Trust Variable Insurance Products Fund II
Fidelity Government Securities Fund
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 December 15, 1994
Edward C. Johnson 3d
Exhibit 5(a)
MANAGEMENT CONTRACT
between
FIDELITY DEVONSHIRE TRUST:
Fidelity Utilities Fund
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 1st day of September 1994 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 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
modified December 1, 1993, 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 September 1, 1994 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 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 .5200%
billion
3 - 6 .4900%
6 - 9 .4600%
9 - 12 .4300%
12 - 15 .4000%
15 - 18 .3850%
18 - 21 .3700%
21 - 24 .3600%
24 - 30 .3500%
30 - 36 .3450%
36 - 42 .3400%
42 - 48 .3350%
48 - 66 .3250%
66 - 84 .3200%
84 - 102 .3150%
102 - 138 .3100%
138 - 174 .3050%
174 - 228 .3000%
228 - 282 .2950%
282 - 336 .2900%
over 336 .2850%
(ii) Individual Fund Fee Rate. The Individual Fund fee rate shall be
.20%.
(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 on December 1, 1993. 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 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, 1995
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.
Fidelity DEVONSHIRE TRUST
on behalf of Fidelity Utilities Fund
By /s/J. Gary Burkhead
J. Gary Burkhead
Senior Vice President
Fidelity Management & Research company
By /s/J. Gary Burkhead
J. Gary Burkhead
President
Exhibit 5(d)
MANAGEMENT CONTRACT
between
FIDELITY DEVONSHIRE TRUST:
Spartan Long-Term Government Bond Fund
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 19th day of July 1990, 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 Spartan Long-Term Government Bond Fund (hereinafter
called the "Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called 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 undertakes to pay all expenses involved in the operation
of the Portfolio, except the following, which shall be paid by the
Portfolio: (i) taxes; (ii) the fees and expenses of all Trustees of the
Fund who are not "interested persons" of the Fund or of the Adviser; (iii)
brokerage fees and commissions; (iv) interest expenses with respect to
borrowings by the Portfolio; and (v) such non-recurring and extraordinary
expenses as may arise, including actions, suits or proceedings to which the
Portfolio is or is threatened to be a party and the legal obligation that
the Portfolio may have to indemnify the Fund's Trustees and officers with
respect thereto. It is understood that service charges billed directly to
shareholders of the Portfolio, including charges for exchanges,
redemptions, or other services, shall not be payable by the Adviser, but
may be received and retained by the Adviser or its affiliates.
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. 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, at the annual rate of .65% of
the average daily net assets of the Portfolio (computed in the manner set
forth in the Declaration of Trust) throughout the month; provided that the
fee, so computed, shall be reduced by the compensation, including
reimbursement of expenses, paid by the Portfolio to those Trustees who are
not "interested persons" of the Fund or the Adviser. In case of initiation
or 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. 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.
5. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 5, this Contract shall continue in force until May 31, 1991
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 5, 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.
6. 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 documents 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.
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 Spartan Long-Term Government Bond Fund
By J. Gary Burkhead
Senior Vice President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By J. Gary Burkhead
President
Exhibit 6(a)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY DEVONSHIRE TRUST:
FIDELITY EQUITY-INCOME FUND
and
FIDELITY DISTRIBUTORS CORPORATION
Required authorizations and approvals having been obtained, Fidelity
Devonshire Trust (formerly Fidelity Equity-Income Fund), a Massachusetts
business trust which may issue one or more series of beneficial interest
("Issuer"), with respect to shares of Fidelity Equity-Income Fund, a series
of the Issuer, and Fidelity Distributors Corporation, a Massachusetts
corporation having its principal place of business in Boston, Massachusetts
("Distributors"), hereby consent pursuant to the existing General
Distribution Agreement dated June 1, 1986, to an amendment in its entirety
of said Agreement as of April 1, 1987, as set forth below.
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor
shall be nonexclusive in that the Issuer reserves the right to sell its
shares to investors on applications received and accepted by the Issuer.
Further, the Issuer reserves the right to issue shares in connection with
the merger or consolidation, or acquisition by the Issuer through purchase
or otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by the Distributor or the Issuer will be sold at the
public offering price. The public offering price for all accepted
subscriptions will be the net asset value per share, as determined in the
manner described in the Issuer's current Prospectus and/or Statement of
Additional Information, plus a sales charge (if any) described in the
Issuer's current Prospectus and/or Statement of Additional Information.
The Issuer shall in all cases receive the net asset value per share on all
sales. If a sales charge is in effect, the Distributor shall have the
right subject to such rules or regulations of the Securities and Exchange
Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to
dealers who have sold shares of the Issuer. If a fee in connection with
shareholder redemptions is in effect, the Issuer shall collect the fee on
behalf of Distributors and, unless otherwise agreed upon by the Issuer and
Distributors, Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by the Distributor except such
unconditional orders as may have been placed with the Distributor before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and the Distributor's authority to process orders
for shares on behalf of the Issuer if, in the judgment of the Issuer, it is
in the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate the Distributor to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for the Distributor's use.
This shall not be construed to prevent the Distributor from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer. However, all sums of
money received by the Distributor as a result of such purchases and sales
or a result of such participation must, after reimbursement of actual
expenses of the Distributor in connection with such activity, be paid over
by the Distributor for the benefit of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to the
Distributor copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1988 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to the Distributor, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust of the Issuer and agrees that the obligations assumed by the Issuer
under this contract shall be limited in all cases to the Issuer and its
assets. The Distributor shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Issuer. Nor shall the
Distributor seek satisfaction of any such obligation from the Trustees or
any individual Trustee of the Issuer. The Distributor understands that the
rights and obligations of each series of shares of the Issuer under the
Issuer's Declaration of Trust are separate and distinct from those of any
and all other series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and the Distributor has executed this instrument in its name and behalf,
and its corporate seal affixed, by one of its officers duly authorized, as
of the day and year first above written.
FIDELITY DEVONSHIRE TRUST:
FIDELITY EQUITY-INCOME FUND
Attest: /s/ Arthur S. Loring By /s/ J. Gary Burkhead
Secretary /s/ J. Gary Burkhead
FIDELITY DISTRIBUTORS CORPORATION
Attest: /s/ Arthur S. Loring By /s/ John F. O'Brien
Clerk /s/ John F. O'Brien
Exhibit 6(b)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY DEVONSHIRE TRUST:
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
and
FIDELITY DISTRIBUTORS CORPORATION
Required authorizations and approvals having been obtained, Fidelity
Devonshire Trust (formerly Fidelity Equity-Income Fund), a Massachusetts
business trust which may issue one or more series of beneficial interest
("Issuer"), with respect to shares of Fidelity Real Estate Investment
Portfolio, a series of the Issuer, and Fidelity Distributors Corporation, a
Massachusetts corporation having its principal place of business in Boston,
Massachusetts ("Distributors"), hereby consent pursuant to the existing
General Distribution Agreement dated October 4, 1986, to an amendment in
its entirety of said Agreement as of April 1, 1987, as set forth below.
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor
shall be nonexclusive in that the Issuer reserves the right to sell its
shares to investors on applications received and accepted by the Issuer.
Further, the Issuer reserves the right to issue shares in connection with
the merger or consolidation, or acquisition by the Issuer through purchase
or otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by the Distributor or the Issuer will be sold at the
public offering price. The public offering price for all accepted
subscriptions will be the net asset value per share, as determined in the
manner described in the Issuer's current Prospectus and/or Statement of
Additional Information, plus a sales charge (if any) described in the
Issuer's current Prospectus and/or Statement of Additional Information.
The Issuer shall in all cases receive the net asset value per share on all
sales. If a sales charge is in effect, the Distributor shall have the
right subject to such rules or regulations of the Securities and Exchange
Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to
dealers who have sold shares of the Issuer. If a fee in connection with
shareholder redemptions is in effect, the Issuer shall collect the fee on
behalf of Distributors and, unless otherwise agreed upon by the Issuer and
Distributors, Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by the Distributor except such
unconditional orders as may have been placed with the Distributor before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and the Distributor's authority to process orders
for shares on behalf of the Issuer if, in the judgment of the Issuer, it is
in the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate the Distributor to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for the Distributor's use.
This shall not be construed to prevent the Distributor from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer. However, all sums of
money received by the Distributor as a result of such purchases and sales
or a result of such participation must, after reimbursement of actual
expenses of the Distributor in connection of such activity, be paid over by
the Distributor for the benefit of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to the
Distributor copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1988 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to the Distributor, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust of the Issuer and agrees that the obligations assumed by the Issuer
under this contract shall be limited in all cases to the Issuer and its
assets. The Distributor shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Issuer. Nor shall the
Distributor seek satisfaction of any such obligation from the Trustees or
any individual Trustee of the Issuer. The Distributor understands that the
rights and obligations of each series of shares of the Issuer under the
Issuer's Declaration of Trust are separate and distinct from those of any
and all other series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and the Distributor has executed this instrument in its name and behalf,
and its corporate seal affixed, by one of its officers duly authorized, as
of the day and year first above written.
FIDELITY DEVONSHIRE TRUST:
FIDELITY REAL ESTATE INVESTMENT PORTFOLIO
Attest: /s/ Arthur S. Loring By /s/ J. Gary Burkhead
Secretary /s/ J. Gary Burkhead
FIDELITY DISTRIBUTORS CORPORATION
Attest: /s/ Arthur S. Loring By /s/ John F. O'Brien
Clerk /s/ John F. O'Brien
Exhibit 6(c)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY UTILITIES INCOME FUND
and
FIDELITY DISTRIBUTORS CORPORATION
Required authorizations and approvals having been obtained, Fidelity
Devonshire Trust, a Massachusetts business trust which may issue one or
more series of beneficial interest ("Issuer"), with respect to shares of
Fidelity Utilities Income Fund, a series of the Issuer, and Fidelity
Distributors Corporation, a Massachusetts corporation having its principal
place of business in Boston, Massachusetts ("Distributors"), hereby consent
pursuant to the existing General Distribution Agreement dated October 22,
1987, to an amendment in its entirety of said Agreement as of April 1,
1987, as set forth below.
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor
shall be nonexclusive in that the Issuer reserves the right to sell its
shares to investors on applications received and accepted by the Issuer.
Further, the Issuer reserves the right to issue shares in connection with
the merger or consolidation, or acquisition by the Issuer through purchase
or otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by the Distributor or the Issuer will be sold at the
public offering price. The public offering price for all accepted
subscriptions will be the net asset value per share, as determined in the
manner described in the Issuer's current Prospectus and/or Statement of
Additional Information, plus a sales charge (if any) described in the
Issuer's current Prospectus and/or Statement of Additional Information.
The Issuer shall in all cases receive the net asset value per share on all
sales. If a sales charge is in effect, the Distributor shall have the
right subject to such rules or regulations of the Securities and Exchange
Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to
dealers who have sold shares of the Issuer. If a fee in connection with
shareholder redemptions is in effect, the Issuer shall collect the fee on
behalf of the Distributor and, unless otherwise agreed upon by the Issuer
and Distributors, Distributors shall be entitled to receive all of such
fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by the Distributor except such
unconditional orders as may have been placed with the Distributor before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and Distributor's authority to process orders for
shares on behalf of the Issuer if, in the judgment of the Issuer, it is in
the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate the Distributor to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for the Distributor' use.
This shall not be construed to prevent the Distributor from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer. However, all sums of
money received by the Distributor as a result of such purchases and sales
or as a result of such participation must, after reimbursement of actual
expenses of the Distributor in connection with such activity, be paid over
by the Distributor for the benefit of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to the
Distributor copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
As provided in the Distribution and Service Plan adopted by the Issuer, it
is recognized by the Issuer that FMR may reimburse the Distributor for any
direct expenses incurred in the distribution of shares of the Issuer from
any source available to it, including advisory and service or management
fees paid to it by the Issuer.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. the Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1988 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to the Distributor, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust of the Issuer and agrees that the obligations assumed by the Issuer
under this contract shall be limited in all cases to the Issuer and its
assets. The Distributor shall not seek satisfaction of any such obligation
from the shareholders or any shareholder of the Issuer. Nor shall the
Distributor seek satisfaction of any such obligation from the Trustees or
any individual Trustee of the Issuer. The Distributor understands that the
rights and obligations of each series of shares of the Issuer under the
Issuer's Declaration of Trust are separate and distinct from those of any
and all other series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and the Distributor has executed this instrument in its name and behalf,
and its corporate seal affixed, by one of its officers duly authorized, as
of the day and year first above written.
FIDELITY
UTILITIES INCOME FUND
Attest:/s/ Arthur S. Loring_____________ By:/s/ J. Gary
Burkhead___________________
Arthur S. Loring J. Gary Burkhead
Secretary
FIDELITY
DISTRIBUTORS CORPORATION
Attest:/s/ Arthur S. Loring_____________ By:/s/ John F.
O'Brien__________________
Arthur S. Loring John F. O'Brien
Clerk
Exhibit 6(d)
GENERAL DISTRIBUTION AGREEMENT
between
FIDELITY DEVONSHIRE TRUST
Spartan Long-Term Government Bond Fund
and
FIDELITY DISTRIBUTORS CORPORATION
Agreement made this 19th day of July, 1990, between Fidelity Devonshire
Trust, a Massachusetts business trust having its principal place of
business in Boston, Massachusetts and which may issue one or more series of
beneficial interest ("Issuer"), with respect to shares of Spartan Long-Term
Government Bond Fund, a series of the Issuer, and Fidelity Distributors
Corporation, a Massachusetts corporation having its principal place of
business in Boston, Massachusetts ("Distributors").
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended ("1933 Act"), and of the laws governing the sale of securities in
the various states ("Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as agent on
behalf of the Issuer, shares authorized for issue and registered under the
1933 Act, and (ii) may sell shares under offers of exchange, if available,
between and among the funds advised by Fidelity Management & Research
Company ("FMR").
2. Sale of Shares by the Issuer - The rights granted to the Distributor
shall be nonexclusive in that the Issuer reserves the right to sell its
shares to investors on applications received and accepted by the Issuer.
Further, the Issuer reserves the right to issue shares in connection with
the merger or consolidation, or acquisition by the Issuer through purchase
or otherwise, with any other investment company, trust, or personal holding
company.
3. Shares Covered by this Agreement - This Agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in
the event that in the discretion of the Issuer treasury shares shall be
sold, and shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus and/or Statement of Additional Information, all shares
sold to investors by the Distributor or the Issuer will be sold at the
public offering price. The public offering price for all accepted
subscriptions will be the net asset value per share, as determined in the
manner described in the Issuer's current Prospectus and/or Statement of
Additional Information, plus a sales charge (if any) described in the
Issuer's current Prospectus and/or Statement of Additional Information.
The Issuer shall in all cases receive the net asset value per share on all
sales. If a sales charge is in effect, the Distributor shall have the
right subject to such rules or regulations of the Securities and Exchange
Commission as may then be in effect pursuant to Section 22 of the
Investment Company Act of 1940 to pay a portion of the sales charge to
dealers who have sold shares of the Issuer. If a fee in connection with
shareholder redemptions is in effect, the Issuer shall collect the fee on
behalf of Distributors and, unless otherwise agreed upon by the Issuer and
Distributors, Distributors shall be entitled to receive all of such fees.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by the Distributor except such
unconditional orders as may have been placed with the Distributor before it
had knowledge of the suspension. In addition, the Issuer reserves the
right to suspend sales and the Distributor's authority to process orders
for shares on behalf of the Issuer if, in the judgment of the Issuer, it is
in the best interests of the Issuer to do so. Suspension will continue for
such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Issuer. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. This does not obligate the Distributor to
register as a broker or dealer under the Blue Sky Laws of any jurisdiction
in which it is not now registered or to maintain its registration in any
jurisdiction in which it is now registered. If a sales charge is in
effect, the Distributor shall have the right to enter into sales agreements
with dealers of its choice for the sale of shares of the Issuer to the
public at the public offering price only and fix in such agreements the
portion of the sales charge which may be retained by dealers, provided that
the Issuer shall approve the form of the dealer agreement and the dealer
discounts set forth therein and shall evidence such approval by filing said
form of dealer agreement and amendments thereto as an exhibit to its
currently effective Registration Statement under the 1933 Act.
7. Authorized Representations - The Distributor is not authorized by the
Issuer to give any information or to make any representations other than
those contained in the appropriate registration statements or Prospectuses
and Statements of Additional Information filed with the Securities and
Exchange Commission under the 1933 Act (as these registration statements,
Prospectuses and Statements of Additional Information may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Issuer for the Distributor's use.
This shall not be construed to prevent the Distributor from preparing and
distributing sales literature or other material as it may deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the Distributor may reasonably be expected to sell. The
Issuer shall make available to the Distributor such number of copies of its
currently effective Prospectus and Statement of Additional Information as
the Distributor may reasonably request. The Issuer shall furnish to the
Distributor copies of all information, financial statements and other
papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration
statement, Prospectus and Statement of Additional Information under the
1933 Act and amendments for the issue of its shares, (b) in connection with
the registration and qualification of shares for sale in the various states
in which the Board of Trustees of the Issuer shall determine it advisable
to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Issuer in their capacity as
such, and (d) of preparing, setting in type, printing and mailing
Prospectuses, Statements of Additional Information and any supplements
thereto sent to existing shareholders.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any shares,
based upon the ground that the registration statement, Prospectus,
Statement of Additional Information, shareholder reports or other
information filed or made public by the Issuer (as from time to time
amended) included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make
the statements not misleading under the 1933 Act, or any other statute or
the common law. However, the Issuer does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Issuer by or on behalf of the Distributor. In no case (i)
is the indemnity of the Issuer in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any person against
any liability to the Issuer or its security holders to which the
Distributor or such person would otherwise be subject by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Issuer to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Issuer in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or any such person (or after the Distributor or
such person shall have received notice of service on any designated agent).
However, failure to notify the Issuer of any claim shall not relieve the
Issuer from any liability which it may have to the Distributor or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer shall be
entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any claims,
but if the Issuer elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or
person or persons, defendant or defendants in the suit. In the event the
Issuer elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Issuer does not elect to
assume the defense of any suit, it will reimburse the Distributor, officers
or directors or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of any of the
shares.
The Distributor also covenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each
person, if any, who controls the Issuer within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person acquiring
any shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees or
alleging that the registration statement, Prospectus, Statement of
Additional Information, shareholder reports or other information filed or
made public by the Issuer (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon, and in
conformity with information furnished to the Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Issuer or any person indemnified to be deemed to protect the Issuer
or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Issuer or any person indemnified unless the Issuer or person, as the case
may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon
the Issuer or any such person (or after the Issuer or such person shall
have received notice of service on any designated agent). However, failure
to notify the Distributor of any claim shall not relieve the Distributor
from any liability which it may have to the Issuer or any person against
whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense of any suit brought
to enforce the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by it and satisfactory to
the Issuer, to its officers and Board and to any controlling person or
persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel,
the Issuer or controlling persons, defendant or defendants in the suit,
shall bear the fees and expense of any additional counsel retained by them.
If the Distributor does not elect to assume the defense of any suit, it
will reimburse the Issuer, officers and Board or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. the Distributor agrees to notify
the Issuer promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
12. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force until January
31, 1991 and thereafter from year to year, provided continuance is approved
annually by the vote of a majority of the Board members of the Issuer, and
by the vote of those Board members of the Issuer who are not "interested
persons" of the Issuer and, if a plan under Rule 12b-1 under the Investment
Company Act of 1940 is in effect, by the vote of those Board members of the
Issuer who are not "interested persons" of the Issuer and who are not
parties to the Distribution and Service Plan or this Agreement and have no
financial interest in the operation of the Distribution and Service Plan or
in any agreements related to the Distribution and Service Plan, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this paragraph, the terms "assignment" and "interested persons"
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated by either party upon not less than
sixty days' prior written notice to the other party.
13. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other
party at the last address furnished by the other party to the party giving
notice: if to the Issuer, at 82 Devonshire Street, Boston, Massachusetts,
and if to the Distributor, at 82 Devonshire Street, Boston, Massachusetts.
14. Limitation of Liability - The Distributor is expressly put on notice of
the limitation of shareholder liability as set forth in the Declaration of
Trust or other organizational document of the Issuer and agrees that the
obligations assumed by the Issuer under this contract shall be limited in
all cases to the Issuer and its assets. The Distributor shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Issuer. Nor shall the Distributor seek satisfaction of
any such obligation from the Trustees or any individual Trustee of the
Issuer. The Distributor understands that the rights and obligations of
each series of shares of the Issuer under the Issuer's Declaration of Trust
or other organizational document are separate and distinct from those of
any and all other series.
IN WITNESS WHEREOF, the Issuer has executed this instrument in its name
and behalf, and its seal affixed, by one of its officers duly authorized,
and the Distributor has executed this instrument in its name and behalf by
one of its officers duly authorized, as of the day and year first above
written.
FIDELITY DEVONSHIRE TRUST:
Spartan Long-Term Government Bond Fund
Attest: /s/ Arthur S. Loring By /s/ J. Gary Burkhead
Secretary
FIDELITY DISTRIBUTORS CORPORATION
Attest: /s/ Arthur S. Loring By /s/ Roger A. Lawson
Clerk
Exhibit 6(e)
AMENDMENT TO GENERAL DISTRIBUTION AGREEMENT
Effective January 1, 1988, Paragraph 8 of the General Distribution
Agreement between each of the funds or portfolios indicated on the attached
Schedule A shall be amended to read in full as follows:
8. Portfolio Securities - Portfolio securities of the issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for
transactions in portfolio securities of the Issuer.
Signed on behalf of each of the funds or portfolios identified on Schedule
A.
On Behalf of Each of the Funds or Portfolios:
Attest:/s/ Arthur S. Loring_____________ By:/s/ J. Gary
Burkhead___________________
Arthur S. Loring J. Gary Burkhead
Secretary
FIDELITY
DISTRIBUTORS CORPORATION:
Attest:/s/ Arthur S. Loring_____________ By:/s/ John F.
O'Brien___________________
Arthur S. Loring John F. O'Brien
AMENDMENT TO GENERAL DISTRIBUTION AGREEMENT
SCHEDULE A
California Tax-Free Fund:
High Yield Portfolio
Money Market Portfolio
Insured Portfolio
Fidelity Capital Trust:
Fidelity Capital Appreciation Fund
Fidelity Value Fund
Fidelity Cash Reserves
Fidelity Charles Street Trust:
Fidelity U.S. Government Reserves
Fidelity Stock Index Fund
Fidelity Contrafund
Fidelity Corporate Trust:
ARP (Adjustable-Rate Preferred Portfolio)
APP (Auction Preferred Portfolio)
Fidelity Court Street Trust:
Fidelity High Yield Municipals
Fidelity Connecticut Tax-Free Portfolio
Fidelity New Jersey Tax-Free High Yield Portfolio
Fidelity New Jersey Tax-Free Money Market Portfolio
Fidelity Colorado Tax-Free Portfolio
Fidelity North Carolina Tax-Free Portfolio
Fidelity Virginia Tax-Free Portfolio
Fidelity Georgia Tax-Free Portfolio
Fidelity Maryland Tax-Free Portfolio
Fidelity Missouri Tax-Free Portfolio
Fidelity Daily Income Trust
Daily Money Fund:
Money Market Portfolio
U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
Fidelity Devonshire Trust:
Fidelity Equity-Income Fund
Fidelity Real Estate Investment Portfolio
Fidelity Utilities Income Fund
Equity Portfolio: Growth
Equity Portfolio: Income
Fidelity Fund
Fidelity Financial Trust:
Fidelity Convertible Securities
Fidelity Freedom Fund
Financial Reserves Fund
Fidelity Fixed-Income Trust:
Fidelity Flexible Bond Portfolio
Fidelity Short-Term Bond Portfolio
Fidelity Government Securities fund (a limited partnership)
Fidelity Growth Company Fund
Fidelity High Income Fund
Fidelity Income Fund:
Fidelity Ginnie Mae Portfolio
Fidelity Mortgage Securities Portfolio
Income Portfolios:
GNMA Series
Limited Term Series
Short Fixed-Income Series
Short Government Series
Short-Intermediate Fixed-Income Series
Variable Rate Series
Yield Plus Series
Liquid Assets Series
State and Local Asset Management Series:
Government Money Market Portfolio
Government Bond Portfolio
The California Portfolio
Fidelity Institutional Cash Portfolios:
Money Market Portfolio
U.S. Government Portfolio
U.S. Treasury Portfolio
U.S. Treasury Portfolio II
Domestic Money Market Portfolio
Fidelity Institutional Tax-Exempt Cash Portfolios
Fidelity Institutional Trust
Fidelity U.S. Equity Index Portfolio
Fidelity U.S. Bond Index Portfolio
Fidelity Intermediate Bond Fund
Fidelity Investment Trust:
Fidelity Europe Fund
Fidelity Global Bond Fund
Fidelity International Growth & Income Fund
Fidelity Overseas Fund
Fidelity Pacific Basin Fund
Fidelity Canada Fund
Fidelity United Kingdom Fund
Fidelity Limited Term Municipals
Fidelity Magellan Fund
Fidelity Massachusetts Tax-Free:
Money Market Portfolio
High Yield Portfolio
Fidelity Money Market Trust:
Domestic Money Market Portfolio
U.S. Government Portfolio
U.S. Treasury Portfolio
Fidelity Municipal Trust:
Fidelity Aggressive Tax-Free Portfolio
Fidelity Insured Tax-Free Portfolio
Fidelity Municipal Bond Portfolio
Fidelity Pennsylvania Tax-Free High Yield Portfolio
Fidelity Pennsylvania Tax-Free Money Market Portfolio
Fidelity Ohio Tax-Free Portfolio
Fidelity Michigan Tax-Free Portfolio
Fidelity Minnesota Tax-Free Portfolio
Fidelity Short-Term Tax-Free Portfolio
Fidelity Texas Tax-Free Portfolio
The North Carolina Cash Management Trust:
Cash Portfolio
Term Portfolio
Fidelity New York Tax-Free Fund:
High Yield Portfolio
Insured Portfolio
Money Market Portfolio
Short-Term Portfolio
Fidelity New Jersey Tax-Free Portfolio, L.P.
Plymouth Fund:
Plymouth Aggressive Income Portfolio
Plymouth Government Securities Portfolio
Plymouth Growth Opportunities Portfolio
Plymouth Income & Growth Portfolio
Plymouth Short-Term Bond Portfolio
Plymouth Investment Series:
Plymouth High Income Municipal Portfolio
Plymouth Global Natural Resources Portfolio
Plymouth Securities Trust:
Plymouth Market Access Plus:
Bull Value Portfolio
Plymouth Market Access Plus:
Bear Value Portfolio
Fidelity Puritan Trust:
Fidelity Balanced Fund
Fidelity Puritan Fund
Fidelity Qualified Dividend Fund
Fidelity Securities Fund:
Fidelity Growth & Income Portfolio
Fidelity OTC Portfolio
Fidelity Blue Chip Fund
Fidelity Select Portfolios:
Air Transportation Portfolio
American Gold Portfolio
Automation and Machinery Portfolio
Automotive Portfolio
Biotechnology Portfolio
Broadcast and Media Portfolio
Brokerage and Investment Management Portfolio
Capital Goods Portfolio
Chemicals Portfolio
Computers Portfolio
Defense and Aerospace Portfolio
Electric Utilities Portfolio
Electronics Portfolio
Energy Portfolio
Energy Service Portfolio
Financial Services Portfolio
Food and Agriculture Portfolio
Health Care Portoflio
Health Care Delivery Portfolio (name changed to Medical Delivery
Housing Portfolio Portfolio on 7/10/87)
Industrial Materials Portfolio
Leisure Portfolio
Life Insurance Portfolio
Money Market Portfolio
Paper and Forest Products Portfolio
Precious Metals and Minerals Portfolio
Property and Casualty Insurance Portfolio
Regional Banks Portfolio
Restaurant Industry Portfolio
Fidelity Select Portfolios (cont.)
Retailing Portfolio
Savings and Loan Portfolio
Software and Computer Services Portfolio
Technology Portfolio
Telecommunications Portfolio
Transportation Portfolio
Utilities Portfolio
Fidelity Special Situations Fund
Tax-Exempt Portfolios:
Limited Term Series
Short-Term Intermediate Series
Fidelity Tax-Exempt Money Market Trust
Fidelity Trend Fund
Fidelity U.S. Treasury Money Market Fund, L.P.
Variable Insurance Products Fund:
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Money Market Portfolio
Overseas Portfolio
Fidelity U.S. Investments -
Government Securities Fund, L.P.
Bond Fund, L.P.
Zero Coupon Bond Fund;
The 1993 Portfolio
The 1998 Portfolio
The 2003 Portfolio
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, into the Prospectuses
and Statements of Additional Information in Post-Effective Amendment No. 86
to the Registration Statement on Form N-1A of Fidelity Devonshire Trust:
Fidelity Equity-Income Fund, Fidelity Mid-Cap Stock Fund, Fidelity Real
Estate Investment Portfolio, Fidelity Utilities Fund, and Spartan Long-Term
Government Bond Fund of our reports dated March 7, 1995 on the financial
statements and financial highlights included in the January 31, 1995 Annual
Reports to Shareholders of Fidelity Equity-Income Fund, Fidelity Mid-Cap
Stock Fund, Fidelity Real Estate Investment Portfolio, Fidelity Utilities
Fund, and Spartan Long-Term Government Bond Fund.
We further consent to the references to our Firm under the headings
"Financial Highlights" in the Prospectuses and "Auditor" in the Statements
of Additional Information.
/s/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 16, 1995
Exhibit 15(a)
DISTRIBUTION AND SERVICE PLAN
of Fidelity Devonshire Trust:
Spartan Long-Term Government Bond Fund
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Spartan
Long-Term Government Bond Fund (the "Portfolio"), a series of shares of
Fidelity Devonshire Trust (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until May 31, 1991 and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust or other organizational document, any
obligations assumed by the Portfolio pursuant to this Plan and any
agreements related to this Plan shall be limited in all cases to the
Portfolio and its assets, and shall not constitute obligations of any other
series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 15(e)
DISTRIBUTION AND SERVICE PLAN
of Fidelity Devonshire Trust:
Fidelity Real Estate Investment Portfolio
1. This Distribution and Service Plan (the "Plan"), when effective in
accordance with its terms, shall be the written plan contemplated by Rule
12b-1 under the Investment Company Act of 1940 (the "Act") of Fidelity Real
Estate Investment Portfolio (the "Portfolio"), a series of shares of
Fidelity Devonshire Trust (the "Fund").
2. The Fund has entered into a General Distribution Agreement with respect
to the Portfolio with Fidelity Distributors Corporation (the
"Distributor"), a wholly-owned subsidiary of Fidelity Management & Research
Company (the "Adviser"), under which the Distributor uses all reasonable
efforts, consistent with its other business, to secure purchasers for the
Portfolio's shares of beneficial interest ("shares"). Under the agreement,
the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor,
advertising, and other promotional activities in connection with the
offering of shares of the Portfolio for sale to the public. It is
understood that the Adviser may reimburse the Distributor for these
expenses from any source available to it, including management fees paid to
it by the Portfolio.
3. The Adviser directly, or through the Distributor, may, subject to the
approval of the Trustees, make payments to securities dealers and other
third parties who engage in the sale of shares or who render shareholder
support services, including but not limited to providing office space,
equipment and telephone facilities, answering routine inquiries regarding
the Portfolio, processing shareholder transactions and providing such other
shareholder services as the Fund may reasonably request.
4. The Portfolio will not make separate payments as a result of this Plan
to the Adviser, Distributor or any other party, it being recognized that
the Portfolio presently pays, and will continue to pay, a management fee to
the Adviser. To the extent that any payments made by the Portfolio to the
Adviser, including payment of management fees, should be deemed to be
indirect financing of any activity primarily intended to result in the sale
of shares of the Portfolio within the context of Rule 12b-1 under the Act,
then such payments shall be deemed to be authorized by this Plan.
5. This Plan shall become effective upon the first business day of the
month following approval by a vote of at least a "majority of the
outstanding voting securities of the Portfolio" (as defined in the Act),
the plan having been approved by a vote of a majority of the Trustees of
the Fund, including a majority of Trustees who are not "interested persons"
of the Fund (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements
related to this Plan (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan.
6. This Plan shall, unless terminated as hereinafter provided, remain in
effect from the date specified above until May 31, 1994 and from year to
year thereafter, provided, however, that such continuance is subject to
approval annually by a vote of a majority of the Trustees of the Fund,
including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on this Plan. This Plan may be
amended at any time by the Board of Trustees, provided that (a) any
amendment to authorize direct payments by the Portfolio to finance any
activity primarily intended to result in the sale of shares of the
Portfolio, to increase materially the amount spent by the Portfolio for
distribution, or any amendment of the Management Contract to increase the
amount to be paid by the Portfolio thereunder shall be effective only upon
approval by a vote of a majority of the outstanding voting securities of
the Portfolio, and (b) any material amendments of this Plan shall be
effective only upon approval in the manner provided in the first sentence
in this paragraph.
7. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Independent Trustees or by a vote of
a majority of the outstanding voting securities of the Portfolio.
8. During the existence of this Plan, the Fund shall require the Adviser
and/or Distributor to provide the Fund, for review by the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts expended in connection with financing any activity
primarily intended to result in the sale of shares of the Portfolio (making
estimates of such costs where necessary or desirable) and the purposes for
which such expenditures were made.
9. This Plan does not require the Adviser or Distributor to perform any
specific type or level of distribution activities or to incur any specific
level of expenses for activities primarily intended to result in the sale
of shares of the Portfolio.
10. Consistent with the limitation of shareholder liability as set forth
in the Fund's Declaration of Trust, any obligations assumed by the
Portfolio pursuant to this Plan and any agreements related to this Plan
shall be limited in all cases to the Portfolio and its assets, and shall
not constitute obligations of any other series of shares of the Fund.
11. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
Exhibit 16(a)
SCHEDULE FOR COMPUTATION OF PERFORMANCE CALCULATIONS
CUMULATIVE TOTAL RETURNS and their income and capital components are
described in the fund's Statement of Additional Information, and are based
on the net asset values, dividends, capital gain distributions, and
reinvestment prices of the historical period covered.
AVERAGE ANNUAL RETURNS are calculated according to the following formula:
Average Annual Return = [(1 + Cumulative Return)1/n] - 1
[where n = the number of years in the base period]
Fidelity Real Estate Investment Portfolio
Name: Real Estate (303)
Notes:
Load:
Redemption:
FiscYear: 31-Jan
Cum Total
Pay-date X-Date X-NAV MonthEnd Shares Value
1.00 17-Nov-86 1000.000 10000
1.00 Nov-86 1000.000 10040
1.00 Dec-86 1000.000 9940
1.00 Jan-87 1000.000 10380
1.00 Feb-87 1000.000 10550
16-Mar 10.66 Mar-87 1000.000 10690
1.00 Apr-87 1000.000 10340
1.00 May-87 1000.000 10150
15-Jun 10.28 Jun-87 1000.000 10340
1.00 Jul-87 1000.000 10300
1.00 Aug-87 1000.000 10100
04-Sep 9.88 Sep-87 1000.000 9710
1.00 Oct-87 1000.000 8400
1.00 Nov-87 1000.000 8630
16-Dec 8.63 Dec-87 1000.000 8620
1.00 Jan-88 1000.000 9180
1.00 Feb-88 1000.000 9480
14-Mar 9.33 Mar-88 1000.000 9250
1.00 Apr-88 1000.000 9260
1.00 May-88 1000.000 9040
30-Jun 16-Jun 9.08 Jun-88 1000.000 9190
1.00 Jul-88 1000.000 9230
1.00 Aug-88 1000.000 9140
28-Sep 14-Sep 9.09 Sep-88 1000.000 9130
1.00 Oct-88 1000.000 9050
1.00 Nov-88 1000.000 8920
27-Dec 13-Dec 8.85 Dec-88 1000.000 8920
1.00 Jan-89 1000.000 9010
1.00 Feb-89 1000.000 9040
31-Mar 17-Mar 9.00 Mar-89 1000.000 8970
1.00 Apr-89 1000.000 9210
1.00 May-89 1000.000 9380
28-Jun 14-Jun 9.45 Jun-89 1000.000 9560
1.00 Jul-89 1000.000 10040
1.00 Aug-89 1000.000 10180
27-Sep 13-Sep 9.93 Sep-89 1000.000 9920
1.00 Oct-89 1000.000 9550
1.00 Nov-89 1000.000 9670
21-Dec 07-Dec 9.56 Dec-89 1000.000 9590
1.00 Jan-90 1000.000 9380
1.00 Feb-90 1000.000 9320
21-Mar 12-Mar 9.25 Mar-90 1000.000 9250
1.00 Apr-90 1000.000 9130
1.00 May-90 1000.000 9090
08-Jun 08-Jun 9.08 Jun-90 1000.000 9110
1.00 Jul-90 1000.000 9170
1.00 Aug-90 1000.000 8520
14-Sep 14-Sep 8.38 Sep-90 1000.000 7980
1.00 Oct-90 1000.000 7750
1.00 Nov-90 1000.000 8240
07-Dec 07-Dec 8.22 Dec-90 1000.000 8260
1.00 Jan-91 1000.000 9030
1.00 Feb-91 1000.000 9310
08-Mar 08-Mar 9.35 Mar-91 1000.000 9800
1.00 Apr-91 1000.000 10070
1.00 May-91 1000.000 10310
07-Jun 07-Jun 10.01 Jun-91 1000.000 9860
1.00 Jul-91 1000.000 10070
1.00 Aug-91 1000.000 10120
16-Sep 13-Sep 9.99 Sep-91 1000.000 10290
1.00 Oct-91 1000.000 10120
1.00 Nov-91 1000.000 10020
09-Dec 06-Dec 9.90 Dec-91 1000.000 10940
1.00 Jan-92 1000.000 11600
1.00 Feb-92 1000.000 11350
09-Mar 06-Ma 11.12 Mar-92 1000.000 11160
1.00 Apr-92 1000.000 11000
1.00 May-92 1000.000 11330
15-Jun 12-Jun 11.17 Jun-92 1000.000 11120
1.00 Jul-92 1000.000 11610
1.00 Aug-92 1000.000 11640
14-Sep 11-Sep 11.67 Sep-92 1000.000 11880
1.00 Oct-92 1000.000 12010
1.00 Nov-92 1000.000 12230
14-Dec 11-Dec 12.17 Dec-92 1000.000 12600
1.00 Jan-93 1000.000 13220
1.00 Feb-93 1000.000 13540
08-Mar 05-Mar 13.71 Mar-93 1000.000 14410
1.00 Apr-93 1000.000 13760
1.00 May-93 1000.000 13590
14-Jun 11-Jun 13.40 Jun-93 1000.000 13820
1.00 Jul-93 1000.000 13910
1.00 Aug-93 1000.000 14130
20-Sep 17-Sep 14.36 Sep-93 1000.000 14660
1.00 Oct-93 1000.000 14420
1.00 Nov-93 1000.000 13580
13-Dec 10-Dec 13.40 Dec-93 1000.000 13570
1.00 Jan-94 1000.000 13680
1.00 Feb-94 1000.000 14350
07-Mar 04-Mar 14.10 Mar-94 1000.000 13720
1.00 Apr-94 1000.000 13910
1.00 May-94 1000.000 14210
13-Jun 10-Jun 14.16 Jun-94 1000.000 13660
1.00 Jul-94 1000.000 13630
1.00 Aug-94 1000.000 13570
12-Sep 09-Sep 13.42 Sep-94 1000.000 13280
1.00 Oct-94 1000.000 12750
1.00 Nov-94 1000.000 12300
12-Dec 09-Dec 12.03 Dec-94 1000.000 13200
1.00 Jan-95 1000.000 12620
Value of Value of
Rep Reinvst Reinvst Total
DIV CGLONG CGSHORT NAV Div Cap Gains Value
10.00
10.04 0 0 10040
9.94 0 0 9940
10.38 0 0 10380
10.55 0 0 10550
0.06 10.69 60 0 10750
10.34 58 0 10398
10.15 57 0 10207
0.15 10.34 210 0 10550
10.30 209 0 10509
10.10 205 0 10305
0.15 9.71 348 0 10058
8.40 301 0 8701
8.63 309 0 8939
0.24 8.62 557 0 9177
9.18 593 0 9773
9.48 612 0 10092
0.15 9.25 756 0 10006
9.26 757 0 10017
9.04 739 0 9779
0.15 9.19 915 0 10105
9.23 919 0 10149
9.14 910 0 10050
0.15 9.13 1075 0 10205
9.05 1065 0 10115
8.92 1050 0 9970
0.14 8.92 1208 0 10128
9.01 1220 0 10230
9.04 1224 0 10264
0.14 8.97 1373 0 10343
9.21 1410 0 10620
9.38 1436 0 10816
0.14 9.56 1627 0 11187
10.04 1708 0 11748
10.18 1732 0 11912
0.14 9.92 1852 0 11772
9.55 1783 0 11333
9.67 1805 0 11475
0.12 9.59 1933 0 11523
9.38 1891 0 11271
9.32 1878 0 11198
0.12 9.25 2009 0 11259
9.13 1982 0 11112
9.09 1974 0 11064
0.12 9.11 2125 0 11235
9.17 2139 0 11309
8.52 1987 0 10507
0.12 7.98 2002 0 9982
7.75 1944 0 9694
8.24 2067 0 10307
0.15 8.26 2261 0 10521
9.03 2472 0 11502
9.31 2548 0 11858
0.12 9.80 2843 0 12643
10.07 2921 0 12991
10.31 2990 0 13300
0.12 9.86 3012 0 12872
10.07 3077 0 13147
10.12 3092 0 13212
0.12 10.29 3305 0 13595
10.12 3251 0 13371
10.02 3218 0 13238
0.13 10.94 3704 0 14644
11.60 3927 0 15527
11.35 3843 0 15193
0.12 11.16 3939 0 15099
11.00 3883 0 14883
11.33 3999 0 15329
0.08 11.12 4033 0 15153
11.61 4211 0 15821
11.64 4222 0 15862
0.08 11.88 4420 0 16300
12.01 4468 0 16478
12.23 4550 0 16780
0.15 12.60 4901 0 17501
13.22 5142 0 18362
13.54 5266 0 18806
0.10 14.41 5751 0 20161
13.76 5491 0 19251
13.59 5423 0 19013
0.12 13.82 5688 0 19508
13.91 5725 0 19635
14.13 5816 0 19946
0.12 14.66 6207 0 20867
14.42 6105 0 20525
13.58 5750 0 19330
0.26 13.57 6120 0 19690
13.68 6170 0 19850
14.35 6472 0 20822
0.12 13.72 6357 0 20077
13.91 6445 0 20355
14.21 6584 0 20794
0.13 13.66 6513 0 20173
13.63 6499 0 20129
13.57 6470 0 20040
0.13 13.28 6522 0 19802
12.75 6262 0 19012
12.30 6041 0 18341
0.25 13.20 6892 0 20092
12.62 6589 0 19209
Dividends Cap Gains Cost of
Received Received Reinvst
in Cash in Cash Distrib
0 0 0
0 0 0
0 0 0
0 0 0
60 0 60
60 0 60
60 0 60
210 0 211
210 0 211
210 0 211
360 0 364
360 0 364
360 0 364
600 0 612
600 0 612
600 0 612
750 0 772
750 0 772
750 0 772
900 0 934
900 0 934
900 0 934
1050 0 1099
1050 0 1099
1050 0 1099
1190 0 1256
1190 0 1256
1190 0 1256
1330 0 1415
1330 0 1415
1330 0 1415
1470 0 1576
1470 0 1576
1470 0 1576
1610 0 1740
1610 0 1740
1610 0 1740
1730 0 1882
1730 0 1882
1730 0 1882
1850 0 2027
1850 0 2027
1850 0 2027
1970 0 2173
1970 0 2173
1970 0 2173
2090 0 2321
2090 0 2321
2090 0 2321
2240 0 2508
2240 0 2508
2240 0 2508
2360 0 2661
2360 0 2661
2360 0 2661
2480 0 2816
2480 0 2816
2480 0 2816
2600 0 2973
2600 0 2973
2600 0 2973
2730 0 3144
2730 0 3144
2730 0 3144
2850 0 3305
2850 0 3305
2850 0 3305
2930 0 3413
2930 0 3413
2930 0 3413
3010 0 3522
3010 0 3522
3010 0 3522
3160 0 3728
3160 0 3728
3160 0 3728
3260 0 3867
3260 0 3867
3260 0 3867
3380 0 4035
3380 0 4035
3380 0 4035
3500 0 4204
3500 0 4204
3500 0 4204
3760 0 4574
3760 0 4574
3760 0 4574
3880 0 4748
3880 0 4748
3880 0 4748
4010 0 4939
4010 0 4939
4010 0 4939
4140 0 5131
4140 0 5131
4140 0 5131
4390 0 5503
4390 0 5503
EXHIBIT 16(B)
SCHEDULE FOR THE COMPUTATION OF MOVING AVERAGES
Fidelity Real Estate Investment Portfolio
The 13-week and 39-week moving averages are long-term or weekly moving
averages. As such, they are based upon the closing adjusted NAV (presented
here) on the last business day of each week for the past 13 and 39 weeks
through the last business day of the week closest to the fund's fiscal year
end.
Adjusted Net Asset Value:
Following Day Dividend + Following Day Capital Gains
Current Day Factor = ---------------------------------------------- + 1
(Following Day Factor)
Following Day NAV
Where:
Following Day Factor = 1.0 until the day preceding the first distribution.
Current Day NAV
Adjusted NAV = ---------------
Current Day Factor
13-week Moving Average is calculated as follows:
Sum of the end-of-week Adjusted Navs for the time period
13
39-week Moving Average is calculated as follows:
Sum of the end-of-week Adjusted NAVs for the time period
39
39 Week Moving Averages
ADJUSTED
DATE FACTOR NAV
08-Jan-93 1.443198 8.73
11-Jan-93 1.443198 8.79
12-Jan-93 1.443198 8.81
13-Jan-93 1.443198 8.86
14-Jan-93 1.443198 8.90
15-Jan-93 1.443198 8.95
18-Jan-93 1.443198 9.00
19-Jan-93 1.443198 9.06
20-Jan-93 1.443198 9.06
21-Jan-93 1.443198 9.07
22-Jan-93 1.443198 9.09
25-Jan-93 1.443198 9.12
26-Jan-93 1.443198 9.10
27-Jan-93 1.443198 9.09
28-Jan-93 1.443198 9.08
29-Jan-93 1.443198 9.16
01-Feb-93 1.443198 9.23
02-Feb-93 1.443198 9.24
03-Feb-93 1.443198 9.28
04-Feb-93 1.443198 9.35
05-Feb-93 1.435759 9.41
08-Feb-93 1.435759 9.43
09-Feb-93 1.435759 9.42
10-Feb-93 1.435759 9.42
11-Feb-93 1.435759 9.42
12-Feb-93 1.435759 9.41
15-Feb-93 1.435759 9.31
16-Feb-93 1.435759 9.31
17-Feb-93 1.435759 9.26
18-Feb-93 1.435759 9.28
19-Feb-93 1.435759 9.29
22-Feb-93 1.435759 9.28
23-Feb-93 1.435759 9.31
24-Feb-93 1.435759 9.37
25-Feb-93 1.435759 9.39
26-Feb-93 1.435759 9.43
01-Mar-93 1.435759 9.49
02-Mar-93 1.435759 9.52
03-Mar-93 1.435759 9.56
04-Mar-93 1.435759 9.60
05-Mar-93 1.425363 9.62
08-Mar-93 1.425363 9.72
09-Mar-93 1.425363 9.81
10-Mar-93 1.425363 9.87
11-Mar-93 1.425363 9.89
12-Mar-93 1.425363 9.88
15-Mar-93 1.425363 9.94
16-Mar-93 1.425363 9.97
17-Mar-93 1.425363 9.98
18-Mar-93 1.425363 10.03
19-Mar-93 1.414490 10.12
22-Mar-93 1.414490 10.09
23-Mar-93 1.414490 10.03
24-Mar-93 1.414490 10.01
25-Mar-93 1.414490 10.05
26-Mar-93 1.414490 10.07
29-Mar-93 1.414490 10.05
30-Mar-93 1.414490 10.10
31-Mar-93 1.414490 10.19
01-Apr-93 1.414490 10.17
02-Apr-93 1.414490 10.05
05-Apr-93 1.414490 10.05
06-Apr-93 1.414490 10.03
07-Apr-93 1.414490 10.03
08-Apr-93 1.414490 10.02
09-Apr-93 1.414490 10.02
12-Apr-93 1.414490 10.09
13-Apr-93 1.414490 10.10
14-Apr-93 1.414490 10.10
15-Apr-93 1.414490 10.12
16-Apr-93 1.414490 10.12
19-Apr-93 1.414490 10.10
20-Apr-93 1.414490 10.02
21-Apr-93 1.414490 10.00
22-Apr-93 1.414490 9.95
23-Apr-93 1.414490 9.93
26-Apr-93 1.414490 9.83
27-Apr-93 1.414490 9.71
28-Apr-93 1.414490 9.69
29-Apr-93 1.414490 9.71
30-Apr-93 1.414490 9.73
03-May-93 1.414490 9.72
04-May-93 1.414490 9.76
05-May-93 1.414490 9.77
06-May-93 1.414490 9.76
07-May-93 1.414490 9.73
10-May-93 1.414490 9.71
11-May-93 1.414490 9.69
12-May-93 1.414490 9.73
13-May-93 1.414490 9.70
14-May-93 1.414490 9.69
17-May-93 1.414490 9.67
18-May-93 1.414490 9.65
19-May-93 1.414490 9.64
20-May-93 1.414490 9.66
21-May-93 1.414490 9.54
24-May-93 1.414490 9.53
25-May-93 1.414490 9.52
26-May-93 1.414490 9.56
27-May-93 1.414490 9.54
28-May-93 1.414490 9.61
31-May-93 1.414490 9.61
01-Jun-93 1.414490 9.60
02-Jun-93 1.414490 9.59
03-Jun-93 1.414490 9.56
04-Jun-93 1.414490 9.53
07-Jun-93 1.414490 9.53
08-Jun-93 1.414490 9.49
09-Jun-93 1.414490 9.51
10-Jun-93 1.414490 9.52
11-Jun-93 1.401935 9.56
14-Jun-93 1.401935 9.56
15-Jun-93 1.401935 9.60
16-Jun-93 1.401935 9.64
17-Jun-93 1.401935 9.64
18-Jun-93 1.401935 9.67
21-Jun-93 1.401935 9.67
22-Jun-93 1.401935 9.67
23-Jun-93 1.401935 9.69
24-Jun-93 1.401935 9.72
25-Jun-93 1.401935 9.75
28-Jun-93 1.401935 9.77
29-Jun-93 1.401935 9.77
30-Jun-93 1.401935 9.86
01-Jul-93 1.401935 9.86
02-Jul-93 1.401935 9.86
05-Jul-93 1.401935 9.85
06-Jul-93 1.401935 9.85
07-Jul-93 1.401935 9.86
08-Jul-93 1.401935 9.86
09-Jul-93 1.401935 9.92
12-Jul-93 1.401935 9.96
13-Jul-93 1.401935 9.96
14-Jul-93 1.401935 10.02
15-Jul-93 1.401935 10.03
16-Jul-93 1.401935 10.02
19-Jul-93 1.401935 10.00
20-Jul-93 1.401935 9.96
21-Jul-93 1.401935 9.94
22-Jul-93 1.401935 9.93
23-Jul-93 1.401935 9.92
26-Jul-93 1.401935 9.90
27-Jul-93 1.401935 9.90
28-Jul-93 1.401935 9.91
29-Jul-93 1.401935 9.93
30-Jul-93 1.401935 9.92
02-Aug-93 1.401935 9.91
03-Aug-93 1.401935 9.91
04-Aug-93 1.401935 9.95
05-Aug-93 1.401935 9.91
06-Aug-93 1.269591 10.96
09-Aug-93 1.269591 10.97
10-Aug-93 1.269591 10.93
11-Aug-93 1.269591 10.99
12-Aug-93 1.269591 10.96
13-Aug-93 1.269591 11.00
16-Aug-93 1.269591 11.00
17-Aug-93 1.269591 11.00
18-Aug-93 1.269591 11.00
19-Aug-93 1.269591 11.00
20-Aug-93 1.269591 11.00
23-Aug-93 1.269591 11.00
24-Aug-93 1.269591 11.02
25-Aug-93 1.269591 11.02
26-Aug-93 1.269591 11.06
27-Aug-93 1.269591 11.08
30-Aug-93 1.269591 11.10
31-Aug-93 1.269591 11.13
01-Sep-93 1.269591 11.18
02-Sep-93 1.269591 11.21
03-Sep-93 1.269591 11.21
06-Sep-93 1.269591 11.19
07-Sep-93 1.269591 11.19
08-Sep-93 1.269591 11.17
09-Sep-93 1.269591 11.23
10-Sep-93 1.259939 11.40
13-Sep-93 1.259939 11.46
14-Sep-93 1.259939 11.42
15-Sep-93 1.259939 11.44
16-Sep-93 1.259939 11.44
17-Sep-93 1.249498 11.49
20-Sep-93 1.249498 11.48
21-Sep-93 1.249498 11.41
22-Sep-93 1.249498 11.49
23-Sep-93 1.249498 11.56
24-Sep-93 1.249498 11.56
27-Sep-93 1.249498 11.60
28-Sep-93 1.249498 11.65
29-Sep-93 1.249498 11.67
30-Sep-93 1.249498 11.73
01-Oct-93 1.249498 11.75
04-Oct-93 1.249498 11.79
05-Oct-93 1.249498 11.75
06-Oct-93 1.249498 11.80
07-Oct-93 1.249498 11.77
08-Oct-93 1.249498 11.82
11-Oct-93 1.249498 11.80
12-Oct-93 1.249498 11.84
13-Oct-93 1.249498 11.83
14-Oct-93 1.249498 11.84
15-Oct-93 1.249498 11.88
18-Oct-93 1.249498 11.86
19-Oct-93 1.249498 11.79
20-Oct-93 1.249498 11.78
21-Oct-93 1.24949 11.76
22-Oct-93 1.249498 11.75
25-Oct-93 1.249498 11.74
26-Oct-93 1.249498 11.66
27-Oct-93 1.249498 11.56
28-Oct-93 1.249498 11.53
29-Oct-93 1.249498 11.54
01-Nov-93 1.249498 11.51
02-Nov-93 1.249498 11.52
03-Nov-93 1.249498 11.42
04-Nov-93 1.249498 11.22
05-Nov-93 1.249498 11.24
08-Nov-93 1.249498 11.25
09-Nov-93 1.249498 11.36
10-Nov-93 1.249498 11.34
11-Nov-93 1.249498 11.31
12-Nov-93 1.249498 11.27
15-Nov-93 1.249498 11.16
16-Nov-93 1.249498 11.10
17-Nov-93 1.249498 11.07
18-Nov-93 1.249498 10.96
19-Nov-93 1.249498 10.85
22-Nov-93 1.249498 10.72
23-Nov-93 1.249498 10.76
24-Nov-93 1.249498 10.79
25-Nov-93 1.249498 10.79
26-Nov-93 1.249498 10.83
29-Nov-93 1.249498 10.84
30-Nov-93 1.249498 10.87
01-Dec-93 1.249498 10.88
02-Dec-93 1.249498 10.91
03-Dec-93 1.249498 10.92
06-Dec-93 1.249498 10.97
07-Dec-93 1.249498 11.00
08-Dec-93 1.249498 11.00
09-Dec-93 1.249498 10.97
10-Dec-93 1.139773 11.76
13-Dec-93 1.139773 11.69
14-Dec-93 1.139773 11.59
15-Dec-93 1.139773 11.57
16-Dec-93 1.139773 11.56
17-Dec-93 1.139773 11.54
20-Dec-93 1.139773 11.55
21-Dec-93 1.139773 11.51
22-Dec-93 1.139773 11.56
23-Dec-93 1.139773 11.63
24-Dec-93 1.139773 11.63
27-Dec-93 1.139773 11.63
28-Dec-93 1.139773 11.70
29-Dec-93 1.139773 11.75
30-Dec-93 1.139773 11.74
31-Dec-93 1.139773 11.91
03-Jan-94 1.139773 11.77
04-Jan-94 1.139773 11.77
05-Jan-94 1.139773 11.77
06-Jan-94 1.139773 11.72
07-Jan-94 1.139773 11.76
10-Jan-94 1.139773 11.78
11-Jan-94 1.139773 11.80
12-Jan-94 1.139773 11.84
13-Jan-94 1.139773 11.85
14-Jan-94 1.139773 11.87
17-Jan-94 1.139773 11.91
18-Jan-94 1.139773 11.89
19-Jan-94 1.139773 11.89
20-Jan-94 1.139773 11.85
21-Jan-94 1.139773 11.86
24-Jan-94 1.139773 11.86
25-Jan-94 1.139773 11.84
26-Jan-94 1.139773 11.84
27-Jan-94 1.139773 11.90
28-Jan-94 1.139773 11.91
31-Jan-94 1.139773 12.00
01-Feb-94 1.139773 11.98
02-Feb-94 1.139773 11.96
03-Feb-94 1.139773 11.92
04-Feb-94 1.139773 11.84
07-Feb-94 1.139773 11.92
08-Feb-94 1.139773 11.94
09-Feb-94 1.139773 11.96
10-Feb-94 1.139773 12.00
11-Feb-94 1.139773 12.03
14-Feb-94 1.139773 12.09
15-Feb-94 1.139773 12.13
16-Feb-94 1.139773 12.20
17-Feb-94 1.139773 12.27
18-Feb-94 1.139773 12.30
21-Feb-94 1.139773 12.38
22-Feb-94 1.139773 12.38
23-Feb-94 1.139773 12.48
24-Feb-94 1.139773 12.48
25-Feb-94 1.139773 12.51
28-Feb-94 1.139773 12.59
01-Mar-94 1.139773 12.53
02-Mar-94 1.139773 12.45
03-Mar-94 1.139773 12.42
04-Mar-94 1.130155 12.48
07-Mar-94 1.130155 12.56
08-Mar-94 1.13015 512.56
09-Mar-94 1.130155 12.51
10-Mar-94 1.130155 12.51
11-Mar-94 1.130155 12.54
14-Mar-94 1.130155 12.57
15-Mar-94 1.130155 12.56
16-Mar-94 1.130155 12.57
17-Mar-94 1.130155 12.61
18-Mar-94 1.123092 12.74
21-Mar-94 1.123092 12.73
22-Mar-94 1.123092 12.77
23-Mar-94 1.123092 12.83
24-Mar-94 1.123092 12.80
25-Mar-94 1.123092 12.82
28-Mar-94 1.123092 12.71
29-Mar-94 1.123092 12.57
30-Mar-94 1.123092 12.35
31-Mar-94 1.123092 12.22
01-Apr-94 1.123092 12.02
04-Apr-94 1.123092 12.02
05-Apr-94 1.123092 12.16
06-Apr-94 1.123092 12.31
07-Apr-94 1.123092 12.39
08-Apr-94 1.123092 12.36
11-Apr-94 1.123092 12.39
12-Apr-94 1.123092 12.37
13-Apr-94 1.123092 12.28
14-Apr-94 1.123092 12.27
15-Apr-94 1.123092 12.25
18-Apr-94 1.123092 12.24
19-Apr-94 1.123092 12.18
20-Apr-94 1.123092 12.20
21-Apr-94 1.123092 12.23
22-Apr-94 1.123092 12.28
25-Apr-94 1.123092 12.39
26-Apr-94 1.123092 12.42
27-Apr-94 1.123092 12.42
28-Apr-94 1.123092 12.38
29-Apr-94 1.123092 12.39
02-May-94 1.123092 12.41
03-May-94 1.123092 12.40
04-May-94 1.123092 12.42
05-May-94 1.123092 12.49
06-May-94 1.123092 12.43
09-May-94 1.123092 129
10-May-94 1.123092 12.44
11-May-94 1.123092 12.40
12-May-94 1.123092 12.43
13-May-94 1.123092 12.45
16-May-94 1.123092 12.42
17-May-94 1.123092 12.42
18-May-94 1.123092 12.48
19-May-94 1.123092 12.53
20-May-94 1.123092 12.59
23-May-94 1.123092 12.58
24-May-94 1.123092 12.62
25-May-94 1.123092 12.62
26-May-94 1.123092 12.62
27-May-94 1.123092 12.66
30-May-94 1.123092 12.66
31-May-94 1.123092 12.65
01-Jun-94 1.123092 12.65
02-Jun-94 1.123092 12.67
03-Jun-94 1.123092 12.68
06-Jun-94 1.123092 12.77
07-Jun-94 1.123092 12.78
08-Jun-94 1.123092 12.73
09-Jun-94 1.123092 12.71
10-Jun-94 1.112875 12.72
13-Jun-94 1.112875 12.71
14-Jun-94 1.112875 12.72
15-Jun-94 1.112875 12.76
16-Jun-94 1.112875 12.71
17-Jun-94 1.106587 12.72
20-Jun-94 1.106587 12.63
21-Jun-94 1.106587 12.61
22-Jun-94 1.106587 12.57
23-Jun-94 1.106587 12.52
24-Jun-94 1.106587 12.43
27-Jun-94 1.106587 12.39
28-Jun-94 1.106587 12.28
29-Jun-94 1.106587 12.28
30-Jun-94 1.106587 12.34
01-Jul-94 1.106587 12.40
04-Jul-94 1.106587 12.34
05-Jul-94 1.106587 12.34
06-Jul-94 1.106587 12.35
07-Jul-94 1.106587 12.37
08-Jul-94 1.106587 12.34
11-Jul-94 1.106587 12.37
12-Jul-94 1.106587 12.37
13-Jul-94 1.106587 12.38
14-Jul-94 1.106587 12.45
15-Jul-94 1.106587 12.51
18-Jul-94 1.106587 12.48
19-Jul-94 1.106587 12.42
20-Jul-94 1.106587 12.39
21-Jul-94 1.106587 12.39
22-Jul-94 1.106587 12.34
25-Jul-94 1.106587 12.33
26-Jul-94 1.106587 12.31
27-Jul-94 1.106587 12.27
28-Jul-94 1.106587 12.25
29-Jul-94 1.106587 12.32
01-Aug-94 1.106587 12.32
02-Aug-94 1.106587 12.34
03-Aug-94 1.106587 12.34
04-Aug-94 1.106587 12.35
05-Aug-94 1.036809 13.18
08-Aug-94 1.036809 13.20
09-Aug-94 1.036809 13.17
10-Aug-94 1.036809 13.18
11-Aug-94 1.036809 13.13
12-Aug-94 1.036809 13.13
15-Aug-94 1.036809 13.17
16-Aug-94 1.036809 13.13
17-Aug-94 1.036809 13.12
18-Aug-94 1.036809 13.07
19-Aug-94 1.036809 13.06
22-Aug-94 1.036809 13.06
23-Aug-94 1.036809 13.00
24-Aug-94 1.036809 13.04
25-Aug-94 1.036809 13.04
26-Aug-94 1.036809 13.06
29-Aug-94 1.036809 13.09
30-Aug-94 1.036809 13.07
31-Aug-94 1.036809 13.09
01-Sep-94 1.036809 13.08
02-Sep-94 1.036809 13.10
05-Sep-94 1.036809 13.07
06-Sep-94 1.036809 13.07
07-Sep-94 1.036809 13.11
08-Sep-94 1.036809 13.12
09-Sep-94 1.026862 13.07
12-Sep-94 1.026862 13.07
13-Sep-94 1.026862 13.04
14-Sep-94 1.026862 13.00
15-Sep-94 1.026862 13.10
16-Sep-94 1.020781 13.16
19-Sep-94 1.020781 13.16
20-Sep-94 1.020781 13.08
21-Sep-94 1.020781 13.02
22-Sep-94 1.020781 13.05
23-Sep-91 .020781 13.00
26-Sep-94 1.020781 12.98
27-Sep-94 1.020781 12.96
28-Sep-94 1.020781 12.95
29-Sep-94 1.020781 12.96
30-Sep-94 1.020781 13.01
03-Oct-94 1.020781 12.97
04-Oct-94 1.020781 12.88
05-Oct-94 1.020781 12.77
06-Oct-94 1.020781 12.75
07-Oct-94 1.020781 12.75
10-Oct-94 1.020781 12.77
11-Oct-94 1.020781 12.78
12-Oct-94 1.020781 12.74
13-Oct-94 1.020781 12.75
14-Oct-94 1.020781 12.76
17-Oct-94 1.020781 12.75
18-Oct-94 1.020781 12.73
19-Oct-94 1.020781 12.69
20-Oct-94 1.020781 12.67
21-Oct-94 1.020781 12.59
24-Oct-94 1.020781 12.57
25-Oct-94 1.020781 12.56
26-Oct-94 1.020781 12.56
27-Oct-94 1.020781 12.54
28-Oct-94 1.020781 12.53
31-Oct-94 1.020781 12.49
01-Nov-94 1.020781 12.40
02-Nov-94 1.020781 12.35
03-Nov-94 1.020781 12.35
04-Nov-94 1.020781 12.31
07-Nov-94 1.020781 12.30
08-Nov-94 1.020781 12.27
09-Nov-94 1.020781 12.27
10-Nov-94 1.020781 12.22
11-Nov-94 1.020781 12.20
14-Nov-94 1.020781 12.19
15-Nov-94 1.020781 12.23
16-Nov-94 1.020781 12.21
17-Nov-94 1.020781 12.16
18-Nov-94 1.020781 12.14
21-Nov-94 1.020781 12.05
22-Nov-94 1.020781 11.94
23-Nov-94 1.020781 11.96
24-Nov-94 1.020781 11.96
25-Nov-94 1.020781 12.05
28-Nov-94 1.020781 12.02
29-Nov-94 1.020781 12.01
30-Nov-94 1.020781 12.05
01-Dec-94 1.020781 12.06
02-Dec-94 1.020781 12.04
05-Dec-94 1.020781 12.08
06-Dec-94 1.020781 12.06
07-Dec-94 1.020781 12.03
08-Dec-94 1.020781 12.03
09-Dec-94 1.000000 12.03
12-Dec-94 1.000000 12.13
13-Dec-94 1.000000 12.24
14-Dec-94 1.000000 12.41
15-Dec-94 1.000000 12.71
16-Dec-94 1.000000 12.83
19-Dec-94 1.000000 12.84
20-Dec-94 1.000000 12.84
21-Dec-94 1.000000 12.90
22-Dec-94 1.000000 12.99
23-Dec-94 1.000000 13.00
26-Dec-94 1.000000 13.01
27-Dec-94 1.000000 13.01
28-Dec-94 1.000000 13.02
29-Dec-94 1.000000 13.03
30-Dec-94 1.000000 13.20
02-Jan-95 1.000000 13.04
03-Jan-95 1.000000 13.04
04-Jan-95 1.000000 13.02
05-Jan-95 1.000000 12.96
06-Jan-95 1.000000 12.89
09-Jan-95 1.000000 12.84
10-Jan-95 1.000000 12.80
11-Jan-95 1.000000 12.75
12-Jan-95 1.000000 12.75
13-Jan-95 1.000000 12.82
16-Jan-95 1.000000 12.85
17-Jan-95 1.000000 12.87
18-Jan-95 1.000000 12.86
19-Jan-95 1.000000 12.82
20-Jan-95 1.000000 12.77
23-Jan-95 1.000000 12.67
24-Jan-95 1.000000 12.67
25-Jan-95 1.000000 12.65
26-Jan-95 1.000000 12.60
27-Jan-95 1.000000 12.62
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000035341
<NAME> Fidelity Devonshire Trust
<SERIES>
<NUMBER> 1
<NAME> Fidelity Equity-Income Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> jan-31-1995
<PERIOD-END> jan-31-1995
<INVESTMENTS-AT-COST> 6,933,026
<INVESTMENTS-AT-VALUE> 7,480,424
<RECEIVABLES> 109,590
<ASSETS-OTHER> 1,722
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,591,736
<PAYABLE-FOR-SECURITIES> 134,878
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,401
<TOTAL-LIABILITIES> 152,279
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,768,405
<SHARES-COMMON-STOCK> 240,831
<SHARES-COMMON-PRIOR> 197,293
<ACCUMULATED-NII-CURRENT> 23,329
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 100,504
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 547,219
<NET-ASSETS> 7,439,457
<DIVIDEND-INCOME> 213,119
<INTEREST-INCOME> 74,471
<OTHER-INCOME> 0
<EXPENSES-NET> 48,912
<NET-INVESTMENT-INCOME> 238,678
<REALIZED-GAINS-CURRENT> 367,145
<APPREC-INCREASE-CURRENT> (814,494)
<NET-CHANGE-FROM-OPS> (208,671)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 211,713
<DISTRIBUTIONS-OF-GAINS> 479,855
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 62,796
<NUMBER-OF-SHARES-REDEEMED> 40,568
<SHARES-REINVESTED> 21,310
<NET-CHANGE-IN-ASSETS> 496,186
<ACCUMULATED-NII-PRIOR> 11,687
<ACCUMULATED-GAINS-PRIOR> 238,348
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 31,213
<INTEREST-EXPENSE> 5
<GROSS-EXPENSE> 49,501
<AVERAGE-NET-ASSETS> 7,085,895
<PER-SHARE-NAV-BEGIN> 35.190
<PER-SHARE-NII> 1.020
<PER-SHARE-GAIN-APPREC> (2.120)
<PER-SHARE-DIVIDEND> .980
<PER-SHARE-DISTRIBUTIONS> 2.220
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.890
<EXPENSE-RATIO> 69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000035341
<NAME> Fidelity Devonshire Trust
<SERIES>
<NUMBER> 2
<NAME> Fidelity Real Estate Investment Portfolio
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> jan-31-1995
<PERIOD-END> jan-31-1995
<INVESTMENTS-AT-COST> 493,504
<INVESTMENTS-AT-VALUE> 487,156
<RECEIVABLES> 12,305
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 499,462
<PAYABLE-FOR-SECURITIES> 3,692
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,687
<TOTAL-LIABILITIES> 9,379
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 505,622
<SHARES-COMMON-STOCK> 38,820
<SHARES-COMMON-PRIOR> 31,488
<ACCUMULATED-NII-CURRENT> 2,697
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11,888)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,348)
<NET-ASSETS> 490,083
<DIVIDEND-INCOME> 31,118
<INTEREST-INCOME> 2,496
<OTHER-INCOME> 0
<EXPENSES-NET> 5,171
<NET-INVESTMENT-INCOME> 28,443
<REALIZED-GAINS-CURRENT> (15,434)
<APPREC-INCREASE-CURRENT> (32,917)
<NET-CHANGE-FROM-OPS> (19,908)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 22,874
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 55,659
<NUMBER-OF-SHARES-REDEEMED> 49,888
<SHARES-REINVESTED> 1,562
<NET-CHANGE-IN-ASSETS> 59,479
<ACCUMULATED-NII-PRIOR> 932
<ACCUMULATED-GAINS-PRIOR> (23)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,108
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,333
<AVERAGE-NET-ASSETS> 501,960
<PER-SHARE-NAV-BEGIN> 13.680
<PER-SHARE-NII> .670
<PER-SHARE-GAIN-APPREC> (1.100)
<PER-SHARE-DIVIDEND> .630
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.620
<EXPENSE-RATIO> 103
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000035341
<NAME> Fidelity Devonshire Trust
<SERIES>
<NUMBER> 3
<NAME> Fidelity Utilities Income Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> jan-31-1995
<PERIOD-END> jan-31-1995
<INVESTMENTS-AT-COST> 1,119,417
<INVESTMENTS-AT-VALUE> 1,173,262
<RECEIVABLES> 55,411
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,228,674
<PAYABLE-FOR-SECURITIES> 28,731
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,761
<TOTAL-LIABILITIES> 57,492
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,125,399
<SHARES-COMMON-STOCK> 86,977
<SHARES-COMMON-PRIOR> 91,973
<ACCUMULATED-NII-CURRENT> 3,566
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11,627)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 53,844
<NET-ASSETS> 1,171,182
<DIVIDEND-INCOME> 47,008
<INTEREST-INCOME> 10,615
<OTHER-INCOME> 0
<EXPENSES-NET> 10,554
<NET-INVESTMENT-INCOME> 47,069
<REALIZED-GAINS-CURRENT> 28,774
<APPREC-INCREASE-CURRENT> (168,504)
<NET-CHANGE-FROM-OPS> (92,661)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 45,266
<DISTRIBUTIONS-OF-GAINS> 66,366
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,901
<NUMBER-OF-SHARES-REDEEMED> 56,033
<SHARES-REINVESTED> 7,136
<NET-CHANGE-IN-ASSETS> (285,233)
<ACCUMULATED-NII-PRIOR> 2,616
<ACCUMULATED-GAINS-PRIOR> 35,948
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,430
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,726
<AVERAGE-NET-ASSETS> 1,217,268
<PER-SHARE-NAV-BEGIN> 15.840
<PER-SHARE-NII> .550
<PER-SHARE-GAIN-APPREC> (1.580)
<PER-SHARE-DIVIDEND> .540
<PER-SHARE-DISTRIBUTIONS> .800
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.470
<EXPENSE-RATIO> 87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000035341
<NAME> Fidelity Devonshire Trust
<SERIES>
<NUMBER> 4
<NAME> Spartan Long-Term Government Bond Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> jan-31-1995
<PERIOD-END> jan-31-1995
<INVESTMENTS-AT-COST> 74,860
<INVESTMENTS-AT-VALUE> 74,479
<RECEIVABLES> 3,040
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 77,520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39
<TOTAL-LIABILITIES> 39
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,479
<SHARES-COMMON-STOCK> 7,358
<SHARES-COMMON-PRIOR> 5,284
<ACCUMULATED-NII-CURRENT> 568
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,187)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (379)
<NET-ASSETS> 77,481
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,160
<OTHER-INCOME> 0
<EXPENSES-NET> 410
<NET-INVESTMENT-INCOME> 3,750
<REALIZED-GAINS-CURRENT> (4,830)
<APPREC-INCREASE-CURRENT> (6,957)
<NET-CHANGE-FROM-OPS> (8,037)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,026
<DISTRIBUTIONS-OF-GAINS> 538
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,527
<NUMBER-OF-SHARES-REDEEMED> 13,764
<SHARES-REINVESTED> 311
<NET-CHANGE-IN-ASSETS> 10,178
<ACCUMULATED-NII-PRIOR> 500
<ACCUMULATED-GAINS-PRIOR> 2,245
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 409
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 410
<AVERAGE-NET-ASSETS> 63,050
<PER-SHARE-NAV-BEGIN> 12.740
<PER-SHARE-NII> .513
<PER-SHARE-GAIN-APPREC> (2.093)
<PER-SHARE-DIVIDEND> .530
<PER-SHARE-DISTRIBUTIONS> .100
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.530
<EXPENSE-RATIO> 65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000035341
<NAME> Fidelity Devonshire Trust
<SERIES>
<NUMBER> 5
<NAME> Fidelity Mid-Cap Stock Fund
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> jan-31-1995
<PERIOD-END> jan-31-1995
<INVESTMENTS-AT-COST> 134,602
<INVESTMENTS-AT-VALUE> 135,935
<RECEIVABLES> 9,989
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 145,924
<PAYABLE-FOR-SECURITIES> 5,473
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,284
<TOTAL-LIABILITIES> 7,757
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 136,222
<SHARES-COMMON-STOCK> 12,820
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (2)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 614
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,333
<NET-ASSETS> 138,167
<DIVIDEND-INCOME> 335
<INTEREST-INCOME> 486
<OTHER-INCOME> 0
<EXPENSES-NET> 836
<NET-INVESTMENT-INCOME> (15)
<REALIZED-GAINS-CURRENT> 2,049
<APPREC-INCREASE-CURRENT> 1,333
<NET-CHANGE-FROM-OPS> 3,367
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,422
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,951
<NUMBER-OF-SHARES-REDEEMED> 14,267
<SHARES-REINVESTED> 136
<NET-CHANGE-IN-ASSETS> 138,167
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 321
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 846
<AVERAGE-NET-ASSETS> 61,495
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (.000)
<PER-SHARE-GAIN-APPREC> .920
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .140
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.780
<EXPENSE-RATIO> 161
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
