SPARTAN(registered trademark)
(registered trademark)
LONG-TERM GOVERNMENT BOND
FUND
ANNUAL REPORT
JANUARY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 12 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 16 Notes to the financial statements.
REPORT OF INDEPENDENT 19 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 20
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY
DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR
ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF
PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A
BANK. FOR MORE
INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL
1-800-544-8888 FOR
A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value), and the effect of the $5 account
closeout fee. You can also look at the fund's income to measure
performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1995 PAST 1 LIFE OF
YEAR FUND
Spartan Long-Term Government Bond -12.45% 46.65%
Lehman Brothers Long-Term Government Bond Index -7.54% n/a
Average General U.S. Government Bond Fund -4.25% n/a
Consumer Price Index 2.80% 13.26%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, or since the fund started on
September 28, 1990. For example, if you invested $1,000 in a fund that had
a 5% return over the past year, you would end up with $1,050. You can
compare these figures to the Lehman Brothers Long-Term Government Bond
Index - a broad measure of the performance of long-term government bonds.
To measure how the fund's performance stacked up against its peers, you can
also look at the average general U.S. government bond fund, which currently
reflects the performance of 146 funds tracked by Lipper Analytical
Services. These benchmarks include reinvested dividends and capital gains,
if any. Comparing the fund's performance to the consumer price index (CPI)
helps show how your fund did compared to inflation. (The CPI returns begin
on the month end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1995 PAST 1 LIFE OF
YEAR FUND
Spartan Long-Term Government Bond -12.45% 9.21%
Lehman Brothers Long-Term Government Bond Index -7.54% n/a
Average General U.S. Government Bond Fund -4.25% n/a
Consumer Price Index 2.80% 2.91%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Spartan Long-Term GoLB Long Term Gov't B
09/30/90 10000.00 10000.00
10/31/90 10380.00 10232.00
11/30/90 10820.00 10663.79
12/31/90 11019.82 10876.00
01/31/91 11140.92 11006.51
02/28/91 11161.10 11059.34
03/31/91 11182.92 11102.47
04/30/91 11367.25 11243.48
05/31/91 11377.50 11234.48
06/30/91 11297.11 11150.22
07/31/91 11484.52 11325.28
08/31/91 11901.01 11718.27
09/30/91 12162.30 12088.57
10/31/91 12151.72 12107.91
11/30/91 12299.78 12173.29
12/31/91 12934.77 12909.77
01/31/92 12587.53 12504.41
02/29/92 12674.34 12580.68
03/31/92 12576.86 12444.81
04/30/92 12631.97 12431.12
05/31/92 12940.60 12784.17
06/30/92 13117.72 12964.42
07/31/92 13543.77 13507.63
08/31/92 13577.41 13600.84
09/30/92 13745.02 13806.21
10/31/92 13505.68 13516.28
11/30/92 13653.85 13578.45
12/31/92 13976.82 13954.58
01/31/93 14343.39 14352.28
02/28/93 14780.90 14840.26
03/31/93 14944.93 14875.88
04/30/93 15017.01 14985.96
05/31/93 15065.07 15035.41
06/30/93 15588.43 15675.92
07/31/93 15893.61 15939.28
08/31/93 16394.10 16594.38
09/30/93 16563.72 16649.14
10/31/93 16737.16 16772.34
11/30/93 16192.06 16337.94
12/31/93 16304.31 16388.59
01/31/94 16751.37 16780.28
02/28/94 15725.77 16092.28
03/31/94 14897.33 15384.22
04/30/94 14586.69 15201.15
05/31/94 14262.54 15096.26
06/30/94 14166.33 14948.32
07/31/94 14616.27 15459.55
08/31/94 14493.56 15340.51
09/30/94 14029.85 14855.75
10/31/94 13974.77 14800.79
11/30/94 14057.38 14894.03
12/31/94 14305.53 15121.91
01/31/95 14667.70 15510.00
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Spartan
Long-Term Government Bond Fund on September 30, 1990, shortly after the
fund started. As the chart shows, by January 31, 1995, the value of your
investment, with dividends reinvested would have grown to $14,668 - a
46.68% increase on your initial investment. This assumes you still owned
the fund on January 31, 1995 and therefore does not include the effect of
the $5 account closeout fee. For comparison, look at how the Lehman
Brothers Long-Term Government Bond Index did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$15,510 - a 55.10% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
YEARS ENDED JANUARY 31, FROM
SEPTEMBER 28,
1990 TO
1995 1994 1993 1992 JANUARY 31, 1991
Dividend return 4.13% 7.14% 7.69% 7.15% 1.01%
Capital appreciation -16.58% 9.63% 6.24% 5.82% 10.38%
return
Total return -12.45% 16.77% 13.93% 12.97% 11.39%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested. Capital appreciation and total returns include the effect of
the $5 account closeout fee on an average sized account.
DIVIDENDS AND YIELD
PERIODS ENDED JANUARY 31, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share - 22.00(cents) 52.00(cents)
Annualized dividend rate - 4.24% 4.88%
30-day annualized yield 7.16% - -
DIVIDENDS per share show the income paid by the fund for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average share price of $10.30 over the past six months and
$10.66 over the past year, you can compare the fund's income over these two
periods. The 30-day annualized YIELD is a standard formula for all funds
based on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds from
different companies on an equal basis.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Although there was a small bond
market rally in January, sharply
rising interest rates caused a severe
downturn in U.S. bond markets
during the 12 months ended
January 31, 1995. Yields rose
sharply - and prices fell - on
virtually all types of fixed-income
investments. For the 12 months
ended January 31, 1995, the
Lehman Brothers Aggregate Bond
Index - a broad measure of
taxable bonds in the U.S. bond
market - had a total return of
- -2.31%. The Federal Reserve
Board raised the federal funds rate
- - the rate banks charge each other
for overnight loans - from 3.00% to
5.50% from February to
November, causing other interest
rates to rise. The Fed was hoping
to head off future inflation that might
be triggered by an improving U.S.
economy. The resulting higher
rates slowed refinancing activity in
mortgage-backed securities,
helping them to outperform
comparable Treasury bonds. The
Salomon Brothers Mortgage Index
returned -0.23% during the
period. Interest rate increases in
many foreign bond markets
followed the rate hikes in the U.S.
Weakness in the U.S. dollar,
however, helped the Salomon
Brothers World Government Bond
Index - which measures bond
market performance in the
developed world, including the
U.S. - to post a 3.66% return.
The JP Morgan Emerging Markets
Bond Index was down 21.71%, on
the heels of market corrections in
many emerging markets earlier in
the year and Mexico's devaluation
of the peso in December.
An interview with Curt Hollingsworth, Portfolio Manager of Fidelity Spartan
Long-Term Government Bond Fund
Q. CURT, HOW HAS THE FUND PERFORMED?
A. It has been a difficult year for the fund. For the 12 months ended
January 31, 1995, the fund had a total return of -12.45%. According to
Lipper Analytical Services, the average general U.S. government bond fund
had a total return of -4.25%.
Q. WHAT CAUSED THE FUND TO SHARPLY UNDERPERFORM THE AVERAGE FUND?
A. There were two reasons. First, the funds included in Lipper's average
U.S. government bond fund category had an average duration that was much
shorter than the duration of this fund. Duration is a measure of a fund's
sensitivity to changes in interest rates. The longer the duration, the more
sensitive a fund is to interest rate changes. Since many of the funds in
the Lipper category aren't focused on longer-term bonds, the average
duration of funds in this category was around five years. However, this
fund, with its long-term focus, had a duration closer to 10 years. That
means the fund was about twice as interest-rate sensitive as the funds it
was compared to. Second, the fund's performance was hurt by a strategy that
didn't work as I intended in a rising interest rate environment.
Q. WHAT STRATEGY WAS THAT?
A. In October 1993, the fund began using a strategy called duration
averaging. This strategy was designed to profit from the long-term cyclical
nature of interest rates. Using this strategy, I would lengthen the average
duration of the fund after a rise in interest rates, causing it to become
more aggressively positioned for a drop in interest rates. Conversely, I
would invest in bonds with shorter maturities if interest rates fell,
causing the fund to become more defensive by positioning it for rising
interest rates.
Q. INTEREST RATES HAVE CLIMBED STEADILY OVER THE YEAR. WHAT EFFECT DID THAT
HAVE?
A. The interest rate environment was especially difficult for a longer-term
bond fund, because its share price is extremely sensitive to changes in
interest rates. Using duration averaging, as rates started going up more
and more, the fund's duration got longer and longer, making it more
vulnerable to each rate increase.
Q. ARE YOU STILL USING DURATION AVERAGING?
A. No. I stopped using this strategy in the summer of 1994, because I
didn't believe it would lead to a return advantage in the foreseeable
future. Instead, I believe success in this environment will be achieved
through sector and security selection, while maintaining a duration neutral
approach. I'm seeking to match the fund's duration to that of a government
bond index. I believe it is equally likely that interest rates will go up
or down over the next year, so for me to invest based on what I think will
happen with interest rates would not be as constructive as focusing on
adding value by investing in cheap individual securities.
Q. WHAT CAN YOU TELL US ABOUT THE STRUCTURE OF THE FUND?
A. At the end of the period, the fund had a very simple portfolio
structure. More than 98% of the fund's investments was in U.S. Treasury
bonds, with very small percentages in U.S. government agency issues and
short-term cash investments. My feeling was that the Treasuries were more
attractive than other options. As far as choosing Treasuries is concerned,
I've underweighted the fund in what are known as "current" 30-year Treasury
bonds. These are bonds that have been on the market for no more than three
months, having been issued at one of the bond auctions that occurs
quarterly. These current bonds typically trade at lower yields - and higher
prices - than older 30-year bonds. That's because they're more easily
tradable, making bond traders - who earn money simply by buying and selling
securities - more willing to pay a premium for them. Of course, paying a
premium doesn't make sense for the fund, because its goal is to provide
income and to increase the value of the fund's shares, with a much longer
time frame than that of bond traders. Over the past several years, as
current long bonds have become older, the yields they offer have grown and
their prices have fallen. This change gradually evolves over a bond's first
year, and that's when they become more attractive for the fund to own.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Real yields - Treasury yields adjusted for inflation - were fairly
attractive at the end of the period. Thirty-year bonds were yielding
roughly 7.8%, with inflation running at about 2.8% for the past 12 months.
That gives you a real yield of about 5%, which is very attractive by
historical standards. One of two things may occur to change the situation.
Inflation may accelerate to narrow the real yield. Or, long-term Treasury
yields may fall, having the same effect. Of course, it's also possible that
real yields could move even higher over the near term.
FUND FACTS
GOAL: to provide income and
increase the value of the
fund's shares by investing
mainly in long-term U.S.
government and government
agency securities.
START DATE: September 28,
1990
SIZE: as of January 31, 1995,
more than $77 million
MANAGER: Curt Hollingsworth,
since 1993; manager, Spartan
Short-Intermediate
Government Fund, since
1992; Fidelity
Short-Intermediate
Government Fund, since
1991; Spartan Limited Maturity
Government Fund, since
1988; joined Fidelity in 1983
(checkmark)
CURT HOLLINGSWORTH ON
LONG-TERM INVESTING:
"It's important to stress that -
being a fund that invests in
bonds with longer maturities
- - Spartan Long-Term
Government Bond Fund can
have more volatility than
other, shorter-term bond
funds. The fund has a
duration - a measure of
interest rate sensitivity - of
about 10 years. That means
- - other things being equal -
if rates rose 1%, the fund's
share price would probably
drop approximately 10%.
Looking at the past year, one
would say that interest rates
easily could rise or fall 1% in
the coming year.
"It's crucial for investors in this
fund to have a longer-term
investing horizon. If they do,
the fund should allow them to
secure today's higher yields for
a fair amount of time. Investors
with a long-term horizon
actually may be exposed to a
different type of risk in a
shorter-term fund -
reinvestment risk, which is the
risk that an investor might not
be able to reinvest short-term
returns at attractive rates.
"This is a long-term
government bond fund. As a
result, its share price is
especially sensitive to interest
rate changes. Investors in the
fund should be clear about
that, and should invest in the
fund for the long haul."
INVESTMENT CHANGES
TOP ISSUERS AS OF JANUARY 31, 1995
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
U.S. Treasury 98.1 80.8
Tennessee Valley Authority
(U.S. Government Agency) 0.9 1.2
EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF JANUARY 31, 1995
6 MONTHS AGO
Years 22.2 22.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL THE PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF JANUARY 31, 1995
6 MONTHS AGO
Years 9.7 10.2
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF JANUARY 31, 1995 AS OF JULY 31, 1994
Row: 1, Col: 1, Value: 1.6
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 50.0
U.S. Treasury
obligations 80.8%
U.S. government
agency
obligations 19.2%
Short-term
investments 0.0%
U.S. Treasury
obligations 98.1%
U.S. government
agency
obligations 0.9%
Short-term
investments 1.0%
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 19.2
Row: 1, Col: 3, Value: 80.8
INVESTMENTS JANUARY 31, 1995
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 99.0%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 98.1%
12 3/4%, 11/15/10 $ 3,200,000 $ 4,350,496
8 7/8%, 8/15/17 60,175,000 66,897,751
9 1/8%, 5/15/18 1,600,000 1,825,500
TOTAL U.S. TREASURY OBLIGATIONS 73,073,747
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.9%
Tennessee Valley Authority:
8 1/4%, 4/15/42 (Callable 2012) 500,000 487,725
6 7/8%, 12/15/43 200,000 164,068
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 651,793
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $74,107,067) 73,725,540
REPURCHASE AGREEMENTS - 1.0%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 5.81%
dated 1/31/95 due 2/1/95 $ 753,122 753,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $74,860,067) $ 74,478,540
INCOME TAX INFORMATION
At January 31,1995, the aggregate cost of investment securities for income
tax purposes was $74,962,285. Net unrealized depreciation aggregated
$483,745, of which $489,166 related to appreciated investment securities
and $972,911 related to depreciated investment securities.
At January 31, 1995, the fund had a capital loss carryforward of
approximately $3,934,668 which will expire on January 31, 2003.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 74,478,540
agreements of $753,000) (cost $74,860,067) -
See accompanying schedule
Cash 731
Receivable for fund shares sold 458,089
Interest receivable 2,583,082
TOTAL ASSETS 77,520,442
LIABILITIES
Dividends payable $ 278
Accrued management fee 38,964
TOTAL LIABILITIES 39,242
NET ASSETS $ 77,481,200
Net Assets consist of:
Paid in capital $ 81,478,947
Undistributed net investment income 567,963
Accumulated undistributed net realized gain (loss) on (4,186,986)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (378,724)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 7,358,093 shares outstanding $ 77,481,200
NET ASSET VALUE, offering price and redemption price per $10.53
share ($77,481,200 (divided by) 7,358,093 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED JANUARY 31, 1995
INVESTMENT INCOME 4,160,118
Interest
EXPENSES
Management fee $ 409,492
Non-interested trustees' compensation 335
TOTAL EXPENSES 409,827
NET INVESTMENT INCOME 3,750,291
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (4,133,739)
Foreign currency transactions (696,101) (4,829,840)
Change in net unrealized appreciation (depreciation) on:
Investment securities (7,126,787)
Assets and liabilities in foreign currencies 169,728 (6,957,059)
NET GAIN (LOSS) (11,786,899)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (8,036,608)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 3,750,291 $ 5,493,483
Net investment income
Net realized gain (loss) (4,829,840) 5,465,921
Change in net unrealized appreciation (depreciation) (6,957,059) 2,639,826
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (8,036,608) 13,599,230
FROM OPERATIONS
Distributions to shareholders: (3,025,880) (5,701,388)
From net investment income
From net realized gain (538,147) (2,855,797)
TOTAL DISTRIBUTIONS (3,564,027) (8,557,185)
Share transactions 165,444,920 131,601,595
Net proceeds from sales of shares
Reinvestment of distributions 3,354,463 8,169,134
Cost of shares redeemed (147,021,095) (160,517,979)
Net increase (decrease) in net assets resulting from 21,778,288 (20,747,250)
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 10,177,653 (15,705,205)
NET ASSETS
Beginning of period 67,303,547 83,008,752
End of period (including undistributed net investment $ 77,481,200 $ 67,303,547
income of $567,963 and $499,970, respectively)
OTHER INFORMATION
Shares
Sold 15,527,302 10,329,522
Issued in reinvestment of distributions 311,436 649,261
Redeemed (13,764,302) (12,536,136)
Net increase (decrease) 2,074,436 (1,557,353)
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JANUARY 31, SEPTEMBER 28,
1990
(COMMENCEMENT
OF
OPERATIONS) TO
JANUARY 31,
1995 1994 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, $ 12.740 $ 12.130 $ 11.600 $ 11.040 $ 10.000
beginning of period
Income from Investment .513 .847 .847 .776 .144
Operations
Net investment income
Net realized and (2.093) 1.123 .703 .604 .996
unrealized gain
(loss)
Total from investment (1.580) 1.970 1.550 1.380 1.140
operations
Less Distributions (.530) C (.840) (.840) (.740) (.100)
From net investment
income
From net realized gain (.100) C (.520) (.180) (.080) -
on investments
Total distributions (.630) (1.360) (1.020) (.820) (.100)
Net asset value, end $ 10.530 $ 12.740 $ 12.130 $ 11.600 $ 11.040
of period
TOTAL RETURN B (12.44)% 16.79% 13.95% 12.98% 11.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 77,481 $ 67,304 $ 83,009 $ 62,992 $ 33,833
(000 omitted)
Ratio of expenses to .65% .65% .65% .65% .65% A
average net assets
Ratio of net investment 5.95% 6.41% 7.35% 7.30% 7.26% A
income to average
net assets
Portfolio turnover rate 422% 153% 135% 335% 256% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ACCOUNT CLOSEOUT FEE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES. SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1995
1. SIGNIFICANT ACCOUNTING
POLICIES.
Spartan Long-Term Government Bond Fund (the fund) is a fund of Fidelity
Devonshire Trust (the trust) and is authorized to issue an unlimited number
of shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. Securities for which quotations are not readily
available through the pricing service are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective February 1, 1994, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, market discount, foreign currency
transactions and losses deferred due to wash sales. The fund also utilized
earnings and profits distributed to shareholders on redemption of shares as
a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $280,619,737 and $258,201, 513 respectively, of which U.S.
government and government agency obligations aggregated $280,349,321 and
$257,926,087, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses. FMR receives a fee that is computed daily at an annual rate of
.65% of the fund's average net assets.
FMR also bears the cost of providing shareholder services to the fund. To
offset the cost of providing these services, FMR or its affiliates collect
certain transaction fees from the fund's shareholders which amounted to
$9,226 for the period.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Spartan Long-Term Government Bond Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Trust: Spartan Long-Term Government Bond Fund,
including the schedule of portfolio investments, as of January 31, 1995,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the four years in the
period then ended and for the period September 28, 1990 (commencement of
operations) to January 31, 1991. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1995 by correspondence with the
custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Trust: Spartan Long-Term Government Bond Fund as of
January 31, 1995, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the four years in the
period then ended and for the period September 28, 1990 (commencement of
operations) to January 31, 1991, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 7, 1995
DISTRIBUTIONS
A total of 95.93% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
The fund will notify shareholders in January 1996 of the applicable
percentage for use in preparing 1995 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Curtis Hollingsworth, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY'S TAXABLE BOND FUNDS
Capital & Income
Ginnie Mae
Global Bond
Government Securities
Intermediate Bond
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Intermediate Government
Short-Term Bond
Short-Term World Income
Spartan(registered trademark) Ginnie Mae
Spartan Government Income
Spartan High Income
Spartan Investment Grade Bond
Spartan Limited Maturity
Government
Spartan Long-Term Government Bond
Spartan Short-Intermediate
Government
Spartan Short-Term Income
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
FIDELITY
(registered trademark)
REAL ESTATE INVESTMENT
PORTFOLIO
ANNUAL REPORT
JANUARY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 14 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 18 Notes to the financial statements.
REPORT OF INDEPENDENT 22 The auditors' opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND ARE
SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR
FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY
FIDELITY FUND,
INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS.
READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JANUARY 31, PAST 1 PAST 5 LIFE OF
1995 YEAR YEARS FUND
Real Estate Investment -3.23% 70.43% 92.09%
S&P 500(registered trademark) 0.53% 66.90% 150.32%
Average Real Estate -7.77% 39.47% n/a
Fund
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on November 17, 1986. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, you would end up with $1,050.
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks - a common proxy for the U.S. stock market.
To measure how the fund's performance stacked up against its peers, you can
compare it to the average real estate fund, which currently reflects the
performance of 11 real estate funds tracked by Lipper Analytical Services.
Both benchmarks include reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Real Estate Investment -3.23% 11.25% 8.27%
S&P 500(registered trademark) 0.53% 10.79% 11.82%
Average Real Estate Fund -7.77% 6.73% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Real Estate (303) Standard & Poor's 50
11/17/86 10000.00 10000.00
11/30/86 10040.00 10206.19
12/31/86 9940.00 9945.93
01/31/87 10380.00 11285.65
02/28/87 10550.00 11731.43
03/31/87 10750.17 12070.47
04/30/87 10398.20 11963.05
05/31/87 10207.13 12067.12
06/30/87 10549.93 12676.51
07/31/87 10509.12 13319.21
08/31/87 10305.06 13816.02
09/30/87 10057.55 13513.45
10/31/87 8700.66 10602.65
11/30/87 8938.89 9728.99
12/31/87 9176.83 10469.37
01/31/88 9773.01 10910.13
02/29/88 10092.39 11418.54
03/31/88 10005.85 11065.71
04/30/88 10016.67 11188.54
05/31/88 9778.69 11285.88
06/30/88 10105.18 11803.90
07/31/88 10149.16 11759.05
08/31/88 10050.20 11359.24
09/30/88 10204.87 11843.14
10/31/88 10115.45 12172.38
11/30/88 9970.14 11998.32
12/31/88 10127.87 12208.29
01/31/89 10230.05 13101.93
02/28/89 10264.12 12775.70
03/31/89 10343.06 13073.37
04/30/89 10619.80 13751.88
05/31/89 10815.82 14308.83
06/30/89 11186.69 14227.27
07/31/89 11748.37 15511.99
08/31/89 11912.19 15816.03
09/30/89 11771.61 15751.18
10/31/89 11332.55 15385.75
11/30/89 11474.94 15699.62
12/31/89 11522.85 16076.41
01/31/90 11270.53 14997.69
02/28/90 11198.44 15191.16
03/31/90 11258.52 15593.72
04/30/90 11112.46 15203.88
05/31/90 11063.78 16686.26
06/30/90 11234.66 16572.79
07/31/90 11308.65 16519.76
08/31/90 10507.06 15026.37
09/30/90 9982.05 14294.59
10/31/90 9694.34 14233.12
11/30/90 10307.28 15152.58
12/31/90 10520.84 15575.34
01/31/91 11501.59 16254.42
02/28/91 11858.23 17416.61
03/31/91 12642.55 17838.09
04/30/91 12990.86 17880.91
05/31/91 13300.48 18653.36
06/30/91 12872.44 17799.04
07/31/91 13146.60 18628.47
08/31/91 13211.87 19069.97
09/30/91 13595.18 18751.50
10/31/91 13370.57 19002.77
11/30/91 13238.45 18236.96
12/31/91 14643.76 20323.26
01/31/92 15527.20 19945.25
02/29/92 15192.57 20204.54
03/31/92 15099.45 19810.55
04/30/92 14882.97 20392.98
05/31/92 15329.46 20492.91
06/30/92 15153.08 20187.56
07/31/92 15820.80 21013.23
08/31/92 15861.68 20582.46
09/30/92 16299.69 20825.34
10/31/92 16478.06 20898.23
11/30/92 16779.90 21610.85
12/31/92 17500.63 21876.67
01/31/93 18361.77 22060.43
02/28/93 18806.23 22360.45
03/31/93 20160.60 22832.26
04/30/93 19251.20 22279.72
05/31/93 19013.36 22876.82
06/30/93 19508.30 22943.16
07/31/93 19635.34 22851.39
08/31/93 19945.89 23717.45
09/30/93 20866.97 23534.83
10/31/93 20525.36 24022.00
11/30/93 19329.70 23793.79
12/31/93 19690.25 24081.70
01/31/94 19849.86 24900.47
02/28/94 20822.04 24225.67
03/31/94 20077.33 23169.43
04/30/94 20355.37 23466.00
05/31/94 20794.37 23850.84
06/30/94 20173.05 23266.50
07/31/94 20128.74 24029.64
08/31/94 20040.14 25014.85
09/30/94 19801.85 24401.99
10/31/94 19011.56 24951.03
11/30/94 18340.57 24042.32
12/31/94 20091.59 24398.86
01/31/95 19208.78 25031.53
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Real
Estate Investment Portfolio on November 17, 1986, when the fund started. As
the chart shows, by January 31, 1995, the value of your investment would
have grown to $19,209 - a 92.09% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$25,032 - a 150.32% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Although there was a small bond
market rally in January, sharply
rising interest rates caused a severe
downturn in U.S. bond markets
during the 12 months ended
January 31, 1995. Yields rose
sharply - and prices fell - on
virtually all types of fixed-income
investments. For the 12 months
ended January 31, 1995, the
Lehman Brothers Aggregate Bond
Index - a broad measure of
taxable bonds in the U.S. bond
market - had a total return of
- -2.31%. The Federal Reserve
Board raised the federal funds rate
- - the rate banks charge each other
for overnight loans - from 3.00% to
5.50% from February to
November, causing other interest
rates to rise. The Fed was hoping
to head off future inflation that might
be triggered by an improving U.S.
economy. The resulting higher
rates slowed refinancing activity in
mortgage-backed securities,
helping them to outperform
comparable Treasury bonds. The
Salomon Brothers Mortgage Index
returned -0.23% during the
period. Interest rate increases in
many foreign bond markets
followed the rate hikes in the U.S.
Weakness in the U.S. dollar,
however, helped the Salomon
Brothers World Government Bond
Index - which measures bond
market performance in the
developed world, including the
U.S. - to post a 3.66% return.
The JP Morgan Emerging Markets
Bond Index was down 21.71%, on
the heels of market corrections in
many emerging markets earlier in
the year and Mexico's devaluation
of the peso in December.
An interview with Barry Greenfield, Portfolio Manager of Fidelity Real
Estate Portfolio
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. The fund returned -3.23% for the year ended January 31, 1995. That
beats the average real estate fund which returned -7.77% for the same time
period, according to Lipper Analytical Services.
Q. WHAT'S HAPPENED IN THE REAL ESTATE INVESTMENT TRUST, OR REIT, MARKET
SINCE THE LAST REPORT?
A. The North American Real Estate Investment Trust index of all public
REITs has declined in each of the past six months, except December. There
are several explanations for why it's gone down so consistently for so
long. One is that the number of new public offerings and secondary issues
has been growing over time. For example, in 1994, there were 72 deals done
for $9.3 billion in the REIT market, compared to only five deals done in
1990 for a total of $262 million. In short, the market has been unable to
absorb the excess supply. Secondly, rising interest rates have made other
investments, such as U.S. Treasuries, a competitive investment alternative
to REITs and has effectively decreased retail demand in an already flooded
market. And, finally, after a five-year bull market, REITs were due for a
correction as several issues were somewhat overvalued.
Q. WHAT'S YOUR INVESTMENT STRATEGY IN THIS TYPE OF ENVIRONMENT?
A. Well, in some ways REITs are like stocks. Some perform better at the
beginning of the investment cycle, such as apartments, while some do better
when the economy is cyclically strong, such as warehouses, industrial
buildings and office buildings. However, during the past several months as
the market continued to plunge, I bought stocks that were cheap, rather
than in a certain sector.
Q. CAN YOU GIVE AN EXAMPLE OF A BARGAIN YOU'VE FOUND?
A. Sure. I've increased my position in Post Properties. Post is a quality
apartment builder in Atlanta, which is fast becoming a major city. Post
has the right product in the right place, and was a bargain during the
period.
Q. YOU MENTIONED RISING INTEREST RATES EARLIER. IF THEY HAVE THE DESIRED
EFFECT AND THE ECONOMY BEGINS TO SLOW, WILL IT BE A DIFFICULT TIME FOR REAL
ESTATE INVESTMENTS?
A. That would seem to be a logical conclusion. However, the fact is that
there's been very little construction since the real estate crash of
1988-91. The economic slowdown, should it come, probably won't impact real
estate very much since it's the building of unnecessary space, not the
stock market, rates or other economic factors, that really
hurts existing real estate.
Q. YOU'VE NEARLY DOUBLED YOUR HOLDING IN STORAGE USA. WHAT'S THE STORY
THERE?
A. Storage USA is a company that has been able to grow quickly by buying up
small competitors. Storage facilities are an interesting business because
nobody wants one built in their backyard. Storage USA has no new
competition and has used its rich stock as currency to buy up the little
guys in an industry that is consolidating down to four or five major
players.
Q. WHAT'S BEEN MOST DISAPPOINTING DURING AN ESPECIALLY TOUGH YEAR?
A. Ironically, the fund's positions in the strongest, highest growth REITs
have cost us some return this year. Let me explain. In a REIT bear market
like we've just experienced, the only companies that can expand for future
growth are the ones that are strong enough to sell additional equity. When
the sale of additional equity is announced, stock prices decline. REITs
are a more sedentary asset than stocks, and as a result are less subject to
fluctuations in their price. It's frustrating when the companies that have
access to capital in a weak market are penalized in the short run, even
though their expansion should enhance future earnings.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I don't think that now is the time to be down on REITs. Here's why:
long-term interest rates appear to have peaked, relieving the additional
pressure of Treasuries as an alternative investment and reviving demand;
the over-abundance of underwritings that we've seen during the past year
has slowed and I expect 1995 to be at normal or below, normal level; also,
occupancy rates continue to rise for all classes of real estate. Another
positive sign is that financial stocks - which some view as the "first
cousins" of REITs - such as electric utilities, banks and insurance
companies, have performed better lately. We've recently come through a
difficult period for REITs and I don't know when it will be over.
Eventually, however, REITs will be due for a catch-up move.
FUND FACTS
GOAL: to provide
above-average income and
increase the value of the
fund's shares by investing
primarily in the securities of
companies principally
engaged in the real estate
industry
START DATE: November 17, 1986
SIZE: as of January 31,
1995, more than $490 million
MANAGER: Barry Greenfield,
since November 1986;
manager Fidelity Fund,
1982-1993; joined Fidelity in
1968
(checkmark)
BARRY GREENFIELD ON INVESTING
IN REITS:
"Despite the appeal of
investing in foreign markets in
1994 by many mutual funds,
the Fidelity Real Estate Fund
has maintained minimal
exposure outside the United
States. Foreign real estate,
with
a few minor exceptions, is
more expensive, as
measured by yield, and
price-to-earnings, than
domestic real estate. In
1989-91 when American real
estate was headed for a fall,
the fund had substantial
investments overseas.
However, now is not the time
to employ that strategy
because foreign real estate is
not as good a value as
domestic real estate."
(solid bullet) The fund's holding in
factory outlet stores was
reduced from over 6% early in
1994 when they were
overvalued to about 3.5%
early in the fourth quarter.
With a 30% decline in prices
in less than a year, these
issues became very cheap
relative to expected 1995 and
1996 growth rates of 17% -
28%. Due to a buying
opportunity late in the year,
the position was back up to
6.1% of the fund by January.
DISTRIBUTIONS
A total of 44% of the dividends
distributed during the fiscal year
qualifies for the
dividends-received deductions
for corporate shareholders.
The fund will notify
shareholders in January 1996
of the applicable percentage
for use in preparing 1995
income tax returns.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JANUARY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Developers Diversified Realty 6.3 6.0
Corp.
Equity Residential Property Trust 5.5 6.2
(SBI)
Kimco Realty Corp. 5.0 4.5
Duke Realty Investors, Inc. 4.2 2.2
Simon Properties Group, Inc. 3.9 4.8
DeBartolo Realty Corp. 3.8 2.6
Post Properties, Inc. 3.6 2.0
Oasis Residential, Inc. 3.3 2.6
Trinet Corporate Realty Trust, Inc. 2.5 1.7
Storage USA, Inc. 2.5 1.3
TOP FIVE REIT SECTORS AS OF JANUARY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO
Apartments 28.3 27.0
Shopping Centers 20.3 27.3
Industrial Buildings 14.9 10.4
Malls 11.1 12.3
Factory Outlets 6.1 4.2
ASSET ALLOCATION
AS OF JANUARY 31, 1995 AS OF JULY 31, 1994
Row: 1, Col: 1, Value: 3.6
Row: 1, Col: 2, Value: 1.3
Row: 1, Col: 3, Value: 45.1
Row: 1, Col: 4, Value: 50.0
Row: 1, Col: 1, Value: 5.5
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 50.1
Row: 1, Col: 4, Value: 40.0
Stocks 94.4%
Convertibles 2.0%
Short-term
investments 3.6%
Stocks 91.0%
Convertibles 3.5%
Short-term
investments 5.5%
INVESTMENTS JANUARY 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 94.4%
SHARES VALUE (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS (REITS) - 92.7%
REITS - APARTMENTS - 28.3%
Associated Estates Realty Corp. 199,100 $ 4,106,438
Avalon Properties, Inc. 513,700 9,824,513
Bay Apartment Community 363,400 7,222,575
Cali Reality Corp. 266,000 4,256,000
Camden Property Trust (SBI) 210,100 4,911,088
Colonial Property Trust (SBI) 435,400 9,742,075
Equity Residential Property Trust (SBI) 1,013,200 26,976,450
Evans Withycombe Resident 509,700 10,194,000
Home Properties of NY 257,600 4,830,000
Merry Land & Investment Co., Inc. 372,394 7,634,077
Oasis Residential, Inc. 735,400 16,270,725
Post Properties, Inc. 589,400 17,755,675
Property Trust of America (SBI) 113,952 1,937,184
Smith (Charles E.) Residential Realty, Inc. 186,200 4,701,550
Summit Property Trust 80,000 1,360,000
United Dominion Realty Trust, Inc. 299,100 4,037,850
Wellsford Residential Property Trust 106,300 2,192,438
137,952,638
REITS - FACTORY OUTLETS - 6.1%
Chelsea GCA Realty, Inc. 317,000 8,004,250
Horizon Outlet Centers, Inc. 347,300 8,161,550
McArthur/Glen Realty Corp. 355,000 5,458,125
Tanger Factory Outlet Centers, Inc. (b) 345,200 8,241,650
29,865,575
REITS - HEALTHCARE FACILITIES - 2.8%
LTC Properties, Inc. 363,800 4,638,450
Meditrust (SBI) 115,000 3,521,875
Nationwide Health Properties, Inc. 83,100 3,022,763
Omega Healthcare Investors 106,100 2,586,188
13,769,276
REITS - HOTELS - 2.1%
Felcor Suite Hotels, Inc. 175,800 3,472,050
RFS Hotel Investors, Inc. 511,300 6,902,550
10,374,600
REITS - INDUSTRIAL BUILDINGS - 14.9%
Bedford Property Investors, Inc. (b) 432,800 2,488,600
CenterPoint Properties Corp. 224,600 4,323,550
Duke Realty Investors, Inc. 781,209 20,311,434
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - INDUSTRIAL BUILDINGS - CONTINUED
EastGroup Properties (SBI) 79,300 $ 1,387,750
MGI Properties, Inc. 224,200 3,194,850
Security Capital Industrial Trust 256,383 4,198,272
Speiker Properties, Inc. 205,200 4,155,300
Storage USA, Inc. 449,800 12,257,050
Trinet Corporate Realty Trust, Inc. 458,200 12,314,125
Weeks Corp. 374,600 7,913,425
72,544,356
REITS - MALLS - 11.1%
CBL & Associates Properties 313,600 6,193,600
Crown American Realty Trust (SBI) 145,600 1,983,800
DeBartolo Realty Corp. 1,311,000 18,354,000
Macerich Company 348,600 7,059,150
Simon Properties Group, Inc. 814,534 19,039,732
Urban Shopping Centers, Inc. 75,000 1,556,250
54,186,532
REITS - MOBIL HOME PARKS - 3.3%
Chateau Properties, Inc. 254,100 5,304,338
ROC Communities, Inc. 197,500 3,752,500
Sun Communities 319,100 7,020,200
16,077,038
REITS - OFFICE BUILDINGS - 4.1%
Beacon Properties Corp. 117,100 2,063,888
Cousins Properties, Inc. 244,300 4,122,563
Crocker Realty Investors, Inc. (a) (b) 92,000 701,500
G&L Realty Corp. 183,800 2,182,625
Highwoods Properties, Inc. 136,900 2,874,900
Liberty Property Trust (SBI) 396,300 7,826,925
19,772,401
REITS - SHOPPING CENTERS - 20.0%
Bradley Real Estate Trust (b) 508,450 7,690,306
Developers Diversified Realty Corp. (b) 1,087,100 30,710,575
Excel Realty Trust, Inc. 148,900 2,494,075
Federal Realty Investment Trust (SBI) 185,700 3,876,488
Franchise Finance Corp. of America 276,000 5,140,500
Glimcher Realty Trust 288,400 5,804,050
Haagen Alexander Properties, Inc. 433,500 6,719,250
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - SHOPPING CENTERS - CONTINUED
IRT Property Co. 295,000 $ 2,986,875
Kimco Realty Corp. 669,000 24,167,625
Regency Realty Group 70,800 1,141,650
Vornado Realty Trust 190,300 6,589,138
97,320,532
TOTAL REAL ESTATE investment trusts 451,862,948
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE - SHOPPING CENTERS - 0.1%
Rouse Co. (The) 25,000 468,750
MEDIA & LEISURE - 1.6%
HOTELS - 1.6%
Prime Hospitality Corp. (a) 460,000 4,140,000
Red Lion Inns LP 159,000 3,378,744
Resort Hotels PLC 200,000 4
7,518,748
TOTAL COMMON STOCKS
(Cost $465,618,790) 459,850,446
CONVERTIBLE PREFERRED STOCKS - 0.7%
CONSTRUCTION & REAL ESTATE - 0.7%
REAL ESTATE - SHOPPING CENTERS - 0.7%
Rouse Co., Series A (Cost $3,360,610) 64,500 3,144,375
CONVERTIBLE BONDS - 1.3%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT
REAL ESTATE INVESTMENT TRUSTS (REITS) - 1.3%
REITS - HEALTHCARE FACILITIES - 0.9%
LTC Properties, Inc.:
8 1/2%, 1/1/00 - $ 363,000 363,000
9 3/4%, 7/1/04 - 3,000,000 3,810,000
4,173,000
REITS - OFFICE BUILDINGS - 0.1%
Liberty Property LP 8%, 7/1/01 - 657,000 652,894
CONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - SHOPPING CENTERS - 0.3%
Malan Realty Investors 9 1/2%, 7/15/04 - $ 2,000,000 $ 1,680,000
TOTAL CONVERTIBLE BONDS
(Cost $6,869,300) 6,505,894
REPURCHASE AGREEMENTS - 3.6%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.81%
dated 1/31/95 due 2/1/95 $ 17,657,849 17,655,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $493,503,700) $ 487,155,715
LEGEND
(a) Non-income producing
(b) Affiliated company (see Note 5 of Notes to Financial Statements).
INCOME TAX INFORMATION
At January 31, 1995, the aggregate cost of investment securities for income
tax purposes was $494,247,753. Net unrealized depreciation aggregated
$7,092,038, of which $17,739,269 related to appreciated investment
securities and $24,831,307 related to depreciated investment securities.
At January 31, 1995, the fund had a capital loss carryforward of
approximately $9,421,256 all of which will expire on January 31, 2003.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 487,155,715
agreements of $17,655,000) (cost $493,503,700) -
See accompanying schedule
Cash 572
Receivable for investments sold 8,975,740
Receivable for fund shares sold 1,446,529
Dividends receivable 1,778,349
Interest receivable 38,364
Other receivables 66,355
TOTAL ASSETS 499,461,624
LIABILITIES
Payable for investments purchased $ 3,691,982
Payable for fund shares redeemed 5,171,392
Accrued management fee 265,000
Other payables and accrued expenses 249,970
TOTAL LIABILITIES 9,378,344
NET ASSETS $ 490,083,280
Net Assets consist of:
Paid in capital $ 505,621,738
Undistributed net investment income 2,696,687
Accumulated undistributed net realized gain (loss) on (11,887,325)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (6,347,820)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 38,820,225 shares outstanding $ 490,083,280
NET ASSET VALUE, offering price and redemption price per $12.62
share ($490,083,280 (divided by) 38,820,225 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED JANUARY 31, 1995
INVESTMENT INCOME $ 31,118,440
Dividends (including $3,882,655 received from
affiliated issuers)
Interest 2,496,403
TOTAL INCOME 33,614,843
EXPENSES
Management fee $ 3,108,374
Transfer agent fees 1,718,267
Accounting fees and expenses 297,387
Non-interested trustees' compensation 5,052
Custodian fees and expenses 40,899
Registration fees 86,159
Audit 48,343
Legal 4,020
Reports to shareholders 18,865
Miscellaneous 5,834
Total expenses before reductions 5,333,200
Expense reductions (160,883) 5,172,317
NET INVESTMENT INCOME 28,442,526
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of (15,434,229)
$(717,179) on sales of investments in affiliated
issuers)
Foreign currency transactions 518 (15,433,711)
Change in net unrealized appreciation (depreciation) on:
Investment securities (32,916,980)
Assets and liabilities in foreign currencies 165 (32,916,815)
NET GAIN (LOSS) (48,350,526)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (19,908,000)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 28,442,526 $ 18,128,279
Net investment income
Net realized gain (loss) (15,433,711) 1,412,613
Change in net unrealized appreciation (depreciation) (32,916,815) 3,281,151
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (19,908,000) 22,822,043
FROM OPERATIONS
Distributions to shareholders from net investment income (22,873,604) (17,531,033)
Share transactions 755,295,760 902,518,648
Net proceeds from sales of shares
Reinvestment of distributions 20,522,128 16,135,275
Cost of shares redeemed (673,557,549) (739,963,733)
Net increase (decrease) in net assets resulting from 102,260,339 178,690,190
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 59,478,735 183,981,200
NET ASSETS
Beginning of period 430,604,545 246,623,345
End of period (including undistributed net investment $ 490,083,280 $ 430,604,545
income of $2,696,687 and $932,472, respectively)
OTHER INFORMATION
Shares
Sold 55,658,988 64,864,558
Issued in reinvestment of distributions 1,561,556 1,182,763
Redeemed (49,888,097) (53,208,850)
Net increase (decrease) 7,332,447 12,838,471
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JANUARY 31,
1995 1994 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 13.68 $ 13.22 $ 11.60 $ 9.03 $ 9.38
Income from Investment Operations
Net investment income .67 .54 .68 B .43 .77
Net realized and unrealized (1.10) .52 1.37 2.63 (.61)
gain (loss)
Total from investment operations (.43) 1.06 2.05 3.06 .16
Less Distributions (.63) (.60) (.43) (.49) (.51)
From net investment income
Net asset value, end of period $ 12.62 $ 13.68 $ 13.22 $ 11.60 $ 9.03
TOTAL RETURN A (3.23) 8.10% 18.26% 35.00% 2.05%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 490 $ 431 $ 247 $ 76 $ 45
Ratio of expenses to average net 1.03% 1.13% 1.16% 1.24% 1.47%
assets
Ratio of expenses to average net 1.06% 1.17% 1.16% 1.24% 1.47%
assets before expense reductions
Ratio of net investment income to 5.67% 4.34% 5.81% 5.84% 8.45%
average net assets
Portfolio turnover rate 75% 110% 82% 84% 49%
</TABLE>
A TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN (SEE NOTES 6 OF TO FINANCIAL STATEMENTS).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1995
5. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Real Estate Investment Portfolio (the fund) is a fund of Fidelity
Devonshire Trust (the trust) and is authorized to issue an unlimited number
of shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities maturing within sixty days of their purchase date are
valued at amortized cost or original cost plus accrued interest, both of
which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective February 1, 1994, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed,
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
are recorded as soon as the fund is informed of the ex-dividend date.
Interest income is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, market discount, partnerships, non-taxable
dividends, capital loss carryforwards, and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Undistributed net investment income
may include temporary book and tax basis differences which will reverse in
a subsequent period. Any taxable income or gain remaining at fiscal year
end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
6. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
resale price at the time of purchase. The fund's investment adviser,
Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
7. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $465,963,474 and $347,247,121, respectively.
8. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .2850% to
.5200% for the period February 1, 1994 to July 31, 1994 and .2700% to
.5200% for the period August 1, 1994 to January 31, 1995. In the event that
these rates were lower than the contractual rates in effect during those
periods, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee. The annual individual fund fee rate is
.30%. For the period, the management fee was equivalent to an annual rate
of .62% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period August 1, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which FSC receives
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $448,328 for the period.
9. TRANSACTIONS WITH AFFILIATED
COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies which are or
were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Bedford Property Investors, Inc. $ 844,805 $ 16,107 $ 147,253 $ 2,488,600
Bradley Real Estate Trust 450,543 145,905 589,792 7,690,306
Crocker Realty Investors, Inc. (a) 231,250 - - 701,500
Developers Diversified Realty Corp. 7,554,034 2,409,550 1,870,224
30,710,575
EastGroup Properties (SBI) 21,416 787,578 216,556 -
Manufactured Home Community 1,903,380 2,838,685 701,226 -
Tanger Factory Outlet Centers, Inc. 4,552,046 213,311 357,604
8,241,650
TOTALS $ 15,557,474 $ 6,411,136 $ 3,882,655 $ 49,832,631
10. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$160,883 under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Real Estate Investment Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Trust: Fidelity Real Estate Investment Portfolio,
including the schedule of portfolio investments, as of January 31, 1995,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are
the responsibility of the fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1995 by correspondence with the
custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Trust: Fidelity Real Estate Investment Portfolio as
of January 31, 1995, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 7, 1995
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
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MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc. London, England
Fidelity Management & Research
(Far East) Inc. Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Barry Greenfield, Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan Fund
Real Estate Investment Portfolio
Utilities Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
UTILITIES
FUND
(FORMERLY FIDELITY UTILITIES INCOME FUND)
ANNUAL REPORT
JANUARY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 20 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 24 Notes to the financial statements.
REPORT OF INDEPENDENT 28 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 29
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND ARE
SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR
FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY
FIDELITY FUND,
INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS.
READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Utilities Fund -6.38% 62.85% 124.72%
S&P 500(registered trademark) 0.53% 66.90% 142.85%
S&P Utilities Index -1.40% 48.94% 132.09%
Average Utility Fund -6.10% 49.46% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on November 27, 1987. For example, if you had invested $1,000 in a
fund that had a 5% return over the past year, you would end up with $1,050.
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks, a common proxy for the U.S. stock market, or
the Standard & Poor's Utilities Index, an unmanaged index of 47 gas,
electric, and telephone stocks. To measure how the fund's performance
stacked up against its peers, you can compare it to the average utility
fund, which currently reflects the performance of 70 utility funds tracked
by Lipper Analytical Services. All three benchmarks include reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Utilities Fund -6.38% 10.24% 11.93%
S&P 500(registered trademark) 0.53% 10.79% 13.14%
S&P Utilities Index -1.40% 8.29% 12.43%
Average Utility Fund -6.10% 8.33% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Utilities Income (31Standard & Poor's 50Standard & Poor's Ut
11/27/87 10000.00 10000.00 10000.00
11/30/87 10000.00 9438.71 9671.16
12/31/87 10059.80 10157.00 9776.58
01/31/88 10983.45 10584.61 10908.71
02/29/88 10873.02 11077.85 10721.08
03/31/88 10500.31 10735.55 10156.08
04/30/88 10510.44 10854.71 10170.29
05/31/88 10946.26 10949.15 10635.08
06/30/88 11087.51 11451.71 10969.02
07/31/88 10954.05 11408.20 10985.47
08/31/88 10902.72 11020.32 10830.58
09/30/88 11295.53 11489.78 11275.71
10/31/88 11534.75 11809.20 11568.88
11/30/88 11451.55 11640.33 11476.33
12/31/88 11545.15 11844.03 11547.48
01/31/89 11724.72 12711.02 12203.38
02/28/89 11502.90 12394.51 11934.91
03/31/89 11631.16 12683.30 12248.79
04/30/89 11984.27 13341.57 13014.34
05/31/89 12562.08 13881.90 13761.37
06/30/89 12820.04 13802.77 13974.67
07/31/89 13493.63 15049.17 15089.85
08/31/89 13352.40 15344.13 14996.29
09/30/89 13418.39 15281.22 15243.73
10/31/89 13462.49 14926.69 15300.13
11/30/89 13892.50 15231.20 15803.50
12/31/89 14537.87 15596.75 16954.00
01/31/90 13799.44 14550.21 15582.42
02/28/90 13834.05 14737.90 15411.01
03/31/90 13821.86 15128.46 15697.66
04/30/90 13264.24 14750.25 15088.59
05/31/90 13904.91 16188.40 16117.63
06/30/90 13964.05 16078.31 15777.55
07/31/90 13976.10 16026.86 15728.64
08/31/90 13265.24 14578.03 14478.21
09/30/90 13470.06 13868.08 15071.82
10/31/90 14290.51 13808.45 16054.50
11/30/90 14608.89 14700.48 16364.35
12/31/90 14806.39 15110.62 16506.72
01/31/91 14743.60 15769.44 16003.27
02/28/91 15271.05 16896.96 16560.18
03/31/91 15451.98 17305.87 16886.42
04/30/91 15451.98 17347.40 16616.24
05/31/91 15451.98 18096.81 16401.89
06/30/91 15336.57 17267.97 16172.26
07/31/91 15817.06 18072.66 16667.13
08/31/91 16206.64 18500.98 17097.14
09/30/91 16719.54 18192.02 17442.51
10/31/91 16930.18 18435.79 17786.12
11/30/91 17061.83 17692.83 17606.48
12/31/91 17942.73 19716.89 18897.04
01/31/92 17352.68 19350.15 17889.83
02/29/92 17285.63 19601.71 17405.01
03/31/92 17084.74 19219.47 17154.38
04/30/92 17645.12 19784.52 18259.12
05/31/92 18000.48 19881.47 18231.73
06/30/92 18179.33 19585.23 18488.80
07/31/92 19161.63 20386.27 19949.42
08/31/92 19189.30 19968.35 19799.80
09/30/92 19244.80 20203.98 19944.33
10/31/92 19216.81 20274.69 19754.86
11/30/92 19398.76 20966.06 19723.25
12/31/92 19898.60 21223.94 20429.35
01/31/93 20115.04 21402.22 20743.96
02/28/93 21182.84 21693.29 22237.52
03/31/93 21752.81 22151.02 22640.02
04/30/93 21547.74 21614.97 22162.32
05/31/93 21606.33 22194.25 22142.37
06/30/93 22623.23 22258.61 23167.56
07/31/93 22903.99 22169.58 23686.52
08/31/93 23953.14 23009.80 24830.58
09/30/93 23967.57 22832.63 24778.43
10/31/93 23773.92 23305.26 24733.83
11/30/93 22790.79 23083.86 23482.30
12/31/93 23004.24 23363.18 23357.84
01/31/94 24004.43 24157.53 23537.70
02/28/94 23019.40 23502.86 22207.82
03/31/94 22148.43 22478.13 21454.97
04/30/94 22709.15 22765.85 21984.91
05/31/94 22304.19 23139.21 21395.72
06/30/94 22128.33 22572.30 21440.65
07/31/94 22819.35 23312.67 22167.48
08/31/94 22992.11 24268.49 22107.63
09/30/94 22378.02 23673.92 21546.10
10/31/94 22362.18 24206.58 21733.55
11/30/94 21649.51 23324.98 21416.24
12/31/94 21788.05 23670.88 21525.46
01/31/95 22472.05 24284.67 23208.75
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Utilities Fund on November 27, 1987, when the fund started. As the chart
shows, by January 31, 1995, the value of your investment would have grown
to $22,472 - a 124.72% increase on your initial investment. For comparison,
look at how both the S&P 500 and the S&P Utilities Index did over the same
period. With dividends reinvested, the same $10,000 investment in the S&P
500 would have grown to $24,285 - a 142.85% increase. A $10,000 investment
in the S&P Utilities Index would have grown to $23,209 - a 132.09%
increase.
(checkmark)
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no guarantee of how it will do tomorrow. The
stock market, for example, has a history of growth in the long run and
volatility in the short run. In turn, the share price and return of a fund
that invests in stocks will vary. That means if you sell your shares during
a market downturn, you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Although there was a small bond
market rally in January, sharply
rising interest rates caused a severe
downturn in U.S. bond markets
during the 12 months ended
January 31, 1995. Yields rose
sharply - and prices fell - on
virtually all types of fixed-income
investments. For the 12 months
ended January 31, 1995, the
Lehman Brothers Aggregate Bond
Index - a broad measure of
taxable bonds in the U.S. bond
market - had a total return of
- -2.31%. The Federal Reserve
Board raised the federal funds rate
- - the rate banks charge each other
for overnight loans - from 3.00% to
5.50% from February to
November, causing other interest
rates to rise. The Fed was hoping
to head off future inflation that might
be triggered by an improving U.S.
economy. The resulting higher
rates slowed refinancing activity in
mortgage-backed securities,
helping them to outperform
comparable Treasury bonds. The
Salomon Brothers Mortgage Index
returned -0.23% during the
period. Interest rate increases in
many foreign bond markets
followed the rate hikes in the U.S.
Weakness in the U.S. dollar,
however, helped the Salomon
Brothers World Government Bond
Index - which measures bond
market performance in the
developed world, including the
U.S. - to post a 3.66% return.
The JP Morgan Emerging Markets
Bond Index was down 21.71%, on
the heels of market corrections in
many emerging markets earlier in
the year and Mexico's devaluation
of the peso in December.
An interview with John Muresianu, Portfolio Manager of Fidelity Utilities
Fund
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. The fund's total return for the 12 months ended January 31, 1995, was
- -6.38%, compared to -6.10% for the average utility fund tracked by Lipper
Analytical Services. The Standard and Poor's Utilities Index returned
- -1.40% over the same period.
Q. WHY DID YOUR FUND AND THE AVERAGE UTILITY FUND LAG THE UTILITY INDEX?
A. Many funds in the Lipper utility group have significant overseas utility
holdings, while the index does not. This difference can lead to a
significant divergence in the performance of the index and the average
utility fund. For instance, the utility sector did quite well in January.
During that month, funds with no overseas holdings performed best. This
fund's performance fell short of the index primarily because I held a large
cash position.
Q. WHY DID YOU HAVE A LARGE CASH POSITION?
A. After declining much of the year, utilities had a strong rally in the
fourth quarter of 1994. I believed there was potential for a correction
after the rally. However, in January the rally accelerated. I'm still
concerned about the broad market. Prices are at the high end of their
valuation ranges, and interest rates have risen sharply over the past 12
months. The combination of high valuations and sharply higher rates has
been a dangerous combination, historically, making the stock market a lot
riskier today than it has been for a while. My large cash position is
driven by my attempt to manage the risk profile of the fund.
Q. HOW HAVE THE FUND'S TELEPHONE HOLDINGS FARED?
A. The telephone group did better than the others in the first half of the
year. The fund is overweighted in these stocks, which helped performance at
that time. I believe - from a long-term perspective - that telephone
utilities can be a much better investment than electric and gas utilities,
because of volume growth potential, particularly on the cellular side. Two
big relative winners for the fund over the period were Ameritech and SBC
Communications. Both companies have about a 40% to 50% cellular subscriber
growth rate and are controlling costs. However, in the second half of
calendar 1994, telephones fared poorly and electrics did well. In January
1995, telephone utility stocks performed best, and electric utilities
surged as well.
Q. WHAT WAS BEHIND THE SURGE IN ELECTRIC STOCKS?
A. The group had declined so much that it attracted "bottom-fishers" -
those who buy stocks after significant declines. The second factor was the
perception that interest rates had peaked. A third factor was that in the
second half of 1994, many portfolio strategists turned negative on the
broad market, and recommended electric utilities as a "safe haven."
Finally, many institutional investors were underweighted in electric
utilities. This added some fuel to the rally.
Q. LET'S TURN TO GAS STOCKS . . .
A. When you talk about gas companies, it's important to distinguish between
local distribution companies - such as Brooklyn Union Gas or People's
Energy in Chicago - and pipeline companies. By and large, the distribution
companies are regulated. The biggest factor impacting earnings for these
companies is the direction of interest rates. The higher the interest rates
go, the higher the earnings allowed by regulators. The paradox here,
however, is that higher rates are good for company earnings, but generally
bad for their stock prices.
Q. WHAT ABOUT PIPELINE COMPANIES?
A. Most stocks in this group are really diversified energy conglomerates.
For example, Enron is a pipeline company, but its earnings will be driven
for the most part by international power projects, oil and gas production,
and electricity marketing. This group has been the most disappointing in
the past six months, largely because of sharply weaker-than-expected gas
prices. The fund's holdings in ENSERCH, Coastal and Sonat were among the
specific stocks in the pipeline group that suffered.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Stock performance in the utility sector will be driven largely by moves
in interest rates. If rates continue to rise, stocks in the sector may
continue to struggle. I'll continue to favor telephone stocks, because they
have the best long-term potential for earnings growth. Finally, I'll
continue to try to manage the risk profile of the fund, because the
combination of rising rates and higher stock valuations hasn't been
positive for the broad market in the past.
FUND FACTS
GOAL: to seek a high total
return through a combination
of current income and capital
appreciation
START DATE: November 27, 1987
SIZE: As of January 31, 1995,
more than $1.1 billion
MANAGER: John Muresianu,
since January 1993; also
manages Fidelity Select
Utilities Growth; analyst, natural
gas pipelines, life insurance,
service companies, Canadian
stocks, foreign currencies,
1989-1992; pension fund
manager, 1987- 1989; joined
Fidelity in 1986
(checkmark)
JOHN MURESIANU ON UTILITY
STOCKS:
"Utility stocks have always
had a certain amount of
volatility, because they tend to
track interest rates, which
have been all over the place
for the past 20 years.
Long-term bond yields have
gone from around 4% in the
mid '60s to more than 12% in
the early '80s, then down to
under 6% in 1993, before
rising back to over 8% in
1994. And there have been a
lot of little moves in between.
"Within the past two years,
the typical pattern prevailed.
In 1993, interest rates fell
sharply and bonds and utility
stocks soared. In 1994,
interest rates rose
dramatically, and bonds and
utility stocks declined. In both
years, telephone utilities
outperformed electric utilities,
mainly because earnings
growth for telephone
companies has been
stronger than for electric
utilities. As far as gas utilities
are concerned, 1993 was a
banner year because low
interest rates coincided with
high gas prices. However, in
1994, the situation reversed:
gas prices dropped just as
interest rates rose.
"Broadly speaking, the stock
market was flat in 1994,
because while interest rates
rose, so did overall earnings.
However, utilities were not flat;
they declined. That's because
rates rose sharply, but earnings
did not rise commensurately."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JANUARY 31, 1995
% OF FUND'S
% OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Ameritech Corp. 4.7 4.0
Southwestern Bell Corp. 4.0 3.7
NYNEX Corp. 3.9 2.9
BellSouth Corp. 3.6 3.2
GTE Corp. 3.6 2.8
U.S. West, Inc. 3.1 2.8
Bell Atlantic Corp. 2.4 2.1
Williams Companies, Inc. 2.2 2.5
Pacific Enterprises 1.9 1.6
Pacific Telesis Group 1.7 1.5
TOP INDUSTRIES AS OF JANUARY 31, 1995
% OF FUND'S
% OF FUND'S INVESTMENTS
INVESTMENTS IN THESE INDUSTRIES
6 MONTHS AGO
Telephone Services 29.7 27.2
Electric Utility 18.3 23.6
Gas 16.8 18.0
ASSET ALLOCATION
AS OF JANUARY 31, 1995* AS OF JULY 31, 1994**
Row: 1, Col: 1, Value: 21.5
Row: 1, Col: 2, Value: 7.8
Row: 1, Col: 3, Value: 40.0
Row: 1, Col: 4, Value: 30.7
Row: 1, Col: 1, Value: 12.1
Row: 1, Col: 2, Value: 7.3
Row: 1, Col: 3, Value: 40.6
Row: 1, Col: 4, Value: 40.0
Stocks 70.7%
Bonds 7.8%
Short-term
investments 21.5%
FOREIGN
INVESTMENTS 7.9%
Stocks 80.6%
Bonds 7.3%
Short-term
investments 12.1%
FOREIGN
INVESTMENTS 10.5%
*
**
INVESTMENTS JANUARY 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 68.5%
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.0%
Terra Nitrogen Co. LP 9,200 $ 252
METALS & MINING - 0.2%
Alcan Aluminium Ltd. 5,000 121
Viag AG 6,200 2,015
2,136
TOTAL BASIC INDUSTRIES 2,388
CONSTRUCTION & REAL ESTATE - 2.1%
CONSTRUCTION - 0.0%
YTL Corp. BHD 80,000 319
ENGINEERING - 0.1%
Glenayre Technologies, Inc. (a) 26,910 975
REAL ESTATE INVESTMENT TRUSTS - 2.0%
Associated Estates Realty Corp. 33,100 683
CBL & Associates Properties 55,300 1,092
Camden Property Trust (SBI) 50,600 1,183
Crown American Realty Trust (SBI) 44,300 603
DeBartolo Realty Corp. 38,000 532
Developers Diversified Realty 21,800 616
Equity Residential Property Trust (SBI) 47,600 1,267
G&L Realty Corp. 12,200 145
Haagen Alexander Properties, Inc. 24,100 373
Kimco Realty Corp. 14,100 509
LTC Properties, Inc. 68,700 876
Macerich Company 900 18
Manufactured Home Community 5,000 81
Merry Land & Investment Co., Inc. 9,477 194
Oasis Residential, Inc. 47,900 1,060
Post Properties, Inc. 79,900 2,407
Simon Properties Group, Inc. 105,800 2,473
Storage Equities, Inc. 265,400 3,716
Summit Property Trust 42,100 716
Taubman Centers, Inc. 103,400 931
Trinet Corporate Realty Trust, Inc. 4,200 113
Urban Shopping Centers, Inc. 94,200 1,955
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Vornado Realty Trust 37,600 $ 1,302
Walden Residential Properties, Inc. 34,100 656
23,501
TOTAL CONSTRUCTION & REAL ESTATE 24,795
ENERGY - 1.8%
COAL - 0.0%
Eastern Enterprises Co. 10,000 266
INDEPENDENT POWER - 0.2%
California Energy Co., Inc. (a) 55,700 989
Magma Power Co. (a) 16,738 638
Trigen Energy Corp. 31,000 694
2,321
OIL & GAS - 1.6%
Amerada Hess Corp. 6,400 290
Coastal Corp. (The) 440,900 11,904
Norsk Hydro AS ADR 10,000 395
Nuevo Energy Corporation (a) 14,500 238
Occidental Petroleum Corp. 96,900 1,817
Pennzoil Co. 10,000 450
Petroleum Heat & Power, Inc. Class A 162,000 1,175
Texaco, Inc. 10,000 616
Total SA Class B 5,000 282
Western Gas Resources, Inc. 60,000 1,080
18,247
TOTAL ENERGY 20,834
HOLDING COMPANIES - 1.1%
Burgenland Holding 28,000 1,015
Cinergy Corp. 463,179 11,406
12,421
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.1%
Alcatel Alsthom CGE 11,000 $ 946
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
Exide Corp. 6,200 299
Tenneco, Inc. 47,511 2,090
2,389
POLLUTION CONTROL - 0.0%
Sanifill, Inc. (a) 7,200 184
United Waste Systems, Inc. (a) 2,000 50
234
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 3,569
PRECIOUS METALS - 0.0%
Barrich Gold Corp. 20,000 400
SERVICES - 0.3%
Chemed Corp. 102,300 3,465
UTILITIES - 62.7%
CELLULAR - 0.1%
Airtouch Communications 20,000 550
ELECTRIC UTILITY - 16.4%
AES Corp. 206,484 3,613
AES China Generating Co. Class A (a) 17,000 147
Baltimore Gas & Electric Co. 52,300 1,268
Boston Edison Co. 159,600 3,990
CESC Ltd. GDR (warrants) (a)(b) 37,000 1
Centerior Energy Corp. 1,313,100 11,982
Central Costanera SA ADR (b) 24,600 627
Central Hudson Gas & Electric Corp. 70,300 1,872
Central Louisiana Electric Co., Inc. 105,200 2,380
Central Puerto SA ADR (b) 11,200 207
Commonwealth Energy Systems (SBI) 1,000 40
Consolidated Edison Co. of New York, Inc. 20,000 565
Consolidated Electric Power Asia Ltd. 608,000 1,187
DQE, Inc. 180,000 5,715
Detroit Edison Company 243,800 6,826
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Eastern Utilities Associates 181,634 $ 4,155
Electrobras PN Class B 3,500,000 1,068
Empresa Nacional De Electricidad SA Ord. 33,900 1,380
Entergy Corp. 94,761 2,310
EVN (Energie-Versor Nieder) 7,100 870
FECSA (Fuerzas Electricas de Cataluna SA) Class A 183,000 858
General Public Utilities Corp. 123,500 3,489
Hawaiian Electric Industries, Inc. 14,500 486
Electricidad de Caracas LA 335,655 474
Huaneng Power International, Inc. Class N sponsored ADR (a) 50,000 644
IES Industries, Inc. 74,600 2,024
Iberdrola SA 358,700 2,118
Illinova Corp. 441,900 9,887
Interstate Power Co. (Del.) 10,000 250
Korea Elecric Power ADR 46,550 884
Korea Electric Power Corp. 14,000 448
LG&E Energy Corp. 30,000 1,177
Long Island Lighting Co. 419,900 6,928
Montana Power Co. 71,600 1,692
NIPSCO Industries, Inc. 332,900 10,153
National Power PLC (a)(b) 150,000 1,126
New England Electric Systems 115,000 3,824
New York State Electric & Gas Corp. 10,000 209
Niagara Mohawk Power Corp. 349,800 5,422
Northeast Utilities 290,900 6,945
Northern Ireland Electric PLC (UK) 120,000 665
Nova Scotia Power, Inc. 193,700 1,514
Ohio Edison Co. 190,000 4,014
Pacific Gas & Electric Co. 78,800 1,990
PacifiCorp 272,800 5,320
Peco Energy Co. 115,900 3,100
Pinnacle West Capital Corp. 492,500 10,219
Portland General Corp. 192,500 3,898
Public Service Co. of Colorado 221,475 6,700
Public Service Co. of New Mexico (a) 534,800 7,420
Rochester Gas & Electric Corp. 41,000 907
SCECorp 497,000 8,138
Scottish Hydro-Electric PLC Ord. 270,000 1,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Sevillana de Electricidad 213,000 $ 870
Shandong Huaneng Power Development Ltd. Class N
sponsored ADR (a) 7,020 61
Sithe Energies, Inc. (a) 154,000 1,444
South Western Electricity PLC ADR (a)(b) 570 72
Southern Co. 46,700 975
Union Electrica Fenosa 420,200 1,517
United Illuminating Co. 59,200 1,887
Veba Vereinigte Elektrizitaets & Bergwerks AG Ord. 59,300 19,939
Verbund Gesellschaft 26,600 1,496
Wing Shan International Ltd. 372,000 47
192,778
GAS - 16.6%
Aquila Gas Pipeline Corp. 43,800 318
British Gas PLC Ord. 268,000 1,285
Brooklyn Union Gas Co. (The) 300,300 7,282
Columbia Gas System, Inc. (The) (a) 307,700 7,577
Consolidated Natural Gas Co. 63,200 2,181
ENSERCH Corp. 1,486,400 19,323
El Paso Natural Gas Co. 108,100 3,243
Energen Corp. 104,700 2,238
Enron Corp. 240,500 7,005
Enron Global Power & Pipelines 125,000 2,813
Equitable Resources, Inc. 6,200 178
Hong Kong & China Gas Co. Ltd. 795,000 1,192
Hong Kong & China Gas Co. Ltd. (warrants) (a) 109,000 15
MCN Corp. 426,200 7,512
MDU Resources Group, Inc. 44,500 1,229
National Fuel Gas Co. 10,000 265
NICOR, Inc. 85,000 2,029
Noram Energy Corp. 99,700 536
Nova Corp. 1,157,400 9,665
ONEOK, Inc. 286,300 5,010
Pacific Enterprises 956,700 21,765
Panhandle Eastern Corp. 404,700 8,499
Questar Corp. 339,400 9,079
Sonat, Inc. 371,200 9,976
Southern Union Company 16,301 267
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
GAS - CONTINUED
Tejas Gas Corp. (Del.) (a) 73,500 $ 3,069
Tejas Power Corp. (a) 223,600 2,040
TransCanada PipeLines Ltd. 494,900 6,155
Trident NGL Holding, Inc. 90,000 956
UGI Corporation 213,681 4,487
WICOR, Inc. 128,700 3,813
Washington Gas Light Co. 93,400 3,222
Westcoat Energy, Inc. 776,300 11,448
Western Resources, Inc. 34,600 1,103
Williams Companies, Inc. 972,200 26,249
Yankee Energy System, Inc. 62,600 1,362
194,386
TELEPHONE SERVICES - 29.3%
ALC Communications Corp. (a) 82,200 2,384
Ameritech Corp. 1,259,800 55,274
BCE, Inc. 125,300 3,773
Bell Atlantic Corp. 515,900 27,987
BellSouth Corp. 715,200 42,376
CPT Class B 452,090 493
Frontier Corp. 262,000 5,502
GTE Corp. 1,234,100 41,805
Hong Kong Telecommunications Ltd. ADR 87,300 1,549
Hong Kong Telecommunications Ltd. 680,000 1,196
LCI International, Inc. (a) 80,000 1,810
LDDS Communications, Inc. (a) 25,500 555
NYNEX Corp. 1,144,400 45,204
Pacific Telesis Group 661,800 20,268
Petersburg Long Distance, Inc. (a) 10,000 60
Koninklijke PPT Nederland 2,000 66
Koninklijke PPT Nederland (a)(b) 77,200 2,530
Southwestern Bell Corp. 1,093,600 46,615
Sprint Corp. 145,400 4,144
Telebras PN (Pfd. Reg.) 32,674,881 1,263
Telefonica de Espana SA sponsored ADR 54,400 2,006
Telecom Italia Ord. 390,000 1,072
U.S. West, Inc. 916,924 35,875
343,807
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
WATER - 0.3%
American Water Works, Inc. 117,931 $ 3,376
Generale des Eaux 3,300 295
3,671
TOTAL UTILITIES 735,192
TOTAL COMMON STOCKS
(Cost $750,040) 803,064
PREFERRED STOCKS - 2.2%
CONVERTIBLE PREFERRED STOCKS - 0.9%
BASIC INDUSTRIES - 0.3%
METALS & MINING - 0.3%
Alumax, Inc., Series A, $4.00 9,366 1,025
Cyprus Amax Minerals Co., Series A, $4.00 18,733 1,115
Reynolds Metals Co. $3.31 22,000 1,078
3,218
PAPER & FOREST PRODUCTS - 0.0%
Bowater, Inc. depositary shares representing 1/4 shares
Series B 19,800 500
TOTAL BASIC INDUSTRIES 3,718
ENERGY - 0.2%
OIL & GAS - 0.2%
Valero Energy Corp. $3.125 16,000 644
Western Gas Resources, Inc. $2.625 75,000 2,372
3,016
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Kenetech Corp. 8 1/4% (a) 49,000 901
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Pittston Co. $3.125 (b) 21,000 $ 887
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
Philippine Long Distance Telephone (GDR) 48,000 2,400
TOTAL CONVERTIBLE PREFERRED STOCKS 10,922
NONCONVERTIBLE PREFERRED STOCKS - 1.3%
UTILITIES - 1.3%
ELECTRIC UTILITY - 1.1%
Alabama Power Co. Class A, 7.60% 116,200 2,702
Cleveland Electric Illuminating Co., Series L adj. rate 7,700 539
Gulf Power Co. Class A, 7.30% 120,000 2,550
Mississippi Power Co. depository shares
representing 1/4 share 7 1/4% 135,600 3,000
Northern Indiana Public Service Co., Series A adj. rate 29,100 1,135
Public Service Co. of New Hampshire Co., Series A 77,500 1,995
Texas Utilities Electric Co.:
Series A adj. rate 7,700 651
Series B adj. rate 4,175 368
12,940
TELEPHONE SERVICES - 0.2%
GTE North, Inc. $7.60 6,800 649
Stet (Societa Finanziaria Telefonica) Spa 500,000 1,262
Telecom Italia Ord. 200,000 443
2,354
TOTAL NONCONVERTIBLE PREFERRED STOCKS 15,294
TOTAL PREFERRED STOCKS
(Cost $27,359) 26,216
CORPORATE BONDS - 1.0%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.2%
UTILITIES - 0.2%
GAS - 0.2%
Consolidated Natural Gas Co. 7 1/4%,
12/15/15 A2 $ 2,250 $ 2,188
NONCONVERTIBLE BONDS - 0.8%
UTILITIES - 0.8%
ELECTRIC UTILITY - 0.8%
Georgia Power Co. 1st mtg.
6 7/8%, 9/1/02 A2 10,000 9,178
TOTAL CORPORATE BONDS
(Cost $11,698) 11,366
U.S. TREASURY OBLIGATIONS - 6.8%
7 1/4%, 11/30/96 Aaa 2,000 2,001
8 1/8%, 8/15/19 Aaa 75,500 78,084
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $77,789) 80,085
REPURCHASE AGREEMENTS - 21.5%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements,
(U.S. Treasury obligations), in a
joint trading account at 5.81%
dated 1/31/95 due 2/1/95 $ 252,572 252,531
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,119,417) $ 1,173,262
LEGEND
(c) Non-income producing
(d) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $5,450,000 or 0.5% of net
assets.
INCOME TAX INFORMATION
At January 31, 1995, the aggregate cost of investment securities for income
tax purposes was $1,123,460,000. Net unrealized appreciation aggregated
$49,802,000, of which $85,967,000 related to appreciated investment
securities and $36,165,000 related to depreciated investment securities.
The fund hereby designates $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 the 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.
The fund intends to elect to defer to its fiscal year ending January 31,
1996 $7,864,000 of losses recognized during the period November 1, 1994 to
January 31, 1995.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JANUARY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 1,173,262
agreements of $252,531) (cost $1,119,417) -
See accompanying schedule
Cash 1
Receivable for investments sold 12,937
Receivable for fund shares sold 33,376
Dividends receivable 5,834
Interest receivable 3,147
Other receivables 117
TOTAL ASSETS 1,228,674
LIABILITIES
Payable for investments purchased $ 28,731
Payable for fund shares redeemed 25,965
Accrued management fee 456
Other payables and accrued expenses 420
Collateral on securities loaned, at value 1,920
TOTAL LIABILITIES 57,492
NET ASSETS $ 1,171,182
Net Assets consist of:
Paid in capital $ 1,125,399
Undistributed net investment income 3,566
Accumulated undistributed net realized gain (loss) on (11,627)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 53,844
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 86,977 shares outstanding $ 1,171,182
NET ASSET VALUE, offering price and redemption price per $13.47
share ($1,171,182 (divided by) 86,977 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JANUARY 31, 1995
INVESTMENT INCOME $ 47,008
Dividends
Interest (including security lending fees of $45) 10,615
TOTAL INCOME 57,623
EXPENSES
Management fee $ 6,340
Basic fee
Performance adjustment 90
Transfer agent fees 3,221
Accounting and security lending fees 523
Non-interested trustees' compensation 18
Custodian fees and expenses 266
Registration fees 60
Audit 60
Legal 11
Reports to shareholders 16
Miscellaneous 121
Total expenses before reductions 10,726
Expense reductions (172) 10,554
NET INVESTMENT INCOME 47,069
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 29,055
Foreign currency transactions (281) 28,774
Change in net unrealized appreciation (depreciation) on:
Investment securities (168,512)
Assets and liabilities in foreign currencies 8 (168,504)
NET GAIN (LOSS) (139,730)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (92,661)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 47,069 $ 47,314
Net investment income
Net realized gain (loss) 28,774 47,637
Change in net unrealized appreciation (depreciation) (168,504) 122,727
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (92,661) 217,678
FROM OPERATIONS
Distributions to shareholders (45,266) (47,168)
From net investment income
From net realized gain (56,109) (19,433)
In excess of net realized gain (10,257) -
TOTAL DISTRIBUTIONS (111,632) (66,601)
Share transactions 620,983 1,145,727
Net proceeds from sales of shares
Reinvestment of distributions 97,934 58,516
Cost of shares redeemed (799,857) (901,215)
Net increase (decrease) in net assets resulting from (80,940) 303,028
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS (285,233) 454,105
NET ASSETS
Beginning of period 1,456,415 1,002,310
End of period (including undistributed net investment $ 1,171,182 $ 1,456,415
income of $3,566 and $2,616, respectively)
OTHER INFORMATION
Shares
Sold 43,901 75,304
Issued in reinvestment of distributions 7,136 3,889
Redeemed (56,033) (59,108)
Net increase (decrease) (4,996) 20,085
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JANUARY 31,
1995 1994 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, $ 15.84 $ 13.94 $ 12.94 $ 11.74 $ 11.96
beginning of period
Income from Investment
Operations
Net investment income .55 .50 .61 .63 .67
Net realized and (1.58) 2.14 1.37 1.38 .10
unrealized gain (loss)
Total from investment (1.03) 2.64 1.98 2.01 .77
operations
Less Distributions (.54) (.52) (.60) (.63) (.69)
From net investment
income
From net realized gain (.68) (.22) (.38) (.18) (.30)
In excess of net (0.12) - - - -
realized
gain
Total distributions (1.34) (.74) (.98) (.81) (.99)
Net asset value, $ 13.47 $ 15.84 $ 13.94 $ 12.94 $ 11.74
end of period
TOTAL RETURN A (6.38)% 19.34% 15.92% 17.70% 6.84%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,171 $ 1,456 $ 1,002 $ 647 $ 220
(in millions)
Ratio of expenses to .87% .86% .87% .95% .94%
average net assets
Ratio of expenses to .88% .87% .87% .95% .94%
average net assets
before expense
reductions
Ratio of net investment 3.87% 3.39% 4.57% 5.11% 5.93%
income to average
net assets
Portfolio turnover rate 98% 47% 73% 39% 43%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL
STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1995
11. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Utilities Fund (the fund) (formerly Fidelity Utilities Income
Fund) is a fund of Fidelity Devonshire Trust (the trust) and is authorized
to issue an unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
The following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Effective February 1, 1994, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, non-taxable dividends and losses deferred due to
wash sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Accumulated undistributed net
investment income may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
12. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading accounts. These balances are invested in
one or more repurchase agreements that mature in 60 days or less from the
date of purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
13. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total investments
in repurchase agreements through a joint trading account. These repurchase
agreements were with entities whose creditworthiness has been reviewed and
found satisfactory by FMR. The repurchase agreements were dated January 31,
1995 and due February 1, 1995. The maturity values of the joint trading
account investments were $252,572,000 at 5.81%. The investments in
repurchase agreements through the joint trading account are summarized as
follows:
SUMMARY OF JOINT TRADING ACCOUNT
Number of dealers or banks 21
Maximum amount with one dealer or bank 14.7%
Aggregate principal amount of agreements $14,596,070,000
Aggregate maturity amount of agreements $14,598,425,679
Aggregate market value of collateral $14,932,241,609
Coupon rates of collateral 3% to 15 3/4%
Maturity dates of collateral 2/2/95 to 11/15/24
14. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,064,812,000 and $1,432,600,000, respectively, of which U.S.
government and government agency obligations aggregated $199,209,000 and
$117,085,000, respectively.
15. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
series of rates and is based on the monthly average net assets of all the
mutual funds advised by FMR. The rates ranged from .2850% to .5200% for the
period February 1, 1994 to July 31, 1994 and .2700% to .5200% for the
period August 1, 1994 to January 31, 1995. In the event that these rates
were lower than the contractual rates in effect during those periods, FMR
voluntarily implemented the above rates, as they resulted in the same or a
lower management fee. The annual individual fund fee rate is .20%. The
basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .15%) based on the fund's investment performance as compared
to the appropriate index over a specified period of time. The fund's
performance adjustment took effect in November 1994. For the period, the
management fee was equivalent to an annual rate of .53% of average net
assets.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period February 1, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which FSC receives
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee is based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the month
plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $608,000 for the period.
16. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, the value of the
securities loaned and the value of collateral amounted to $1,810,000 and
$1,920,000, respectively.
17. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$172,000 under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Utilities Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Trust: Fidelity Utilities Fund, (formerly Fidelity
Utilities Income Fund), including the schedule of portfolio investments, as
of January 31, 1995, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
five years in the period then ended. These financial statements and
financial highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1995 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Trust: Fidelity Utilities Fund as of January 31,
1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 7, 1995
DISTRIBUTIONS
A total of 5.86% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
A total of 66% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1996 of the applicable
percentage for use in preparing 1995 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
John Muresianu, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan Fund
Real Estate Investment Portfolio
Utilities Fund
THE FIDELITY
TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(registered trademark)
EQUITY-INCOME
FUND
ANNUAL REPORT
JANUARY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 39 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 43 Notes to the financial statements.
REPORT OF INDEPENDENT 49 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 50
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND ARE
SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR
FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY
FIDELITY FUND,
INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS.
READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage of change in value, the average annual
percentage change, or the growth of a hypothetical $10,000 investment. A
fund's total return includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells stocks that have grown in value).
Equity-Income has a 2% sales charge, which has been waived through December
31, 1995.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Equity-Income -3.01% 66.31% 203.96%
Equity-Income (incl. 2% sales charge) -4.95% 62.99% 197.88%
S&P 500 0.53% 66.90% 265.09%
Average Equity Income Fund -3.51% 53.74% 188.14%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or 10 years. For
example, if you had invested $1,000 in a fund that had a 5% return over the
past year, you would end up with $1,050. You can compare these figures to
the performance of the Standard & Poor's Composite Index of 500 Stocks - a
common proxy for the U.S. stock market. To measure how the fund's
performance stacked up against its peers, you can compare it to the average
equity income fund, which currently reflects the performance of 101 funds
tracked by Lipper Analytical Services. Both benchmarks include reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Equity-Income -3.01% 10.71% 11.76%
Equity-Income (incl. 2% sales charge) -4.95% 10.26% 11.53%
S&P 500 0.53% 10.79% 13.83%
Average Equity Income Fund -3.51% 8.88% 10.85%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
Equity Income (023) Standard & Poor's 50
01/31/85 9800.00 10000.00
02/28/85 9807.62 10123.00
03/31/85 9774.45 10130.09
04/30/85 9770.51 10120.97
05/31/85 10290.55 10705.96
06/30/85 10433.29 10874.04
07/31/85 10485.20 10857.73
08/31/85 10497.18 10765.44
09/30/85 10238.35 10428.48
10/31/85 10574.24 10910.28
11/30/85 11023.43 11658.73
12/31/85 11399.13 12223.01
01/31/86 11647.74 12291.46
02/28/86 12389.45 13210.86
03/31/86 13080.27 13948.02
04/30/86 13017.86 13790.41
05/31/86 13057.98 14524.06
06/30/86 13235.95 14769.52
07/31/86 12757.60 13943.90
08/31/86 13479.64 14978.54
09/30/86 12846.80 13739.81
10/31/86 13399.40 14532.60
11/30/86 13536.41 14885.74
12/31/86 13345.16 14506.16
01/31/87 14636.16 16460.14
02/28/87 15066.49 17110.31
03/31/87 15331.43 17604.80
04/30/87 15137.16 17448.12
05/31/87 15047.90 17599.92
06/30/87 15467.66 18488.71
07/31/87 15929.46 19426.09
08/31/87 16380.64 20150.68
09/30/87 16016.58 19709.38
10/31/87 13204.96 15463.98
11/30/87 12620.10 14189.75
12/31/87 13126.67 15269.59
01/31/88 14003.79 15912.44
02/29/88 14658.62 16653.96
03/31/88 14481.79 16139.35
04/30/88 14682.50 16318.50
05/31/88 14852.81 16460.47
06/30/88 15694.54 17216.00
07/31/88 15663.76 17150.58
08/31/88 15349.87 16567.46
09/30/88 15802.06 17273.24
10/31/88 16082.35 17753.43
11/30/88 15926.63 17499.56
12/31/88 16079.01 17805.80
01/31/89 17106.28 19109.19
02/28/89 16953.15 18633.37
03/31/89 17282.07 19067.53
04/30/89 17926.53 20057.13
05/31/89 18353.98 20869.44
06/30/89 18410.36 20750.49
07/31/89 19606.70 22624.26
08/31/89 19845.97 23067.69
09/30/89 19604.62 22973.11
10/31/89 18563.96 22440.14
11/30/89 18812.38 22897.92
12/31/89 19081.06 23447.47
01/31/90 17910.66 21874.14
02/28/90 17939.03 22156.32
03/31/90 17951.28 22743.46
04/30/90 17276.58 22174.87
05/31/90 18389.11 24336.92
06/30/90 18314.64 24171.43
07/31/90 18053.21 24094.08
08/31/90 16651.65 21915.98
09/30/90 15446.79 20848.67
10/31/90 15137.71 20759.02
11/30/90 16087.04 22100.06
12/31/90 16405.79 22716.65
01/31/91 17205.32 23707.09
02/28/91 18412.30 25402.15
03/31/91 18680.23 26016.88
04/30/91 18773.63 26079.32
05/31/91 19754.35 27205.95
06/30/91 18890.44 25959.92
07/31/91 19898.77 27169.65
08/31/91 20347.79 27813.57
09/30/91 20248.30 27349.08
10/31/91 20559.19 27715.56
11/30/91 19746.07 26598.62
12/31/91 21229.62 29641.51
01/31/92 21439.41 29090.17
02/29/92 22093.00 29468.35
03/31/92 21795.17 28893.71
04/30/92 22529.57 29743.19
05/31/92 22749.88 29888.93
06/30/92 22487.77 29443.58
07/31/92 23047.91 30647.83
08/31/92 22586.62 30019.55
09/30/92 22768.55 30373.78
10/31/92 23001.39 30480.09
11/30/92 23758.13 31519.46
12/31/92 24345.19 31907.15
01/31/93 25066.90 32175.17
02/28/93 25671.13 32612.75
03/31/93 26515.46 33300.88
04/30/93 26464.68 32495.00
05/31/93 26938.62 33365.86
06/30/93 27264.15 33462.62
07/31/93 27682.28 33328.77
08/31/93 28612.42 34591.93
09/30/93 28571.36 34325.58
10/31/93 29061.60 35036.11
11/30/93 28597.16 34703.27
12/31/93 29532.98 35123.18
01/31/94 30711.16 36317.37
02/28/94 29873.34 35333.17
03/31/94 28574.31 33792.64
04/30/94 29200.22 34225.19
05/31/94 29572.14 34786.48
06/30/94 29177.61 33934.21
07/31/94 29999.00 35047.25
08/31/94 31048.56 36484.19
09/30/94 30324.84 35590.33
10/31/94 30609.45 36391.11
11/30/94 29351.66 35065.75
12/31/94 29604.81 35585.77
01/31/95 29788.03 36508.51
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity
Equity-Income Fund on January 31, 1985, and paid a 2% sales charge. As the
chart shows, by January 31, 1995, the value of your investment would have
grown to $29,788 - a 197.88% increase on your initial investment. For
comparison, look at how the S&P 500 did over the same period. With
dividends reinvested, the same $10,000 investment would have grown to
$36,509 - a 265.09% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Although there was a small bond
market rally in January, sharply
rising interest rates caused a severe
downturn in U.S. bond markets
during the 12 months ended
January 31, 1995. Yields rose
sharply - and prices fell - on
virtually all types of fixed-income
investments. For the 12 months
ended January 31, 1995, the
Lehman Brothers Aggregate Bond
Index - a broad measure of
taxable bonds in the U.S. bond
market - had a total return of
- -2.31%. The Federal Reserve
Board raised the federal funds rate
- - the rate banks charge each other
for overnight loans - from 3.00% to
5.50% from February to
November, causing other interest
rates to rise. The Fed was hoping
to head off future inflation that might
be triggered by an improving U.S.
economy. The resulting higher
rates slowed refinancing activity in
mortgage-backed securities,
helping them to outperform
comparable Treasury bonds. The
Salomon Brothers Mortgage Index
returned -0.23% during the
period. Interest rate increases in
many foreign bond markets
followed the rate hikes in the U.S.
Weakness in the U.S. dollar,
however, helped the Salomon
Brothers World Government Bond
Index - which measures bond
market performance in the
developed world, including the
U.S. - to post a 3.66% return.
The JP Morgan Emerging Markets
Bond Index was down 21.71%, on
the heels of market corrections in
many emerging markets earlier in
the year and Mexico's devaluation
of the peso in December.
An interview with Stephen Petersen, Portfolio Manager of Fidelity Equity
Income Fund
Q. STEVE, HOW HAS THE FUND PERFORMED?
A. The fund did slightly better than its peers. For the year ended January
31, 1995, the fund returned -3.01% versus the average equity income fund,
which returned -3.51% for the same time period, according to Lipper
Analytical Services.
Q. IT SOUNDS LIKE IT WAS A TOUGH INVESTING ENVIRONMENT. HOW DO YOU EXPLAIN
THE FUND'S MEDIOCRE RESULTS?
A. The two overriding factors that impacted returns were the poor
performance of international markets and concerns over interest rates.
Nearly 17% of the fund was invested overseas at year end, and those markets
did poorly across the board. The reason? Fears about rising interest rates
and how they would affect the growth of corporate earnings had a negative
impact on stocks not only in the U.S. but also abroad.
Q. WE'VE BEEN HEARING A LOT ABOUT VOLATILITY IN THE FOREIGN MARKETS
RECENTLY. DID IT AFFECT THE FUND?
A. Yes. The impact of poor returns overseas was the fund's biggest
disappointment this year. The best way to break it down is by region. About
3% of the fund was invested in emerging market debt, athough very few of
the fund's investments were in Mexico. The problem with the devaluation of
the Mexican peso led to a 15%-20% sell-off of bonds from around the world.
Our holdings in Argentina, Brazil and Mexico suffered as a result. We also
had about 3% of the fund invested in Japan. Our theory there was that the
larger electronics and auto companies were heading toward an economic
recovery. While this was true, and the companies did well, interest rate
concerns - coupled with the devastating Kobe earthquake - caused the
Japanese market to fall about 10%. The remainder of the fund's
international exposure was in Europe where, again, high interest rates were
the culprit. In hindsight, the U.S. was clearly the place to be invested
during the past six months.
Q. WHAT WERE SOME OF THE MAJOR STRATEGIC DECISIONS THAT YOU MADE DURING THE
PAST SIX MONTHS?
A. In the middle of the period, I began cutting back on cyclical stocks -
those that rise and fall with the economy - because, although they were
strong performers, I felt that investors' expectations were a bit too high
and that the stocks' returns would ultimately be disappointing. Instead, I
began buying consumer non-durables such as food and drug stocks. In
general, though, I was looking for out-of-favor companies, with dividend
yield at or about the market average, that were undervalued or in a
turnaround situation.
Q. CAN YOU GIVE AN EXAMPLE?
A. Sure, tobacco companies are a good illustration of my point. Their
price/earnings ratio, dividend yield and cash-flow generation make the
stocks very attractive. However, because of the continued threat of
litigation, companies such as RJR Nabisco and Philip Morris are
undervalued. Historically, these companies are very profitable. By
increasing my holdings in them, I'm making an educated bet that their
situation will improve over time and they will overcome adversity in the
marketplace.
Q. YOU'VE ALSO DECREASED THE FUND'S HOLDING IN FINANCIAL STOCKS FROM 20.4%
SIX MONTHS AGO TO 16.7% AT THE END OF JANUARY. HOW DOES THAT FIT INTO YOUR
STRATEGY?
A. Well, once again we're back to interest rates and their influence.
Financial stocks, particularly banks, have been a large position in the
fund for some time now. I'm concerned about their ability to grow in the
future. The spread between the rates they pay depositors and the rates they
charge on loans is narrowing. I've eliminated the fund's large holding in
Citicorp completely, and have reduced holdings in NationsBank Corp. and
First Fidelity Bancorporation. Because they're not earning the spreads that
they used to, and because bad debt loans are at a record low, I really
don't see the earnings acceleration that I would like to see. While I was
selling bank stocks, I added to the fund's holdings in American Express and
Federal National Mortgage Association (FNMA). American Express is a
turnaround situation with strong earnings potential and FNMA had dropped
significantly during the period, presenting the fund with a buying
opportunity.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The fund will have to be more short-term oriented while the market
continues to be trendless. Interest rates may pause at their current levels
if it is perceived that they are having the desired effect of slowing the
economy. But for the near term, the direction of interest rates will be
what drives the market. Therefore, the fund will have to be poised to move
quickly in and out of opportunities as they come along. Our mission,
however, will remain unchanged: the fund will continue to pursue better
quality issues that are undervalued in the marketplace to achieve long-term
gains.
FUND FACTS
GOAL: to increase the value
of the fund's shares over the
long term by investing
mainly in income-producing
equities
START DATE: May 16, 1966
SIZE: as of January 31,
1995, more than $7.4 billion
MANAGER: Stephen
Petersen, since August
1993; manager, various
institutional accounts, since
1987; joined Fidelity in 1980
(checkmark)
STEPHEN PETERSEN ON
CONVERTIBLE SECURITIES:
"Convertible securities are an
integral part of this fund and
have remained steady at
about 10% - 15% of assets
during the year. Convertible
securities are bonds or
preferred shares that are
exchangeable for a set
number of the issuing
corporation's common stock
at a pre-determined price.
"This year, rising interest
rates have caused investors
to sell convertibles,
regardless of the strength of
the underlying security. There
haven't been many attractive
opportunities in the past year
because of rising interest
rates, a shaky stock market
and lack of liquidity in the
convertible market.
"Recently, convertibles as an
asset class have
underperformed stocks and
have acted more like bonds.
Given this period of relatively
poor performance, the group
as a whole looks more
attractive now than it has in a
while."
(solid bullet) The fund's investments in
foreign securities fell from
20.9% to 16.5% during the
past six months.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JANUARY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 2.4 2.7
Philip Morris Companies, Inc. 2.3 1.8
American Express Co. 1.8 1.4
Federal National Mortgage 1.5 0.4
Association
International Business Machines 1.4 1.1
Corp.
RJR Nabisco Holdings Corp. 1.1 0.5
Ameritech Corp. 1.1 0.9
Sears, Roebuck & Co. 1.0 0.5
British Petroleum PLC ADR 1.0 0.8
Schlumberger Ltd. 0.9 0.7
TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO
Finance 16.7 20.4
Basic Industries 11.3 10.4
Utilities 10.3 11.2
Energy 10.0 9.0
Nondurables 6.4 4.2
ASSET ALLOCATION
AS OF JANUARY 31, 1995* AS OF JULY 31, 1994**
Row: 1, Col: 1, Value: 5.0
Row: 1, Col: 2, Value: 11.0
Row: 1, Col: 3, Value: 4.1
Row: 1, Col: 4, Value: 29.9
Row: 1, Col: 5, Value: 50.0
Row: 1, Col: 1, Value: 4.2
Row: 1, Col: 2, Value: 12.9
Row: 1, Col: 3, Value: 6.2
Row: 1, Col: 4, Value: 20.0
Row: 1, Col: 5, Value: 56.7
Stocks 76.7%
Bonds 6.2%
Convertible
Securities 12.9%
Other securities
and short-term
investments 4.2%
FOREIGN
INVESTMENTS 21.5%
Stocks 76.7%
Bonds 6.2%
Convertible
Securities 12.9%
Other securities
and short-term
investments 4.2%
FOREIGN
INVESTMENTS 20.9%
Stocks 79.9%
Bonds 4.1%
Convertible
Securities 11.0%
Other securities
and short-term
investments 5.0%
FOREIGN
INVESTMENTS 16.5%
Stocks x.x%
Bonds x.x%
Short-term
Investments x.x%
Stocks 76.7%
Bonds 6.2%
Convertible
Securities 12.9%
Other Securities
and short-term
investments 4.2%
** FOREIGN
INVESTMENTS 21.5%
*
**
INVESTMENTS JANUARY 31, 1995
Showing Percentage of Total Value of Investments in Securities
COMMON STOCKS - 79.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.0%
AEROSPACE & DEFENSE - 0.7%
Boeing Co. 75,000 $ 3,338
Martin Marietta Corp. 913,700 40,774
Northrop Corp. 149,900 6,052
50,164
DEFENSE ELECTRONICS - 0.3%
Raytheon Co. 340,200 22,708
TOTAL AEROSPACE & DEFENSE 72,872
BASIC INDUSTRIES - 9.2%
CHEMICALS & PLASTICS - 5.7%
Akzo NV:
Ord. 45,000 5,088
sponsored ADR 115,700 6,580
Betz Laboratories, Inc. 348,500 16,075
Dow Chemical Co. 185,600 11,577
du Pont (E.I.) de Nemours & Co. 1,035,900 55,162
Eastman Chemical Co. 567,275 28,222
EVC International NV (a)(g) 207,100 9,733
Goodrich (B.F.) Company 472,300 20,486
Grace (W.R.) & Co. 1,755,800 68,037
Great Lakes Chemical Corp. 482,900 27,465
Hoechst AG Ord. 115,200 24,294
Imperial Chemical Industries:
Ord. 1,335,300 15,686
PLC ADR 223,600 10,425
Lubrizol Corp. 154,400 5,211
Lyondell Petrochemical Co. 667,900 14,777
Nalco Chemical Co. 650,900 22,293
Olin Corp. 158,600 7,890
Potash Corp. of Saskatchewan 559,100 19,570
Union Carbide Corp. 1,395,000 35,573
Witco Corp. 864,600 22,696
426,840
IRON & STEEL - 0.9%
Armco, Inc. (a) 1,150,000 7,331
Compania Siderurgica Nacional 228,000,000 6,700
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - CONTINUED
Lukens, Inc. 440,100 $ 12,268
Mannesmann AG Ord. 148,200 39,692
65,991
METALS & MINING - 1.1%
Aluminum Co. of America 416,774 32,769
De Beers Consolidated Mines Ltd. ADR 268,400 5,334
Noranda, Inc. 420,000 7,127
Reynolds Metals Co. 724,500 36,225
81,455
PAPER & FOREST PRODUCTS - 1.5%
Georgia-Pacific Corp. 158,600 11,419
International Paper Co. 273,100 19,424
Scott Paper Co. 517,100 35,874
Union Camp Corp. 71,000 3,346
Westvaco Corp. 78,000 2,837
Weyerhaeuser Co. 1,043,900 39,538
112,438
TOTAL BASIC INDUSTRIES 686,724
CONGLOMERATES - 4.2%
Allied-Signal, Inc. 1,179,100 42,153
Brascan Ltd. Class A 1,819,600 24,086
Crane Co. 731,500 20,025
Dial Corp. (The) 1,511,400 34,951
Hanson Trust PLC sponsored ADR 583,600 10,724
Harris Corp. 278,600 11,492
ITT Corp. 484,100 43,327
Textron, Inc. 803,900 41,501
Tyco Laboratories, Inc. 718,600 34,762
United Technologies Corp. 793,100 50,957
313,978
CONSTRUCTION & REAL ESTATE - 1.1%
BUILDING MATERIALS - 0.4%
Armstrong World Industries, Inc. 486,900 21,545
Dexter Corp. 344,200 7,142
28,687
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE - CONTINUED
CONSTRUCTION - 0.0%
Lennar Corp. 146,500 $ 2,252
Pulte Corp. 62,800 1,272
3,524
REAL ESTATE - 0.0%
Southmark Corp. (a) 9 -
REAL ESTATE INVESTMENT TRUSTS - 0.7%
Carr Realty Corp. 97,800 1,761
Crown American Realty Trust (SBI) 412,100 5,615
Equity Residential Property Trust (SBI) 616,400 16,412
Federal Realty Investment Trust (SBI) 171,700 3,584
Haagen Alexander Properties, Inc. 180,200 2,793
Macerich Company 150,800 3,054
Merry Land & Investment Co., Inc. 267,748 5,489
Simon Properties Group, Inc. 286,300 6,692
Taubman Centers, Inc. 156,800 1,411
Vornado Realty Trust 114,000 3,947
50,758
TOTAL CONSTRUCTION & REAL ESTATE 82,969
DURABLES - 3.9%
AUTOS, TIRES, & ACCESSORIES - 3.0%
Bridgestone Corp. 1,199,000 16,722
Echlin, Inc. 72,100 2,379
General Motors Corp. 1,150,846 44,595
Genuine Parts Company 411,800 15,082
Honda Motor Co. Ltd. 480,000 7,465
Johnson Controls, Inc. 302,900 14,388
Nissan Motor Co. Ltd. Ord. 1,418,000 10,045
Snap-on Tools Corp. 724,400 22,909
Suzuki Motor Corp. 648,000 6,014
TRW, Inc. 401,100 25,721
Toyota Motor Corp. 1,801,000 34,334
Volkswagen AG 98,600 25,418
225,072
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.3%
Matsushita Electric Industrial Co. Ltd. 992,000 $ 13,736
Sony Corp. 131,100 6,038
Whirlpool Corp. 72,700 3,626
23,400
TEXTILES & APPAREL - 0.6%
Jones Apparel Group, Inc. (a) 211,300 5,071
Liz Claiborne, Inc. 972,200 16,163
Oshkosh B'Gosh, Inc. Class A 171,600 2,488
Stride Rite Corp. 168,100 1,828
Unifi, Inc. 655,700 17,868
43,418
TOTAL DURABLES 291,890
ENERGY - 8.4%
ENERGY SERVICES - 1.9%
Baker Hughes, Inc. 1,455,100 25,646
Halliburton Co. 1,170,200 42,420
Schlumberger Ltd. 1,292,300 68,169
136,235
OIL & GAS - 6.5%
Amerada Hess Corp. 125,800 5,708
Amoco Corp. 861,600 49,973
British Petroleum PLC:
ADR 963,830 74,817
Ord. 6,402,725 41,477
Chevron Corp. 947,100 42,264
Exxon Corp. 413,100 25,819
Kerr-McGee Corp. 458,600 21,726
Mobil Corp. 521,500 45,045
Murphy Oil Corp. 498,600 21,689
Phillips Petroleum Co. 714,600 22,778
Royal Dutch Petroleum Co. 423,200 47,345
Texaco, Inc. 154,300 9,509
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Total SA:
Class B 457,850 $ 25,815
Class B sponsored ADR 557,400 15,816
Unocal Corp. 1,454,737 38,005
487,786
TOTAL ENERGY 624,021
FINANCE - 14.8%
BANKS - 5.7%
Banc One Corp. 727,220 21,453
Bank of New York Co., Inc. 1,276,994 38,310
BankAmerica Corp. 244,800 10,557
Barnett Banks, Inc. 80,700 3,450
Boatmen's Bancshares, Inc. 697,600 21,277
Chemical Banking Corp. 1,184,100 46,032
Comerica, Inc. 538,426 13,528
Commerzbank AG 52,300 10,944
Deutsche Bank AG 55,700 25,228
Dresdner Bank AG Ord. 61,500 15,632
First Chicago Corp. 674,800 31,716
First Fidelity Bancorporation 898,200 42,440
First Union Corp. 205,986 8,806
Firstar Corp. 348,700 9,589
Fleet Financial Group, Inc. 605,500 18,997
KeyCorp. 755,300 20,960
Mercantile Bancorporation, Inc. 343,450 11,892
NationsBank Corp. 791,543 36,807
Norwest Corp. 465,200 11,165
Royal Bank of Canada 1,046,000 20,443
Shawmut National Corp. (warrants) (a) 10,731 39
Signet Banking Corp. 149,521 4,878
424,143
CLOSED END INVESTMENT COMPANY - 0.0%
Latin American Investment Fund, Inc. 138,000 2,484
CREDIT & OTHER FINANCE - 3.1%
American Express Co. 4,314,800 135,916
Beneficial Corp. 814,000 32,662
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
GFC Financial Corp. 577,850 $ 19,069
Household International, Inc. 955,800 38,829
Trilon Financial Corp. Class A 2,024,100 5,395
231,871
FEDERAL SPONSORED CREDIT - 1.5%
Federal National Mortgage Association 1,574,400 112,570
INSURANCE - 2.9%
ACE Ltd. 180,000 4,432
Allstate Corp. 1,026,700 24,769
American Bankers Insurance Group, Inc. 606,220 15,231
American Premier Underwriters, Inc. 1,027,300 25,811
Chubb Corp. (The) 147,100 11,915
CIGNA Corp. 476,700 32,237
Continental Corp. 433,400 8,343
Fremont General Corp. 58,150 1,272
General Re Corp. 190,900 24,650
NWNL Companies, Inc. 767,100 24,260
SAFECO Corp. 26,800 1,414
Travelers, Inc. (The) 905,300 33,383
USLIFE Corp. 213,000 7,535
215,252
SAVINGS & LOANS - 0.5%
Ahmanson (H.F.) & Co. 1,179,900 19,321
Washington Mutual, Inc. 1,111,800 19,595
38,916
SECURITIES INDUSTRY - 1.1%
Bear Stearns Companies, Inc. 535,700 8,906
First Marathon Inc. Class A (non-vtg.) (a) 1,105,300 9,230
Lehman Brothers Holdings, Inc. 888,760 15,109
Nomura Securities Co. Ltd. 1,970,000 38,346
PaineWebber Group, Inc. 617,850 9,268
80,859
TOTAL FINANCE 1,106,095
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - 5.1%
DRUGS & PHARMACEUTICALS - 2.9%
American Home Products Corp. 420,800 $ 29,509
Bristol-Myers Squibb Co. 823,400 50,639
Pfizer, Inc. 689,100 56,334
Schering-Plough Corp. 421,700 33,103
Warner-Lambert Co. 611,000 47,658
217,243
MEDICAL EQUIPMENT & SUPPLIES - 2.2%
Baxter International, Inc. 1,403,100 41,391
Becton, Dickinson & Co. 974,700 51,172
Bergen Brunswig Corp. Class A 693,655 15,867
Johnson & Johnson 864,600 50,255
Pall Corp. 399,200 7,585
166,270
TOTAL HEALTH 383,513
HOLDING COMPANIES - 0.6%
Brierley Investments Ltd. 15,004,300 11,006
Cinergy Corp. 356,898 8,789
Jardine Matheson Holdings Ltd. 898,400 6,379
Jardine Strategic Holdings Ltd. 4,340,000 13,801
SDW Holdings Corp. (g) 152,000 4,180
44,155
INDUSTRIAL MACHINERY & EQUIPMENT - 4.6%
ELECTRICAL EQUIPMENT - 3.0%
General Electric Co. 3,466,400 178,520
General Signal Corp. 872,300 30,312
Philips Electronics 576,900 18,164
226,996
INDUSTRIAL MACHINERY & EQUIPMENT - 1.2%
Caterpillar, Inc. 579,800 29,859
Cooper Industries, Inc. 433,800 16,593
Deere & Co. 213,400 15,205
Goulds Pumps, Inc. 107,200 2,171
Keystone International, Inc. 850,700 14,462
Mitsubishi Heavy Industry 1,726,000 11,638
89,928
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.4%
Browning-Ferris Industries, Inc. 322,300 $ 9,991
Safety Kleen Corp. 1,091,400 17,190
27,181
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 344,105
MEDIA & LEISURE - 1.1%
ENTERTAINMENT - 0.0%
Cedar Fair LP (depositary units) 118,300 3,371
PUBLISHING - 1.1%
Dow Jones & Co., Inc. 520,800 17,056
Gannett Co., Inc. 633,200 32,214
Houghton Mifflin Co. 21,900 901
McGraw-Hill, Inc. 113,900 7,404
News Corp. Ltd. ADR 181,500 2,813
Times Mirror Co. Series A 557,700 18,056
Torstar Corp. Class B 225,500 3,305
81,749
TOTAL MEDIA & LEISURE 85,120
NONDURABLES - 5.9%
BEVERAGES - 0.4%
Cadbury-Schweppes PLC Ord. 135,700 903
Heileman G Brewing, Inc. Class 1 (a)(e)(f) 100 2,000
PepsiCo, Inc. 780,000 28,762
31,665
FOODS - 1.0%
CPC International, Inc. 176,800 9,613
Goodman Fielder Ltd. Ord. 8,288,100 7,587
Interstate Bakeries Corp. Del. 188,700 2,807
Montedison SPA:
ADR 73,500 570
sponsored Ord. 4,824,400 3,784
Nabisco Holdings Class A 386,200 10,910
Nestle SA (Reg.) 24,200 22,082
Ralston Purina Co. 434,700 19,562
76,915
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 0.6%
Avon Products, Inc. 237,852 $ 13,587
Tambrands, Inc. 680,500 29,517
43,104
TOBACCO - 3.9%
Dibrell Brothers, Inc. 46,000 793
Imasco Ltd. 1,203,100 34,523
Philip Morris Companies, Inc. 2,840,600 169,371
RJR Nabisco Holdings Corp. (a) 14,618,600 85,884
290,571
TOTAL NONDURABLES 442,255
RETAIL & WHOLESALE - 3.1%
APPAREL STORES - 0.5%
Charming Shoppes, Inc. 817,500 5,212
Edison Brothers Stores, Inc. 769,900 9,527
Limited, Inc. (The) 308,500 5,206
Petrie Stores Corp. 358,870 7,761
TJX Companies, Inc. 646,300 8,644
United States Shoe Corp. 100,000 2,012
38,362
GENERAL MERCHANDISE STORES - 1.8%
Dayton Hudson Corp. 246,300 16,902
Dillard Department Stores, Inc. Class A 481,700 12,645
Federated Department Stores, Inc.:
(Del.) (a) 1,279,467 24,150
Class C (warrants) (Del.) (a) 101,200 430
Hudsons Bay Co. Ord. 194,100 3,276
Penney (J.C.) Co., Inc. 88,600 3,677
Sears, Roebuck & Co. 1,733,300 76,482
137,562
GROCERY STORES - 0.7%
Fleming Companies, Inc. 521,459 10,625
Grand Union Capital Corp. Class B (a)(b) 6,979 1
Grand Union Co. (warrants) (a)(b) 1,749 -
Great Atlantic & Pacific Tea Co., Inc. 764,500 14,239
Supervalu, Inc. 1,087,800 25,835
50,700
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
International Semi-Tech Microelectronics Inc. 480,000 $ 1,552
Toys "R" Us, Inc. (a) 224,000 6,552
8,104
TOTAL RETAIL & WHOLESALE 234,728
SERVICES - 1.5%
LEASING & RENTAL - 0.2%
GATX Corp. 344,800 14,051
PRINTING - 1.0%
Deluxe Corp. 596,100 15,946
Donnelley (R.R.) & Sons Co. 384,000 11,616
Moore Corporation Ltd. 1,494,100 26,280
New England Business Service, Inc. 140,700 2,603
Standard Register Co. 505,300 8,464
Wallace Computer Services, Inc. 265,000 7,619
72,528
SERVICES - 0.3%
Block (H & R), Inc. 238,400 8,523
Jostens, Inc. 789,000 14,793
Kelly Services, Inc. Class A 129,300 3,879
27,195
TOTAL SERVICES 113,774
TECHNOLOGY - 4.1%
COMPUTER SERVICES & SOFTWARE - 0.1%
Sterling Software, Inc. (a) 118,677 4,243
COMPUTERS & OFFICE EQUIPMENT - 2.8%
Digital Equipment Corp. (a) 1,112,900 37,700
International Business Machines Corp. 1,409,500 101,660
Semi-tech Microelectronics 3,120,700 5,710
Xerox Corp. 575,181 62,910
207,980
ELECTRONICS - 1.0%
AMP, Inc. 154,000 10,934
Hitachi Ltd. 2,130,000 18,251
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Nitto Denko Corp. 633,000 $ 9,146
TDK Corp. 108,000 4,378
Texas Instruments, Inc. 122,572 8,458
Thomas & Betts Corp. 256,800 16,788
Toshiba Corp. 1,046,000 6,444
74,399
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. 387,700 18,997
TOTAL TECHNOLOGY 305,619
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.1%
Swire Pacific Class A 564,000 3,070
RAILROADS - 1.1%
Burlington Northern, Inc. 407,400 19,352
CSX Corp. 680,300 48,726
Canadian Pacific Ltd. Ord. 1,223,900 16,636
84,714
SHIPPING - 0.0%
Shun Tak Holdings Ltd. 282,000 164
TOTAL TRANSPORTATION 87,948
UTILITIES - 9.5%
ELECTRIC UTILITY - 3.7%
Baltimore Gas & Electric Co. 195,000 4,729
DPL, Inc. 729,150 15,677
DQE, Inc. 143,800 4,566
Entergy Corp. 1,657,100 40,392
Great Bay Power (a) 93,930 751
Houston Industries, Inc. 270,100 10,770
Huaneng Power International, Inc. Class N sponsored ADR (a) 428,300 5,514
Illinova Corp. 1,774,000 39,693
Korea Electric Power Corp. 615,000 19,660
Niagara Mohawk Power Corp. 516,400 8,004
Pacific Gas & Electric Co. 217,500 5,492
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
PacifiCorp. 663,300 $ 12,934
Peco Energy Co. 562,400 15,044
Pinnacle West Capital Corp. 914,800 18,982
Portland General Corp. 308,900 6,255
Unicom Corp. 683,300 17,766
Veba Vereinigte Elektrizitaets & Bergwerks AG Ord. 154,700 52,017
278,246
GAS - 1.5%
Consolidated Natural Gas Co. 362,700 12,513
Enron Corp. 626,900 18,258
MCN Corp. 430,000 7,579
Pacific Enterprises 1,326,200 30,171
Panhandle Eastern Corp. 1,346,600 28,279
Williams Companies, Inc. 399,400 10,784
107,584
TELEPHONE SERVICES - 4.3%
Ameritech Corp. 1,892,400 83,029
Bell Atlantic Corp. 671,200 36,413
BellSouth Corp. 767,100 45,451
Frontier Corp. 534,200 11,218
NYNEX Corp. 1,287,100 50,840
Southwestern Bell Corp. 1,011,300 43,107
Sprint Corp. 629,600 17,944
U.S. West, Inc. 911,700 35,678
323,680
TOTAL UTILITIES 709,510
TOTAL COMMON STOCKS
(Cost $5,330,377) 5,929,276
PREFERRED STOCKS - 6.6%
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - 6.0%
BASIC INDUSTRIES - 1.1%
IRON & STEEL - 0.2%
Armco, Inc., Class A, $3.625 276,200 $ 13,672
Bethlehem Steel Corporation $5.00 24,700 1,278
14,950
METALS & MINING - 0.8%
Alumax, Inc., Series A, $4.00 (a) 322,667 35,332
Kaiser Aluminum Corp. $0.96 712,400 8,014
Reynolds Metals Co. $3.31 236,300 11,579
54,925
PAPER & FOREST PRODUCTS - 0.1%
Bowater, Inc. depositary shares representing 1/4 shares
Series B 324,300 8,189
TOTAL BASIC INDUSTRIES 78,064
DURABLES - 1.1%
AUTOS, TIRES, & ACCESSORIES - 1.0%
Chrysler Corp., Series A, $4.625 (g) 457,800 56,996
Ford Motor Co. (Del.), Series A, $4.20 239,100 19,636
76,632
TEXTILES & APPAREL - 0.1%
Fieldcrest Cannon, Inc. $3.00 170,900 8,139
TOTAL DURABLES 84,771
ENERGY - 1.2%
ENERGY SERVICES - 0.1%
Reading & Bates Corp. $1.625 246,300 5,480
OIL & GAS - 1.1%
Atlantic Richfield Co. $.5575 928,300 21,815
Diamond Shamrock, Inc. $2.50 (g) 159,900 7,915
Maxus Energy Corp. $4.00 122,300 4,189
Occidental Petroleum Corp. $3.00 694,900 31,965
Unocal Corp. $3.50 (g) 423,900 20,347
86,231
TOTAL ENERGY 91,711
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - 0.7%
BANKS - 0.4%
Norwest Corp., Series B, $3.50 470,400 $ 31,047
INSURANCE - 0.3%
Alexander & Alexander Services, Inc.,
Class A, $3.60 (g) 168,500 7,077
Travelers, Inc. $2.75 221,800 12,088
USF&G Corp., Series C, $5.00 83,095 5,183
24,348
TOTAL FINANCE 55,395
HEALTH - 0.2%
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
U.S. Surgical Corp. $2.20 (g) 477,500 12,773
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
ELECTRICAL EQUIPMENT - 0.6%
Westinghouse Electric Corp. $1.30 (g) 2,902,700 41,001
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.2%
Evergreen Media Corp. $3.00 exchangeable 341,500 13,830
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 956,400 7
TOTAL MEDIA & LEISURE 13,837
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands International, Inc. $2.875 232,600 9,362
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp. exchangeable
pay-in-kind $3.52 (a) 100,562 2,237
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
TECHNOLOGY - 0.2%
ELECTRONICS - 0.2%
National Semiconductor Corp. $3.25 210,200 $ 14,399
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.3%
Pittston Co. $3.125 (g) 177,200 7,487
UAL, Inc. 6 1/4% (g) 184,600 15,564
23,051
UTILITIES - 0.3%
GAS - 0.2%
Enron Corp., Series J, $10.50 31,800 12,402
Tejas Gas Corp. Delaware $2.625 40,800 1,663
14,065
TELEPHONE SERVICES - 0.1%
Philippine Long Distance Telephone (GDR) 171,700 8,585
TOTAL UTILITIES 22,650
TOTAL CONVERTIBLE PREFERRED STOCKS 449,251
NONCONVERTIBLE PREFERRED STOCKS - 0.6%
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc. pay-in-kind $14.25 215,599 5,659
FINANCE - 0.5%
BANKS - 0.5%
BankAmerica Corp. adj. rate Series 1 262,564 12,472
First Chicago Corp. adj. rate 166,630 8,040
First Fidelity Bancorporation, Series D, adj. rate 41,570 4,001
First Interstate Bancorp depositary shares representing
1/8 share, Series G, 9% 178,200 4,544
Shawmut National Corp. depositary shares
representing 1/10th share, 9.30% 194,350 4,883
33,940
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.0%
First Nationwide Bank 11 1/2% 18,500 $ 1,790
TOTAL FINANCE 35,730
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B, adj. rate 18,485 887
Louisiana Power & Light Co. 9.68% 50,300 1,270
Niagara Mohawk Power Corp., Series A, adj. rate 104,595 2,040
4,197
TOTAL NONCONVERTIBLE PREFERRED STOCKS 45,586
TOTAL PREFERRED STOCKS
(Cost $485,127) 494,837
CORPORATE BONDS - 7.0%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT
CONVERTIBLE BONDS - 5.0%
BASIC INDUSTRIES - 0.8%
CHEMICALS & PLASTICS - 0.2%
Hercules, Inc. 8%, 8/15/10 A3 $ 5,490 14,274
IRON & STEEL - 0.1%
Allegheny Ludlum Corp. 5 7/8%, 3/15/02 Baa2 3,620 3,765
METALS & MINING - 0.2%
Freeport McMoran, Inc. 6.55%, 1/15/01 Ba3 13,030 11,857
Walsin Lihwa Corp. 3 1/4%, 6/16/04 (g) - 4,000 4,060
15,917
PACKAGING & CONTAINERS - 0.0%
International Container Term Services, Inc.
unsecured 6%, 2/19/00 (g) - 2,100 2,415
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 0.3%
Repap Enterprises, Inc. 8 1/2%, 8/1/97 - $ 4,360 $ 4,077
Stone Container Corp. 8 7/8%,
7/15/00 (g) B2 10,810 17,836
21,913
TOTAL BASIC INDUSTRIES 58,284
CONGLOMERATES - 0.2%
Hanson PLC euro 9 1/2%, 1/31/06 A2 GBP 7,600 12,398
CONSTRUCTION & REAL ESTATE - 0.1%
BUILDING MATERIALS - 0.0%
Cemex SA 4 1/4%, 11/1/97 (g) Ba3 4,100 2,829
CONSTRUCTION - 0.1%
Continental Homes Holding Corp. 6 7/8%,
3/15/02 B3 3,900 3,062
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Centerpoint Properties 8.22%, 1/15/04 - 1,374 1,432
Liberty Property L.P. 8%, 7/1/01 - 1,358 1,350
2,782
TOTAL CONSTRUCTION & REAL ESTATE 8,673
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Bridgestone Conv. 3.70%, 12/31/98 - JPY 724,000 8,172
CONSUMER ELECTRONICS - 0.0%
Matsushita Electric Industrial Co. Ltd.
1.30%, 3/29/02 Aa2 JPY 192,000 1,765
1.40%, 3/31/04 Aa2 JPY 192,000 1,772
3,537
TEXTILES & APPAREL - 0.1%
Unifi, Inc. 6%, 3/15/02 Baa1 5,460 5,433
TOTAL DURABLES 17,142
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
ENERGY - 0.3%
OIL & GAS - 0.3%
Apache Corp. 6%, 1/15/02 (g) BBB- $ 8,710 $ 8,623
Cross Timbers Oil Co. 5 1/4%, 11/1/03 B2 2,583 2,015
Pennzoil Co. exchangeable 6 1/2%, 1/15/03 Baa2 8,560 9,758
USX-Marathon Group 7%, 6/15/17 BB- 221 181
20,577
FINANCE - 0.5%
BANKS - 0.2%
Bank of Boston Corp. 7 3/4%, 6/15/11 Baa2 4,182 5,008
Bank of New York Co., Inc. 7 1/2%, 8/15/01 A3 6,370 9,842
14,850
CREDIT & OTHER FINANCE - 0.0%
Huntingdon International Holdings PLC euro
7 1/2%, 9/25/06 - 1,000 550
INSURANCE - 0.3%
Fremont General Corp. liquid yield option
0%, 10/12/13 Ba2 42,650 13,648
NAC RE Corp. 5 1/4%, 12/15/02 Baa3 4,020 3,457
USF&G Corp. 0%, 3/3/09 Ba2 15,780 7,574
24,679
TOTAL FINANCE 40,079
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.1%
Matsushita Electric Works Co. Ltd. 2.70%,
5/31/02 - JPY 761,000 8,933
POLLUTION CONTROL - 0.2%
WMX Technologies, Inc. 2%, 1/24/05 A 21,808 17,828
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 26,761
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 0.9%
BROADCASTING - 0.7%
Comcast Corp. 1 1/8%, 4/15/07 B1 $ 33,870 $ 13,082
Time Warner, Inc.:
liquid yield option 0%, 6/22/13 Ba1 78,130 28,762
8 3/4%, 1/10/15 Ba3 10,747 10,371
52,215
LEISURE DURABLES & TOYS - 0.2%
Outboard Marine Corp. 7%, 8/1/02 B1 12,130 12,494
PUBLISHING - 0.0%
News America Holdings, Inc. liquid yield option,
0%, 3/11/13 Ba1 3,910 1,451
TOTAL MEDIA & LEISURE 66,160
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Grand Metropolitan PLC 6 1/2%,
1/31/00 (g) A+ 14,200 14,200
RETAIL & WHOLESALE - 0.3%
APPAREL STORES - 0.1%
Baker (J.) Inc. 7%, 6/1/02 B2 5,520 5,409
Dylex Ltd. 9%, 8/15/00 - CAD 30 11
5,420
GENERAL MERCHANDISE STORES - 0.2%
Federated Department Stores, Inc.
0%, 2/15/04 (d) Ba1 11,790 11,525
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Price Co. 5 1/2%, 2/28/12 Baa1 3,080 2,418
TOTAL RETAIL & WHOLESALE 19,363
SERVICES - 0.1%
ADVERTISING - 0.1%
Omnicom Group, Inc. 4 1/2%, 9/1/00 (g)(i) Baa2 4,910 4,996
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.3%
COMPUTER SERVICES & SOFTWARE - 0.1%
Sterling Software, Inc. 5 3/4%, 2/01/03 B1 $ 7,384 $ 9,692
COMPUTERS & OFFICE EQUIPMENT - 0.2%
IBM France 5 3/4%, 1/1/98 - 142,300 11,446
TOTAL TECHNOLOGY 21,138
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.5%
AMR Corp. 6 1/8%, 11/1/24 Ba2 36,885 31,306
Delta Air Lines, Inc. 3.23%, 6/15/03 Ba3 10,960 8,083
39,389
UTILITIES - 0.3%
CELLULAR - 0.2%
Cellular Communications, Inc. liquid yield option
0%, 7/27/99 B1 5,430 4,290
Rogers Communications, Inc. liquid yield option
0%, 5/20/13 B2 14,176 4,572
Technology Resources Industries 2 3/4%,
11/28/04 (g) - 8,450 7,626
16,488
GAS - 0.1%
SFP Pipeline Holdings, Inc. 0%, 8/15/10 Baa3 3,690 4,354
TELEPHONE SERVICES - 0.0%
CAM-NET Communications Network
10%, 8/15/97 (g) - 3,250 1,625
TOTAL UTILITIES 22,467
TOTAL CONVERTIBLE BONDS 371,627
NONCONVERTIBLE BONDS - 2.0%
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.1%
American Pacific Corp. 11%, 12/15/02 (g) - 3,000 2,850
Envirodyne Industries, Inc. 10 1/4%, 12/1/01 B3 2,290 1,723
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
CHEMICALS & PLASTICS - CONTINUED
IMC Fertilizer Group, Inc. 10 3/4%, 6/15/03 B3 $ 1,000 $ 1,033
NL Industries, Inc. 0%, 10/15/05 (d) B2 5,000 3,125
8,731
IRON & STEEL - 0.0%
AK Steel Corp. 10 3/4%, 4/1/04 B1 1,170 1,164
PACKAGING & CONTAINERS - 0.0%
Crown Packaging Holdings Ltd. 12 1/4%,
11/1/03 (d) Caa 3,366 1,557
PAPER & FOREST PRODUCTS - 0.1%
Indorayon Yankee 9 1/8%, 10/15/00 BB 590 466
Repap Enterprises, Inc. 9.0625%, 7/21/97 (i) - 1,355 1,199
Repap Wisconsin, Inc.:
9 1/4%, 2/1/02 B1 110 98
9 7/8%, 5/1/06 B3 280 242
Stone Container Corp.
10 3/4%, 6/15/97 B2 1,150 1,170
11 7/8%, 12/1/98 B1 3,670 3,780
6,955
TOTAL BASIC INDUSTRIES 18,407
CONGLOMERATES - 0.1%
Figgie International Holdings, Inc. 9 7/8%,
10/1/99 Ba3 9,000 7,740
CONSTRUCTION & REAL ESTATE - 0.1%
BUILDING MATERIALS - 0.0%
USG Corp. Series B 10 1/4%, 12/15/02 B1 353 358
CONSTRUCTION - 0.0%
Hillsborough/Jim Walter Corp. 17%, 1/1/96 (b) Ca 230 131
Ryland Group, Inc. 9 5/8%, 6/1/04 Ba3 1,500 1,257
1,388
REAL ESTATE - 0.1%
Bardell Associates Note Trust 12 1/2%,
11/1/08 (f) - 2,941 2,989
TOTAL CONSTRUCTION & REAL ESTATE 4,735
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Grupo Dina Yank 8%, 8/8/04 - $ 6,510 $ 2,604
Harvard Industries, Inc. 12%, 7/15/04 B2 4,000 4,040
Truck Components, Inc. 12 1/4%, 6/30/01 B2 400 415
7,059
ENERGY - 0.1%
ENERGY SERVICES - 0.0%
Falcon Drilling, Inc. 9 3/4%, 1/15/01 B2 340 323
INDEPENDENT POWER - 0.0%
California Energy Corp., Inc. 0%,
1/15/04 (d) Ba3 3,350 2,345
OIL & GAS - 0.1%
Flores & Rucks, Inc. 13 1/2%, 12/1/04 B3 6,900 6,969
TOTAL ENERGY 9,637
FINANCE - 0.2%
BANKS - 0.1%
Banamex 5% 12/2/09 Ba2 MXN 6,700 887
Bancomer SA 9%, 6/1/00 (g) Ba2 11,250 7,369
8,256
CREDIT & OTHER FINANCE - 0.1%
General Electric Capital Corp. peso linked
6.56%, 10/29/96 (i) Aaa 2,000 986
Third Mexican Acceptance Corp. coll. notes gtd.
by Grupo Sidek SA and Grupo Situr SA
10 1/2%, 3/15/98 (g) - 4,000 3,110
4,096
SAVINGS & LOANS - 0.0%
Anchor Bancorp, Inc. 8 7/8%, 7/9/03 Ba3 2,000 1,740
TOTAL FINANCE 14,092
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Exide Corp. 10 3/4%, 12/15/02 B1 2,250 2,273
Mosler, Inc. 11%, 4/15/03 Caa 1,010 742
Specialty Equipment Cos., Inc. 11 3/8%, 12/1/03 B3 4,400 4,268
7,283
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 0.4%
BROADCASTING - 0.2%
Diamond Cable Communications PLC 0%,
9/30/04 (d) B3 $ 4,000 $ 2,110
New City 11 3/8%, 11/1/03 B3 3,250 2,958
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 1,520 1,459
SCI Television, Inc.:
secured 7 1/2%, 6/30/98 - 2,261 2,193
secured 11%, 6/30/05 B3 3,488 3,501
12,221
LEISURE DURABLES & TOYS - 0.0%
IHF CAP, Inc. 13%, 7/15/02 (g) B3 3,000 3,015
LODGING & GAMING - 0.1%
Bally's Gaming International, Inc. 10 3/8%,
7/15/98 - 7,500 7,012
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 - 3,110 2,993
Harrah's Jazz Co. 14 1/4%, 11/15/01 B1 1,480 1,573
11,578
PUBLISHING - 0.1%
Enquirer/Star Group, Inc. Unit 0%, 5/15/97 Ba3 8,230 6,461
TOTAL MEDIA & LEISURE 33,275
NONDURABLES - 0.2%
BEVERAGES - 0.0%
Dr. Pepper/Seven-Up Companies, Inc.
0%, 11/1/02 (d) B3 3,000 2,464
HOUSEHOLD PRODUCTS - 0.2%
Revlon Consumer Products Corp. 9 3/8%, 4/1/01 B2 5,550 4,926
Revlon Worldwide Corp. secured 0%, 3/15/98 B3 13,825 8,052
12,978
TOTAL NONDURABLES 15,442
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 0.2%
APPAREL STORES - 0.0%
Apparel Retailers, Inc. 0%, 8/15/05 (d) Caa $ 800 $ 424
Specialty Retailers, Inc., 11%, 8/15/03 B3 1,260 1,103
1,527
GROCERY STORES - 0.1%
Pathmark Stores, Inc.:
9 5/8%, 5/1/03 B2 3,050 2,745
0%, 11/1/03 (d) B3 3,000 1,530
4,275
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
Florists Transworld Delivery-FTD 14%,
12/15/01 (g) B3 4,300 4,300
Rickel Home Centers, Inc. 13 1/2%, 12/15/01 B2 2,900 2,755
7,055
TOTAL RETAIL & WHOLESALE 12,857
TRANSPORTATION - 0.1%
RAILROADS - 0.1%
Southern Pacific Rail Corp. 9 3/8%, 8/15/05 Ba3 4,000 3,840
TRUCKING & FREIGHT - 0.0%
Trism, Inc. 10 3/4%, 12/15/00 B2 1,320 1,254
TOTAL TRANSPORTATION 5,094
UTILITIES - 0.2%
CELLULAR - 0.0%
Pagemart Nationwide, Inc. 0%, 2/1/05
(d)(g) - 4,000 2,045
ELECTRIC UTILITY - 0.1%
Calpine Corp. 9 1/4%, 2/1/04 B1 6,000 4,950
Del Norte Funding Corp. 9.05%, 1/2/93 (b) Ca 2,364 1,342
El Paso Funding Corp. lease oblig.
10 3/4%, 4/1/13 (b) Ca 1,000 570
6,862
CORPORATE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
GAS - 0.1%
Columbia Gas Systems, Inc. (b):
9%, 8/1/93 Caa $ 1,000 $ 1,200
10 1/4%, 8/1/11 Caa 150 193
10.15%, 11/1/13 Caa 500 622
9 1/2%, 10/10/19 B1 1,500 1,836
9.91%, 5/28/20 - 1,590 1,972
5,823
TOTAL UTILITIES 14,730
TOTAL NONCONVERTIBLE BONDS 150,351
TOTAL CORPORATE BONDS
(Cost $538,800) 521,978
COMMERCIAL MORTGAGE SECURITIES - 0.1%
ACP Mortgage LP commercial floater Series F,
.066978%, 2/28/28 (g) 3,901 2,681
CS First Boston Mortgage Securities Corp.
commercial Series 1994-M1 Class E,
12.60%, 2/15/02 (g) 3,000 2,905
Resolution Trust Corp. commercial:
Series 1994-C1 Class E, 8%, 6/25/26 3,931 3,071
Series 1994-N2 Class 5-B,
10 5/8%, 12/15/04 (g) 2,400 2,299
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $10,911) 10,956
FOREIGN GOVERNMENT OBLIGATIONS (L) - 2.1%
Argentina Republic:
6 1/2%, 3/31/05 (i)(g) - 4,075 2,455
BOCON:
3.2712%, 4/1/01 (i) - ARP 7 2
6%, 4/1/01 (i) B1 1,169 626
3.2712%, 9/1/02 (i) - ARP - -
3.2712%, 4/1/07 (i) - ARP 36,974 8,502
6%, 4/1/07 (i) B1 25,773 9,202
FOREIGN GOVERNMENT OBLIGATIONS (L) - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Argentina Republic - continued
Brady:
euro:
4 1/4%, 3/31/23 (i) B1 $ 80,876 $ 35,585
7 1/8%, 3/31/23 (i) B1 8,500 5,143
BOTE:
1.67875%, 4/1/96 (i) - 950 314
4.32967%, 4/3/00 (i) - 8,534 5,209
euro 6 1/2%, 3/31/05 (i) BB- 15,750 9,489
Peso Letras 0%, 2/24/95 BBB ARP 1,017 1,006
Brazil Federative Republic:
IDU euro 7.8125%, 1/1/01 (i) B1 3,735 2,988
8%, 4/15/14 B2 4,080 1,867
4%, 4/15/24 - 43,500 17,672
euro 4%, 4/15/24 (i) - 6,000 2,438
Mexican Government Brady 6.63%, 12/31/19 Ba2 FRF 15,000 1,412
Mexico Value Recovery (rights) (a) - 39,605 -
Morocco Trust 7 3/8%, 1/3/09 (g)(i) - 9,750 6,264
Republic of Bulgaria Tranch A, 7.5625%,
7/28/24 (i) - 14,375 6,361
Republic of Ecuador (g):
7 5/8%, 12/21/04 - 1,961 1,177
30 year discount bond (h) - 18,500 9,111
past due interest (h) - 53,500 15,716
Republic of Panama 7 1/8%, 5/10/02 - 9,750 7,020
Republic of Venezuela:
FLIRB, 7%, 3/31/07 (i) Ba2 6,750 3,038
6 5/8%, 3/31/20 Ba3 3,000 1,455
7%, 3/31/20 (i) Ba3 1,000 485
Republic of Venezuela Oil Recovery (rights) (a) B+ 29 -
Siderurgica Brasileiras Inflation Indexed
6%, 8/15/99 (k) - BRR 15,062 2,446
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $196,283) 156,983
COLLATERALIZED NOTES - 0.0%
Argentina Local Market Securities Trust 1994-11
amortizing note 11.30%, 4/1/00 (collateralized
by Argentine govt. securities) (g)
(Cost $913) 913 712
PURCHASED BANK DEBT - 0.3%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (000S) (J) (000S)
El Paso Electric Co.:
term loan:
7%, 10/26/96 $ 2,571 $ 2,488
0%, 1/4/99 508 491
unsecured loan 0%, 12/1/95 118 68
unsecured term loan:
0%, 4/1/95 147 84
0%, 1/3/99 667 384
Empressa de Electricidad del Peru SA loan
participation (a) 1,000 510
GPA Group PLC:
CCF 2,714 2,295
DAF 630 -
term loan 450 290
Morroco Trust 8.5175%, 1/1/09 (i) JPY 384,301 2,477
Republic of Ecuador:
loan participation 5,000 1,969
loan participation under 1983 and 1984 extension
and refinancing agreements 8,500 3,347
loan participation under 1985 multi-year
refinancing agreement 11,500 4,701
Republic of Panama (a):
final 3,000 1,395
loan participation 10,000 4,650
TOTAL PURCHASED BANK DEBT
(Cost $30,082) 25,149
REPURCHASE AGREEMENTS - 4.6%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.81%
dated 1/31/95 due 2/1/95 $ 340,588 340,533
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $6,933,026) $ 7,480,424
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO BUY
1,543,971 ESP 2/21/95 $ 11,659 $ 113
TOTAL CONTRACTS TO BUY
(Payable amount $11,546) $ 11,659 $ 113
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.2%
CONTRACTS TO SELL
151,402 DEM 4/28/95 $ 99,602 $ 648
1,543,971 ESP 2/21/95 11,659 225
122,861 FRF 2/21/95 23,261 (210)
4,301,601 ITL 4/26/95 2,658 39
8,289,996 JPY 4/10/95 83,804 (987)
TOTAL CONTRACTS TO SELL
(Receivable amount $220,699) $ 220,984 $ (285)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 3.0%
$ (172)
SECURITY TYPE ABBREVIATIONS
FLIRB - Front loaded interest reduction
bonds
CURRENCY ABBREVIATIONS
ARP - Argentine peso
BRR - Brazilian Real
DEM - German deutsche mark
ESP - Spanish peseta
FRF - French franc
ITL - Italian lira
MXN - Mexican peso
JPY - Japanese yen
LEGEND
18. Non-income producing.
19. Non-income producing - issuer filed for bankruptcy protection under the
Federal Bankruptcy Code or is in default of interest payment.
20. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
21. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
22. Affiliated company (see Note 6 of Notes to Financial Statements).
23. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Bardell Associates
Note Trust
12 1/2%, 11/1/08 4/19/94 $2,996,000
Heileman G Class 1
Unit 1/21/94 $2,013,000
24. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $313,292,000 or 4.2% of net
assets.
25. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
26. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
27. Principal amount is stated in United States dollars unless otherwise
noted.
28. Principal amount shown is original face amount and does not reflect the
inflation adjustments.
29. Some foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.8% AAA, AA, A 0.8%
Baa 0.5% BBB 0.9%
Ba 2.2% BB 2.0%
B 2.8% B 2.0%
Caa 0.1% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 2.4%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
2.3% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 83.5%
Japan 2.7
Germany 2.6
United Kingdom 2.5
Canada 2.4
Netherlands 1.2
Argentina 1.0
Others (individually less than 1%) 4.1
TOTAL 100.0%
INCOME TAX INFORMATION
At January 31, 1995, the aggregate cost of investment securities for income
tax purposes was $6,940,826,000. Net unrealized appreciation aggregated
$539,598,000, of which $892,100,000 related to appreciated investment
securities and $352,502,000 related to depreciated investment securities.
The fund hereby designates $34,170,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
(EXCEPT PER-SHARE AMOUNTS) JANUARY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 7,480,424
agreements of $340,533) (cost $6,933,026) -
See accompanying schedule
Cash 697
Receivable for investments sold 74,353
Unrealized appreciation on foreign currency contracts 1,025
Receivable for fund shares sold 5,635
Dividends receivable 17,981
Interest receivable 9,414
Other receivables 2,207
TOTAL ASSETS 7,591,736
LIABILITIES
Payable for investments purchased $ 101,212
Regular delivery
Delayed delivery 33,666
Unrealized depreciation on foreign currency contracts 1,197
Payable for fund shares redeemed 11,163
Accrued management fee 2,714
Other payables and accrued expenses 2,327
TOTAL LIABILITIES 152,279
NET ASSETS $ 7,439,457
Net Assets consist of:
Paid in capital $ 6,768,405
Undistributed net investment income 23,329
Accumulated undistributed net realized gain (loss) on 100,504
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 547,219
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 240,831 shares outstanding $ 7,439,457
NET ASSET VALUE, offering price and redemption price per $30.89
share ($7,439,457 (divided by) 240,831 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED JANUARY 31, 1995
INVESTMENT INCOME $ 213,119
Dividends
Interest (including security lending fees of $110) 74,471
TOTAL INCOME 287,590
EXPENSES
Management fee $ 31,213
Transfer agent fees 15,809
Accounting and security lending fees 805
Non-interested trustees' compensation 125
Custodian fees and expenses 973
Registration fees 138
Audit 170
Legal 77
Interest 5
Miscellaneous 186
Total expenses before reductions 49,501
Expense reductions (589) 48,912
NET INVESTMENT INCOME 238,678
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of $1,480 386,227
on sales of investments of affiliated issuers)
Foreign currency transactions (19,082) 367,145
Change in net unrealized appreciation (depreciation) on:
Investment securities (812,668)
Assets and liabilities in foreign currencies (1,826) (814,494)
NET GAIN (LOSS) (447,349)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (208,671)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 238,678 $ 214,173
Net investment income
Net realized gain (loss) 367,145 484,404
Change in net unrealized appreciation (depreciation) (814,494) 531,022
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (208,671) 1,229,599
FROM OPERATIONS
Distributions to shareholders: (211,713) (213,298)
From net investment income
From net realized gain (479,855) (23,174)
TOTAL DISTRIBUTIONS (691,568) (236,472)
Share transactions 2,038,192 1,968,083
Net proceeds from sales of shares
Reinvestment of distributions 667,773 224,887
Cost of shares redeemed (1,309,540) (1,365,987)
Net increase (decrease) in net assets resulting from 1,396,425 826,983
share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS 496,186 1,820,110
NET ASSETS
Beginning of period 6,943,271 5,123,161
End of period (including undistributed net investment $ 7,439,457 $ 6,943,271
income of $23,329 and $11,688, respectively)
OTHER INFORMATION
Shares
Sold 62,796 60,873
Issued in reinvestment of distributions 21,310 6,963
Redeemed (40,568) (42,075)
Net increase (decrease) 43,538 25,761
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JANUARY 31,
1995 1994 1993 C 1992 1991
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 35.19 $ 29.87 $ 26.57 $ 22.38 $ 25.25
Income from Investment Operations
Net investment income 1.02 1.11 1.11 D 1.18 1.46
Net realized and unrealized (2.12) 5.48 3.27 4.21 (2.48)
gain (loss)
Total from investment operations (1.10) 6.59 4.38 5.39 (1.02)
Less Distributions (.98) (1.15) (1.08) (1.20) (1.55)
From net investment income
From net realized gain (2.22) (.12) - - (.30)
Total distributions (3.20) (1.27) (1.08) (1.20) (1.85)
Net asset value, end of period $ 30.89 $ 35.19 $ 29.87 $ 26.57 $ 22.38
TOTAL RETURN A, B (3.01) 22.52% 16.92% 24.61% (3.94)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 7,439 $ 6,943 $ 5,123 $ 4,421 $ 3,941
Ratio of expenses to average net .69% .66% .67% .68% .70%
assets
Ratio of expenses to average net .70% .66% .67% .68% .70%
assets before expense reductions
Ratio of net investment income to 3.37% 3.55% 4.02% 4.81% 6.18%
average net assets
Portfolio turnover rate 50% 70% 84% 111% 107%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C AS OF FEBRUARY 1, 1993 THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Equity Income Fund (the fund) is a fund of Fidelity Devonshire
Trust (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Effective February 1, 1994, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of net investment income accrued and the U.S. dollar amount
actually received. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for futures
and options transactions, foreign currency transactions, market discount,
partnerships, non-taxable dividends and losses deferred due to wash sales.
The fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Accumulated undistributed net
investment income may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. These contracts
involve market risk in excess of the unrealized gain or loss reflected in
the fund's Statement of Assets and Liabilities. The U.S. dollar value of
the currencies the fund has committed to buy or sell is shown in the
schedule of investments under the caption "Forward Foreign Currency
Contracts." This amount represents the aggregate exposure to each currency
the fund has acquired or hedged through currency contracts at period end.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms.
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date. Contracts that have been offset with different
counterparties are reflected as both a contract to buy and a contract to
sell in the schedule of investments under the caption "Forward Foreign
Currency Contracts."
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and and the date when the securities will be
delivered and paid for are fixed at the time the transaction is negotiated.
The market value of the securities purchased or sold on a when-issued or
forward commitment basis are identified as such in the fund's schedule of
investments. The fund may receive compensation for interest forgone in the
purchase of a delayed delivery security. With respect to purchase
commitments, the fund identifies securities as segregated in its custodial
records with a value at least equal to the amount of the commitment. Losses
may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. Buying futures, writing
puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS AND OPTIONS - CONTINUED
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
INDEXED SECURITIES. The fund may invest in indexed securities whose values
are linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other underlying instruments. The
fund uses these securities to increase or decrease its exposure to markets
that might be difficult to invest in through conventional securities.
Indexed securities may be more volatile than their underlying instruments,
but any loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, restricted securities (excluding 144A issues) amounted
to $4,989,000 or 0.1% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $4,394,947,000 and $3,464,542,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2850% to .5200% for the period February 1, 1994 to July
31, 1994 and .2700% to .5200% for the period August 1, 1994 to January 31,
1995. In the event that these rates were lower than the contractual rates
in effect during those periods, FMR voluntarily implemented the above
rates, as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .12%. For the period, the management fee was
equivalent to an annual rate of .44% of average net assets.
SALES LOAD. For the period December 31, 1993 through December 31, 1995,
Fidelity Distributors Corporation, an affiliate of FMR and the general
distributor of the fund, will voluntarily waive the sales charge (2% of the
offering price) on the sales of shares.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period February 1, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which FSC receives
account fees and asset-based fees that vary according to account size and
type of account. FSC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee is based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the month
plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $1,984,000 for the period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, there were no
loans outstanding.
6. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies which are or
were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Astrex Inc. $ - $ 1,500,000 $ - $ -
Heileman G Brewing, Inc.
Class 1 (a) - - - 2,000,000
TOTALS $ - $ 1,500,000 $ - $ 2,000,000
(a) Non-income producing.
7. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $24,086,000 and $10,369,000,
respectively. The weighted average interest rate was 4.11%. Interest
expense includes $5,000 paid under the bank borrowing program.
8. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$589,000 under this arrangement.
9. LITIGATION
The fund is engaged in litigation against the obligor on the inflation
adjusted debt of Siderurgica Brasileiras SA, contesting the calculation of
the principal adjustment. The probability of success cannot be predicted
and the amount of recovery cannot be estimated. Any recovery from this
litigation would inure to the benefit of the fund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Equity-Income Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Trust: Fidelity Equity-Income Fund, including the
schedule of portfolio investments, as of January 31, 1995, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1995 by correspondence with the
custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Trust: Fidelity Equity-Income Fund as of January 31,
1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 7, 1995
DISTRIBUTIONS
The Board of Trustees of Fidelity Equity-Income Fund voted to pay on March
6, 1995, to shareholders of record at the opening of business on March 3,
1995, a distribution of $.28 derived from capital gains realized from sales
of portfolio securities and a dividend of $.26 from net investment income.
A total of 77% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1996 of the applicable
percentage for use in preparing 1995 income tax returns.
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INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Stephen Petersen, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S GROWTH AND INCOME FUNDS
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THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
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* INDEPENDENT TRUSTEES
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FIDELITY
(registered trademark)
MID-CAP STOCK
FUND
ANNUAL REPORT
JANUARY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 22 Notes to the financial statements.
REPORT OF INDEPENDENT 26 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 27
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMA-
TION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES
ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY,
AND ARE
SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR
FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY
FIDELITY FUND,
INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS.
READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been a few positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each
performance figure includes changes in a fund's share price, plus
reinvestment of any dividends (or income) and capital gains (the profits
the fund earns when it sells stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1995 PAST 6 LIFE OF
MONTHS FUND
Mid-Cap Stock 10.04 9.27%
S&P MidCap 400(registered trademark) 1.65% -2.47%
Average Mid-Cap Fund 4.06% n/a
CUMULATIVE TOTAL RETURNS reflect the fund's actual performance over a set
period - in this case, six months, or since the fund began on March 29,
1994. For example, if you invested $1,000 in a fund that had a 5% return
over the past year, you would end up with $1,050. You can compare the
fund's performance to the Standard & Poor's MidCap 400 index - a broad
measure of the performance of the mid-cap market. To measure how the fund's
performance stacked up against its peers, you can compare it to the average
mid-cap fund, which currently reflects the performance of 92 funds tracked
by Lipper Analytical Services. Both benchmarks include reinvested dividends
and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year. In the fund's next report we'll report these numbers for
the fund and the benchmarks.
$10,000 OVER LIFE OF FUND
Fidelity Mid Cap FunStandard & Poor's Mi
03/29/94 10000.00 10000.00
03/31/94 9780.00 9631.19
04/30/94 9840.00 9702.46
05/31/94 9890.00 9610.29
06/30/94 9690.00 9279.69
07/31/94 9930.00 9594.28
08/31/94 10740.00 10097.02
09/30/94 10990.00 9908.20
10/31/94 11180.00 10016.20
11/30/94 10720.00 9564.47
12/31/94 10846.15 9652.27
01/31/95 10927.24 9752.75
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Mid-Cap Stock Fund on March 29, 1994, when the fund started. As the chart
shows, by January 31, 1995, the value of your investment would have grown
to $10,927 - a 9.27% increase on your initial investment. For comparison,
look at how the S&P MidCap 400 did over the same period. With dividends
reinvested, the same $10,000 investment in the S&P MidCap 400 would have
fallen to $9,753 - a 2.47% decrease.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Although there was a small bond
market rally in January, sharply
rising interest rates caused a severe
downturn in U.S. bond markets
during the 12 months ended
January 31, 1995. Yields rose
sharply - and prices fell - on
virtually all types of fixed-income
investments. For the 12 months
ended January 31, 1995, the
Lehman Brothers Aggregate Bond
Index - a broad measure of
taxable bonds in the U.S. bond
market - had a total return of
- -2.31%. The Federal Reserve
Board raised the federal funds rate
- - the rate banks charge each other
for overnight loans - from 3.00% to
5.50% from February to
November, causing other interest
rates to rise. The Fed was hoping
to head off future inflation that might
be triggered by an improving U.S.
economy. The resulting higher
rates slowed refinancing activity in
mortgage-backed securities,
helping them to outperform
comparable Treasury bonds. The
Salomon Brothers Mortgage Index
returned -0.23% during the
period. Interest rate increases in
many foreign bond markets
followed the rate hikes in the U.S.
Weakness in the U.S. dollar,
however, helped the Salomon
Brothers World Government Bond
Index - which measures bond
market performance in the
developed world, including the
U.S. - to post a 3.66% return.
The JP Morgan Emerging Markets
Bond Index was down 21.71%, on
the heels of market corrections in
many emerging markets earlier in
the year and Mexico's devaluation
of the peso in December.
An interview with Jennifer Uhrig, Portfolio Manager of Fidelity Mid-Cap
Stock Fund
Q. JENNIFER, HOW HAS THE FUND DONE?
A. The fund is off to a great start. Since its inception on March 29, 1994,
through January 31, 1995, the fund had a total return of 9.27%. For the
best available comparison to its peers, we can look at the period from
March 31, 1994, through January 31, 1995. During that time, the fund
returned 11.73%, while the average mid-cap stock fund tracked by Lipper
Analytical Services returned 0.98%.
Q. WHAT FACTORS HAVE HELPED THE FUND PERFORM SO MUCH BETTER THAN ITS PEERS?
A. It comes down to individual stock picking and finding companies that
have the potential to do well regardless of the short-term whims of the
market. I've tried to stay away from guessing which sector is going to be
hot and for how long. I've maintained a balanced approach and tried to pick
good stocks within several attractive sectors, so that when the market
becomes favorable toward a particular sector, I'll be invested in stocks I
believe are promising.
Q. WHICH SECTORS HAVE DONE WELL LATELY?
A. Technology and finance, most recently. At the end of the period, the
fund had a 20.6% stake in technology, a sector which was very strong toward
the end of the year. Technology companies currently have very good earnings
momentum because of strong personal computer demand and a drive for
improved productivity by businesses. Digital and Novell are two companies
that have interested me. Digital could be a real turnaround story, having
increased revenues and cut costs. It has produced a high-end computer work
station product line that runs on the Alpha chip. This microchip - which
Digital developed internally - is regarded as the highest performance chip
on the market. As far as Novell is concerned, it has two things going for
it. First, it is cutting costs. Second, the company intends to release
early this year a new product upgrade called NetWare 4.0, which is its
latest version of local area network (LAN) software that's so predominant
in the marketplace. It looks like Novell could have a resurgence of revenue
growth from that product.
Q. WHAT ABOUT FINANCE?
A. Finance - 9.2% of the fund at the end of the period- did especially well
in January, because there have been indications that the economy may have
started to slow down, and that the Federal Reserve Board is nearing the end
of its interest rate increases. This optimism was a change from investor
sentiment in most of 1994, when rising interest rates really hurt the
sector. I've maintained the fund's holdings in the Federal National
Mortgage Association - Fannie Mae - which is a very high quality financial
stock. I would probably classify the stock as one of my disappointments
during most of the period. It was hurt by the decline in the bond market
and slowdowns in mortgage refinancing. However, it's started to do better
now that there is more optimism about the bond market and interest rates.
Q. WERE THERE OTHER DISAPPOINTMENTS OF NOTE?
A. Westpoint Stevens - a manufacturer of sheets and towels - is an
extraordinarily inexpensive stock that has not performed yet. That's
because the cost of its major raw material, cotton, has been unusually
high. However, there's been some evidence recently that cotton supplies
might increase, lowering the commodity's price. First, it has been reported
that sales of cotton picking machines have been unusually strong. Second,
it appears that some Far Eastern apparel manufacturers are starting to cut
back on the cotton content in some of their products because cotton is so
expensive. When cotton prices readjust, it looks like the stock will
perform better. Even in this environment, the company generates a lot of
free cash flow - which it can use to buy back stock, pay down debt,
increase dividends or invest in capital improvements. In addition,
Westpoint Stevens has great market shares for its products, is the low-cost
producer in the industry, and has excellent profit margins.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. The general direction of the market over the next six months depends a
lot on interest rate movements. I avoid making calls on what interest rates
will do; it's akin to trying to time the market. I will stick to stock
picking, while moving toward growth stocks - companies with the potential
for rapid future earnings growth - which I think will outperform the broad
market if the economy slows.
FUND FACTS
GOAL: to increase the value
of the fund's shares by
investing mainly in stocks of
companies with
medium-sized market
capitalizations
START DATE: March 29, 1994
SIZE: as of January 31, 1995,
more than $138 million
MANAGER: Jennifer Uhrig,
since March 1994; Fidelity
Select Retailing Portfolio,
1991-1993; Select
Developing Communications
Portfolio, 1990-1991; Fidelity
Select Telecommunications
Portfolio, 1987-1990;
joined Fidelity in 1987
(checkmark)
JENNIFER UHRIG ON MANAGING A
GROWING FUND:
"The fund has been growing,
and periodically receives
relatively large cash
investments for a fund its
size. This tends to happen
when the market is strong.
When the fund receives
inflows, I try to invest the
money opportunistically in
stocks that are attractively
priced, near-term. If I can't do
that, I try not to chase stocks.
Instead, I prefer to invest the
new money gradually, over
time. While looking for new
opportunities, I occasionally
keep the cash in derivative
investments called Standard &
Poor's MidCap 400 futures
contracts. These instruments
move in step with the index,
so their performance tracks
broad market moves.
Therefore, their risk is roughly
equivalent to that of the broad
mid-cap market.
"In addition, the futures are
easy to buy and sell, and have
very low transaction costs.
Ideally, I'd like to have the
fund reflect more of the active
management of the stocks I
pick rather than the
performance of the broad
market, but in the short run,
the futures are a useful tool.
By using them, the fund's
performance generally
doesn't suffer from receiving a
lot of new cash in a rising
market environment."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JANUARY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Cytec Industries, Inc. 2.7 2.9
Westpoint Stevens, Inc. Class A 2.3 2.2
Viacom, Inc. Class B (non-vtg.) 1.9 0.0
Halliburton Co. 1.7 0.9
RJR Nabisco Holdings Corp. 1.7 1.9
Federal National Mortgage 1.6 1.5
Association
Sun Microsystems, Inc. 1.5 0.0
Gannett Co., Inc. 1.5 0.0
Cherry Corp. 1.5 2.4
Dynatech Corp. 1.4 0.0
TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO
Technology 20.6 10.7
Media & Leisure 9.3 11.1
Finance 9.2 10.9
Retail & Wholesale 6.8 6.8
Industrial Machinery & Equipment 6.4 8.0
ASSET ALLOCATION
AS OF JANUARY 31, 1995 AS OF JULY 31, 1994
Row: 1, Col: 1, Value: 13.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 43.4
Row: 1, Col: 4, Value: 43.4
Row: 1, Col: 1, Value: 13.8
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 43.1
Row: 1, Col: 4, Value: 43.1
Stocks 86.8%
Short-term
investments 13.2%
Stocks 86.2%
Short-term
investments 13.8%
INVESTMENTS JANUARY 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 86.4%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.3%
Flightsafety International, Inc. 10,600 $ 397,500
BASIC INDUSTRIES - 4.8%
CHEMICALS & PLASTICS - 3.8%
Airgas, Inc. (a) 32,900 789,600
Cytec Industries, Inc. (a) 98,200 3,731,600
Union Carbide Corp. 25,000 637,500
5,158,700
PACKAGING & CONTAINERS - 0.6%
Gaylord Container Corp. Class A (a) 104,100 871,838
PAPER & FOREST PRODUCTS - 0.4%
Caraustar Industries, Inc. 24,000 507,000
TOTAL BASIC INDUSTRIES 6,537,538
CONSTRUCTION & REAL ESTATE - 2.1%
CONSTRUCTION - 2.1%
Lennar Corp. 69,600 1,070,100
Pulte Corp. 64,000 1,296,000
Standard Pacific Corp. 84,700 465,850
2,831,950
DURABLES - 5.6%
AUTOS, TIRES, & ACCESSORIES - 0.7%
Bandag, Inc. 15,700 914,525
CONSUMER ELECTRONICS - 0.5%
Harman International Industries, Inc. 19,100 697,150
TEXTILES & APPAREL - 4.4%
Burlington Industries, Inc. (a) 42,400 455,800
Cygne Designs, Inc. (a) 44,400 510,600
Image Industries, Inc. (a) 94,200 1,271,700
Jones Apparel Group, Inc. (a) 29,100 698,400
Westpoint Stevens, Inc. Class A (a) 226,200 3,081,975
6,018,475
TOTAL DURABLES 7,630,150
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - 5.3%
ENERGY SERVICES - 3.7%
Energy Service Co., Inc. (a) 73,200 $ 869,250
Global Industries Ltd. (a) 2,500 58,125
Halliburton Co. 65,100 2,359,875
Nabors Industries, Inc. (a) 60,100 390,650
Offshore Pipelines, Inc. 40,000 900,000
Pride Petroleum Services, Inc. (a) 82,200 400,725
4,978,625
OIL & GAS - 1.6%
Amerada Hess Corp. 33,000 1,497,375
Burlington Resources, Inc. 20,000 690,000
2,187,375
TOTAL ENERGY 7,166,000
FINANCE - 9.2%
BANKS - 4.6%
Bank of Boston Corp. 10,900 305,200
Barnett Banks, Inc. 15,000 641,250
Boatmen's Bancshares, Inc. 23,000 701,500
Fleet Financial Group, Inc. 25,208 790,901
Mercantile Bancorporation, Inc. 20,000 692,500
Republic New York Corp. 32,000 1,524,000
Shawmut National Corp. 80,372 1,617,487
6,272,838
CREDIT & OTHER FINANCE - 1.8%
Beneficial Corp. 20,600 826,575
GFC Financial Corp. 48,100 1,587,300
2,413,875
FEDERAL SPONSORED CREDIT - 2.3%
Federal Home Loan Mortgage Corporation 18,000 1,008,000
Federal National Mortgage Association 29,850 2,134,275
3,142,275
INSURANCE - 0.5%
UNUM Corp. 15,500 680,063
TOTAL FINANCE 12,509,051
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - 6.1%
DRUGS & PHARMACEUTICALS - 2.6%
Amgen, Inc. (a) 22,500 $ 1,431,563
Biogen, Inc. (a) 24,900 905,738
Immunex Corp. (a) 38,000 579,500
Noven Pharmaceuticals, Inc. (a) 76,700 604,013
3,520,814
MEDICAL EQUIPMENT & SUPPLIES - 2.1%
Baxter International, Inc. 44,500 1,312,750
Becton, Dickinson & Co. 30,400 1,596,000
2,908,750
MEDICAL FACILITIES MANAGEMENT - 1.4%
Health Management Associates, Inc. Class A (a) 54,800 1,507,000
Lincare Holdings, Inc. (a) 14,600 379,600
1,886,600
TOTAL HEALTH 8,316,164
INDUSTRIAL MACHINERY & EQUIPMENT - 6.4%
ELECTRICAL EQUIPMENT - 3.6%
California Amplifier, Inc. (a) 168,500 1,011,000
Cherry Corp. (a) 123,200 1,971,200
Cherry Corp. Class A (a) 105,500 1,608,875
Owosso Corp. 35,000 354,375
4,945,450
INDUSTRIAL MACHINERY & EQUIPMENT - 2.6%
Applied Power, Inc. Class A 22,400 546,000
Deere & Co. 10,000 712,500
Fedders Corp. (a) 52,400 347,150
Fedders Corp. Class A (a) 53,700 275,213
Goulds Pumps, Inc. 27,600 558,900
Harnischfeger Industries, Inc. 41,859 1,114,496
3,554,259
POLLUTION CONTROL - 0.2%
Western Waste Industries, Inc. (a) 17,000 280,500
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 8,780,209
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 9.3%
BROADCASTING - 3.9%
ACS Enterprises, Inc. (a) 51,700 $ 607,475
British Sky Broadcasting Group ADR (a) 26,000 627,250
CAI Wireless Systems, Inc. (a) 33,300 349,650
People's Choice TV Corp. (a) 53,100 1,035,450
Viacom, Inc. Class B (non-vtg.) (a) 57,000 2,629,125
5,248,950
ENTERTAINMENT - 0.4%
Royal Caribbean Cruises Ltd. 21,500 591,250
LEISURE DURABLES & TOYS - 1.2%
Outboard Marine Corp. 38,100 800,100
West Marine, Inc. (a) 45,000 877,500
1,677,600
LODGING & GAMING - 1.2%
Promus Companies, Inc. (a) 48,100 1,635,400
PUBLISHING - 1.9%
Gannett Co., Inc. 39,000 1,984,125
Meredith Corp. 14,200 656,750
2,640,875
RESTAURANTS - 0.7%
Bertucci's, Inc. (a) 51,800 427,350
Buffets, Inc. (a) 45,000 438,750
Uno Restaurant Corp. (a) 5,300 79,500
945,600
TOTAL MEDIA & LEISURE 12,739,675
NONDURABLES - 4.2%
FOODS - 1.3%
IBP, Inc. 56,950 1,701,381
HOUSEHOLD PRODUCTS - 1.2%
Tambrands, Inc. 37,600 1,630,900
TOBACCO - 1.7%
RJR Nabisco Holdings Corp. (a) 394,300 2,316,513
TOTAL NONDURABLES 5,648,794
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - 6.8%
APPAREL STORES - 0.7%
Talbots, Inc. 30,100 $ 914,288
GENERAL MERCHANDISE STORES - 1.8%
Federated Department Stores, Inc. (Del.) (a) 57,000 1,075,875
Lechters, Inc. (a) 79,100 1,344,700
2,420,575
GROCERY STORES - 1.5%
Safeway, Inc. (a) 21,600 693,900
Smith's Food & Drug Center, Inc. 30,000 772,500
Whole Foods Market, Inc. (a) 45,800 532,425
1,998,825
RETAIL & WHOLESALE, MISCELLANEOUS - 2.8%
Brookstone, Inc. (a) 18,000 99,000
Circuit City Stores, Inc. 61,900 1,392,750
Fabri-Centers of America, Inc. (a) 42,300 692,663
Friedmans, Inc. Class A (a) 48,600 874,800
Office Depot, Inc. (a) 28,000 728,000
3,787,213
TOTAL RETAIL & WHOLESALE 9,120,901
SERVICES - 2.7%
ADVERTISING - 1.3%
ADVO-Systems, Inc. 97,100 1,711,388
SERVICES - 1.4%
Emcare Holdings (a) 1,000 13,625
Kinder-Care Learning Centers, Inc. (a) 155,000 1,840,625
1,854,250
TOTAL SERVICES 3,565,638
TECHNOLOGY - 20.2%
COMMUNICATIONS EQUIPMENT - 2.1%
Dynatech Corp. (a) 61,600 1,894,200
General Instrument Corp. (a) 35,100 956,475
ITI Technologies (a) 500 12,188
2,862,863
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - 6.2%
Ceridian Corp. (a) 15,000 $ 442,500
CompUSA, Inc. 60,000 1,095,000
Gametek, Inc. (a) 10,000 36,250
Mercury Interactive Group Corp. (a) 24,400 311,100
MicroAge, Inc. (a) 38,600 446,313
Neostar Retail Group (a) 40,500 425,250
Novell, Inc. (a) 98,700 1,751,925
Sierra On-Line, Inc. (a) 26,600 814,625
Softkey International, Inc. (a) 34,300 827,488
Spectrum Holobyte, Inc. (a) 3,200 35,200
SunGard Data Systems, Inc. (a) 27,900 997,425
Symantec Corp. (a) 64,300 1,269,925
8,453,001
COMPUTERS & OFFICE EQUIPMENT - 7.4%
AST Research, Inc. (a) 70,200 1,053,000
ADAPTEC, Inc. (a) 24,300 665,213
Compaq Computer Corp. (a) 31,000 1,108,250
Data General Corp. (a) 91,700 710,675
Digital Equipment Corp. (a) 45,700 1,548,088
General Motors Corp. Class E 38,000 1,467,750
Insight Enterprises, Inc. 30,000 307,500
Kronos, Inc. (a) 41,200 1,071,200
Merisel, Inc. 20,000 130,000
Sun Microsystems, Inc. (a) 61,700 2,020,675
10,082,351
ELECTRONIC INSTRUMENTS - 1.4%
Cohu, Inc. 11,500 299,000
Kulicke & Soffa Industries, Inc. (a) 61,100 1,206,725
Tektronix, Inc. 12,000 400,500
1,906,225
ELECTRONICS - 3.1%
Advanced Micro Devices, Inc. (a) 36,400 1,069,250
Intel Corp. 20,300 1,408,313
Linear Technology Corp. 11,700 579,150
Micrel, Inc. (a) 4,000 62,500
Motorola, Inc. 10,000 591,250
National Semiconductor Corp. (a) 26,700 487,275
4,197,738
TOTAL TECHNOLOGY 27,502,178
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - 1.8%
RAILROADS - 1.8%
Chicago & North Western Holdings Corp. (a) 50,900 $ 1,087,988
Wisconsin Central Transportation Corp. (a) 35,000 1,400,000
2,487,988
UTILITIES - 1.6%
TELEPHONE SERVICES - 1.6%
Ameritech Corp. 19,000 833,625
Southwestern Bell Corp. 33,000 1,406,616
2,240,241
TOTAL COMMON STOCKS
(Cost $116,381,980) 117,473,977
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
TECHNOLOGY - 0.4%
COMPUTER SERVICES & SOFTWARE - 0.4%
SAP AG (Cost $543,142) 800 500,623
U.S. TREASURY OBLIGATIONS - 2.4%
PRINCIPAL
AMOUNT
U.S. Treasury stripped coupon 0%, 8/15/19 $ 19,050,000 2,876,169
U.S. Treasury Bill, yields at date of purchase 5.49%, 3/09/95 350,000
348,100
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,940,639) 3,224,269
REPURCHASE AGREEMENTS - 10.8%
MATURITY
AMOUNT
Investments in repurchase agreements,
(U.S. Treasury obligations) in a
joint trading account at 5.81%
dated 1/31/95 due 2/1/95 $ 14,738,378 14,736,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $134,601,761) $ 135,934,869
LEGEND
(e) Non-income producing
INCOME TAX INFORMATION
At January 31, 1995, the aggregate cost of investment securities for income
tax purposes was $135,019,726. Net unrealized appreciation aggregated
$915,143, of which $5,815,313 related to appreciated investment securities
and $4,900,170 related to depreciated investment securities.
The fund hereby designates $13,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 135,934,869
agreements of $14,736,000) (cost $134,601,761) -
See accompanying schedule
Cash 496
Receivable for investments sold 4,266,021
Receivable for fund shares sold 5,666,286
Dividends receivable 56,499
TOTAL ASSETS 145,924,171
LIABILITIES
Payable for investments purchased $ 5,473,322
Payable for fund shares redeemed 2,093,273
Accrued management fee 69,020
Other payables and accrued expenses 122,012
TOTAL LIABILITIES 7,757,627
NET ASSETS $ 138,166,544
Net Assets consist of:
Paid in capital $ 136,221,501
Accumulated net investment income (loss) (2,450)
Accumulated undistributed net realized gain (loss) on 614,385
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 1,333,108
investments
NET ASSETS, for 12,820,217 shares outstanding $ 138,166,544
NET ASSET VALUE, offering price and redemption price per $10.78
share ($138,166,544 (divided by) 12,820,217 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 29, 1994 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31, 1995
INVESTMENT INCOME $ 334,811
Dividends
Interest 485,980
TOTAL INCOME 820,791
EXPENSES
Management fee $ 321,245
Transfer agent fees 374,864
Accounting fees and expenses 45,699
Non-interested trustees' compensation 104
Custodian fees and expenses 12,110
Registration fees 73,406
Audit 18,256
Legal 161
Miscellaneous 267
Total expenses before reductions 846,112
Expense reductions (9,975) 836,137
NET INVESTMENT INCOME (LOSS) (15,346)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 2,028,196
Futures contracts 21,100 2,049,296
Change in net unrealized appreciation (depreciation) 1,333,108
on investment securities
NET GAIN (LOSS) 3,382,404
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 3,367,058
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C>
MARCH 29, 1994
(COMMENCEMENT
OF
OPERATIONS) TO
JANUARY 31,
1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ (15,346)
Net investment income (loss)
Net realized gain (loss) 2,049,296
Change in net unrealized appreciation (depreciation) 1,333,108
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,367,058
Distributions to shareholders from net realized gains (1,422,015)
Share transactions 287,355,752
Net proceeds from sales of shares
Reinvestment of distributions 1,393,114
Cost of shares redeemed (152,527,365)
Net increase (decrease) in net assets resulting from share transactions 136,221,501
TOTAL INCREASE (DECREASE) IN NET ASSETS 138,166,544
NET ASSETS
Beginning of period -
End of period (including accumulated net investment loss of $2,450) 138,166,544
OTHER INFORMATION
Shares
Sold 26,950,947
Issued in reinvestment of distributions 135,914
Redeemed (14,266,644)
Net increase (decrease) 12,820,217
</TABLE>
FINANCIAL HIGHLIGHTS
MARCH 29, 1994
(COMMENCEMENT OF
OPERATIONS) TO
JANUARY 31, 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.00
Income from Investment Operations
Net investment income .00
Net realized and unrealized gain (loss) .92
Total from investment operations .92
Less Distributions
From net realized gain (.14)
Total distributions (.14)
Net asset value, end of period $ 10.78
TOTAL RETURN B 9.27%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 138,167
Ratio of expenses to average net assets 1.61% A
Ratio of expenses to average net assets before 1.63% A
expense reductions
Ratio of net investment income to average net assets (.03)% A
Portfolio turnover rate 190% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN AND FOR PERIODS OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED. (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS.)
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1995
10. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Mid-Cap Stock Fund (the fund) is a fund of Fidelity Devonshire
Trust (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities maturing within sixty days of their purchase date are
valued at amortized cost or original cost plus accrued interest, both of
which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and
losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. The effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. The fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code. By so qualifying, the fund
will not be subject to income taxes to the extent that it distributes all
of its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income Tax
Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income is accrued as earned. Investment income
is recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for market
discounts and futures and options transactions.
The fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Accumulated undistributed net
investment loss may include temporary book and tax basis differences which
will reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
11. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of FMR, may transfer uninvested cash balances into one
or more joint trading accounts. These balances are invested in one or more
repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. Buying futures, writing
puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or,
in the absence of a sale, the last offering price. Options traded
over-the-counter are valued using dealer-supplied valuations.
12. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $199,488,762 and $82,064,939, respectively, of which U.S.
Government and Government agency obligations aggregated $3,483,824 and
$1,002,820, respectively.
The market value of futures contracts opened and closed during the period
amounted to $13,898,950 and $13,920,050, respectively.
13. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2850% to .5200% for the period March 29, 1994 to July
31, 1994 and .2700% to .5200% for the period August 1, 1994 to January 31,
1995. In the event that these rates were lower than the contractual rates
in effect during those periods, FMR voluntarily implemented the above
rates, as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .30%. The basic fee is subject to a performance
adjustment (up to a maximum of (plus/minus) .20) based on the fund's
investment
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
performance as compared to the appropriate index over a specified period of
time. The fund's performance adjustment will not take effect until March,
1995. For the period, the management fee was equivalent to an annualized
rate of .62% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period March 29, 1994 (commencement of operations) to December
31, 1994, FSC received fees based on the type, size, number of accounts and
the number of transactions made by shareholders. Effective January 1, 1995,
the Board of Trustees approved a revised transfer agent fee contract
pursuant to which FSC receives account fees and asset-based fees that vary
according to account size and type of account. FSC pays for typesetting,
printing and mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $123,577 for the period.
14. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$9,975 under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Mid-Cap Stock Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Devonshire Trust: Fidelity Mid-Cap Stock Fund, including the
schedule of portfolio investments, as of January 31, 1995, and the related
statement of operations, the statement of changes in net assets and the
financial highlights for the period March 29, 1994 (commencement of
operations) to January 31, 1995. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1995 by correspondence with the
custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Devonshire Trust: Fidelity Mid-Cap Stock Fund as of January 31,
1995, the results of its operations, the changes in its net assets, and the
financial highlights for the period March 29, 1994 (commencement of
operations)
to January 31, 1995, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 7, 1995
DISTRIBUTIONS
The Board of Trustees of Fidelity Mid-Cap Stock Fund voted to pay on March
6, 1995, to shareholders of record at the opening of business on March 3,
1995, a distribution of $.02 derived from capital gains realized from sales
of portfolio securities.
A total of 19% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1996 of the applicable
percentage for use in preparing 1995 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call --
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios.(registered trademark)
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
Fidelity Investments
P.O. Box 30281
Salt Lake City, UT 84130-0281
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions
World Trade Center
164 Northern Avenue
Boston, MA 02210
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
1 West Pennsylvania Ave.
Towson, MD
7401 Wisconsin Avenue
Bethesda, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
101 Cambridge Street
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
26955 Northwestern Hwy.
Southfield, MI
MINNESOTA
38 South Sixth Street
Minneapolis, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
2200 West Main Street
Durham, NC
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
1903 East Ninth Street
Cleveland, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
1010 Lamar Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
1001 Fourth Avenue
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(Far East) Inc. Tokyo, Japan
Fidelity Management & Research (U.K.) Inc. London, England
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Robert H. Morrison, Manager,
Security Transactions
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Fidelity Fifty
Growth Company Fund
Low-Priced Stock Fund
Magellan Fund (registered trademark)
Mid-Cap Stock Fund
New Millennium(trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Stock Fund
Stock Selector
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
