FIDELITY DEVONSHIRE TRUST, N-30D, 1996-09-10

FIDELITY DEVONSHIRE TRUST
N-30D, 1996-09-10

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FIDELITY

(REGISTERED TRADEMARK)
REAL ESTATE INVESTMENT
PORTFOLIO
SEMIANNUAL REPORT
JULY 31, 1996
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.

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, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE

DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first seven
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in both the stock and bond markets so far
this year. In 1995, both stock and bond markets posted strong results,
while the year before, stocks posted below-average returns and bonds had
one of the worst years in history.
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. 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 securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND

Real Estate Investment 4.39% 14.04% 80.15% 136.83%

S&P 500(registered trademark) 1.77% 16.57% 89.62% 253.24%

Real Estate Funds Average 4.42% 13.66% 67.44% n/a

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 17, 1986. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's return to the
performance of the Standard & Poor's 500 Index - a widely recognized,
unmanaged index of common stocks. To measure how the fund's performance
stacked up against its peers, you can compare it to the real estate funds
average, which reflects the performance of 50 mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. over the past six
months. Both benchmarks reflect reinvestment of dividends and capital
gains, if any, but do not reflect any sales charges, brokerage commissions,
or other costs of investing.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Real Estate Investment 14.04% 12.49% 9.28%

S&P 500 16.57% 13.65% 13.88%

Real Estate Funds Average 13.66% 10.72% 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
IMAHDR PRASUN SHR__CHT 19960731 19960809 152815 S00000000000001
Real Estate SP Standard & Poor 500
00303 SP001
1986/11/17 10000.00 10000.00
1986/11/30 10040.00 10206.19
1986/12/31 9940.00 9945.93
1987/01/31 10380.00 11285.65
1987/02/28 10550.00 11731.43
1987/03/31 10750.17 12070.47
1987/04/30 10398.20 11963.05
1987/05/31 10207.13 12067.12
1987/06/30 10549.92 12676.51
1987/07/31 10509.11 13319.21
1987/08/31 10305.05 13816.02
1987/09/30 10057.55 13513.45
1987/10/31 8700.66 10602.65
1987/11/30 8938.89 9728.99
1987/12/31 9176.83 10469.37
1988/01/31 9773.01 10910.13
1988/02/29 10092.39 11418.54
1988/03/31 10005.85 11065.71
1988/04/30 10016.67 11188.54
1988/05/31 9778.69 11285.88
1988/06/30 10105.17 11803.90
1988/07/31 10149.15 11759.05
1988/08/31 10050.19 11359.24
1988/09/30 10204.86 11843.14
1988/10/31 10115.44 12172.38
1988/11/30 9970.14 11998.32
1988/12/31 10127.86 12208.29
1989/01/31 10230.04 13101.93
1989/02/28 10264.10 12775.70
1989/03/31 10343.05 13073.37
1989/04/30 10619.79 13751.88
1989/05/31 10815.81 14308.83
1989/06/30 11186.67 14227.27
1989/07/31 11748.35 15511.99
1989/08/31 11912.17 15816.03
1989/09/30 11771.59 15751.18
1989/10/31 11332.53 15385.75
1989/11/30 11474.92 15699.62
1989/12/31 11522.84 16076.41
1990/01/31 11270.51 14997.69
1990/02/28 11198.42 15191.16
1990/03/31 11258.50 15593.72
1990/04/30 11112.44 15203.88
1990/05/31 11063.76 16686.26
1990/06/30 11234.64 16572.79
1990/07/31 11308.63 16519.76
1990/08/31 10507.04 15026.37
1990/09/30 9982.02 14294.59
1990/10/31 9694.32 14233.12
1990/11/30 10307.25 15152.58
1990/12/31 10520.81 15575.34
1991/01/31 11501.57 16254.42
1991/02/28 11858.20 17416.61
1991/03/31 12642.52 17838.09
1991/04/30 12990.83 17880.91
1991/05/31 13300.45 18653.36
1991/06/30 12872.41 17799.04
1991/07/31 13146.57 18628.47
1991/08/31 13211.84 19069.97
1991/09/30 13595.15 18751.50
1991/10/31 13370.55 19002.77
1991/11/30 13238.43 18236.96
1991/12/31 14643.73 20323.26
1992/01/31 15527.17 19945.25
1992/02/29 15192.53 20204.54
1992/03/31 15099.41 19810.55
1992/04/30 14882.93 20392.98
1992/05/31 15329.42 20492.91
1992/06/30 15153.05 20187.56
1992/07/31 15820.76 21013.23
1992/08/31 15861.64 20582.46
1992/09/30 16299.66 20825.34
1992/10/31 16478.03 20898.23
1992/11/30 16779.87 21610.85
1992/12/31 17500.60 21876.67
1993/01/31 18361.74 22060.43
1993/02/28 18806.20 22360.45
1993/03/31 20160.56 22832.26
1993/04/30 19251.16 22279.72
1993/05/31 19013.32 22876.82
1993/06/30 19508.26 22943.16
1993/07/31 19635.30 22851.39
1993/08/31 19945.85 23717.45
1993/09/30 20866.93 23534.83
1993/10/31 20525.32 24022.00
1993/11/30 19329.67 23793.79
1993/12/31 19690.21 24081.70
1994/01/31 19849.82 24900.47
1994/02/28 20822.00 24225.67
1994/03/31 20077.29 23169.43
1994/04/30 20355.33 23466.00
1994/05/31 20794.34 23850.84
1994/06/30 20173.01 23266.50
1994/07/31 20128.70 24029.64
1994/08/31 20040.10 25014.85
1994/09/30 19801.81 24401.99
1994/10/31 19011.52 24951.03
1994/11/30 18340.53 24042.32
1994/12/31 20091.55 24398.86
1995/01/31 19208.74 25031.53
1995/02/28 19513.16 26007.01
1995/03/31 19590.41 26774.47
1995/04/30 19282.15 27562.98
1995/05/31 19991.16 28664.67
1995/06/30 20408.84 29330.55
1995/07/31 20767.71 30303.15
1995/08/31 21189.00 30379.22
1995/09/30 21565.68 31661.22
1995/10/31 20965.76 31548.19
1995/11/30 21076.27 32933.15
1995/12/31 22284.69 33567.45
1996/01/31 22686.07 34710.08
1996/02/29 22766.35 35031.84
1996/03/31 22783.69 35369.20
1996/04/30 22751.21 35890.54
1996/05/31 23222.15 36816.16
1996/06/30 23600.83 36956.43
1996/07/31 23683.07 35323.69
IMATRL PRASUN SHR__CHT 19960731 19960809 152820 R00000000000120

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Real Estate Investment Portfolio on November 17, 1986,
when the fund started. As the chart shows, by July 31, 1996, the value of
the investment would have grown to $23,683 - a 136.83% increase on the
initial investment. For comparison, look at how the S&P 500 did over the
same period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $35,324 - a 253.24% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW

An interview with Barry Greenfield, Portfolio Manager of Fidelity Real
Estate Investment Portfolio
Q. HOW DID THE FUND PERFORM, BARRY?
A. For the six months ended July 31, 1996, the fund had a total return of
4.39%. During that same period, the real estate funds average, as tracked
by Lipper Analytical Services, Inc., returned 4.42%. For the 12-month
period ended July 31, 1996, the fund returned 14.04%, while the Lipper
average returned 13.66%. It's important to remember that the Lipper group
includes funds that have very small asset bases, which can skew relative
results one way or another based on market conditions.
Q. WHAT'S BEEN HAPPENING IN THE REAL ESTATE INVESTMENT ENVIRONMENT
RECENTLY?
A. Well, the most important thing to note is that there have been virtually
no significant new initial public offerings of real estate investment
trusts (REITs) since the end of the last boom in 1994. What we have seen
instead is both a strong secondary offering market and the ability of
established companies to take advantage of low interest rates to issue
debt. Some of these companies have been able to grow their assets through
spread investing - that is, buying an existing property that will give them
a higher return than their borrowing costs. Additionally, there has been
consolidation within the REIT market. DeBartolo and Simon recently joined
to create the world's largest REIT, for example, and mobile home REITs
Chateau and ROC Communities announced a possible merger just before the
period ended. In fact, mergers have helped to cut the total number of REITs
outstanding from more than 230 to right around 200 in the past year alone.
And many of the resulting companies are of very high quality; there are now
more than 40 companies in the industry with investment-grade ratings.
Q. HOW DID YOU STRUCTURE THE FUND OVER THE PAST SIX MONTHS?
A. Let me back up a bit to explain that. I think of the real estate market
as having roughly a nine-year cycle or, to use a baseball metaphor, a
nine-inning game. Within the market, some of the sectors are further along
in their part of this broad cycle than others. Apartments, for example, may
be in the sixth inning, while downtown office buildings are much earlier in
the cycle, say, late in the first inning. I look at not only which sectors
are at what point in the cycle, but then also, which geographic areas look
relatively attractive. Given all of that, the fund has benefited from its
substantial overweighting in the hotel and office sectors, particularly
suburban offices. Mortgage REITs have also been a positive, but lesser,
contributor to returns. The fund would have benefited from more exposure to
retail REITs; although retail is the largest sector of the REIT market, the
fund was underweighted in the sector during the period.
Q. SPEAKING OF RETAIL, YOU'VE INCREASED THE FUND'S POSITION IN MALLS, WHILE
CUTTING BACK ON NEIGHBORHOOD SHOPPING CENTERS. WHAT WAS BEHIND THAT?
A. A year ago, I felt that the consumer was strapped with high debt and
little ability to spend money. As a result, I had reduced the fund's
positions in retail store REITs, especially small shopping centers where
you'll typically find a pizza parlor, a dry cleaner, etc. In the early
spring of this year, consumers actually did spend fairly strongly, due to
early and high tax refunds. Retailers were caught up in a wave of investor
enthusiasm that I believed was temporary at best. I recognized, however,
that people who are more economically secure would have room to continue to
spend, and I directed assets into those areas I felt could benefit. So I
increased the fund's positions in Taubman and other mall developers that
cater to more upscale retail store clients, such as Saks, Gucci, Tiffany's
and the like.
Q. WHAT ABOUT THE GEOGRAPHY SIDE OF THE EQUATION? WHICH AREAS HAVE YOU BEEN
FOCUSING ON, AND HAVE YOU TENDED TO AVOID OTHERS?
A. Our analysts saw signs of slowing in the apartment sector in both the
southeast and the southwest. Of course, in Atlanta, you might expect a
slowdown after the boost provided by the Olympics, so we had to factor that
in. But the same kinds of signs were in place in Las Vegas, Phoenix, Austin
and San Antonio as well. The area that we've been particularly positive
about is California (see call-out box on page 8). The state had lagged the
nation through the economic recovery beginning in 1992, but lately it's
been quite strong, growing far more robustly than the country as a whole.
Over the period, we directed as much of the fund's assets as we reasonably
could into California.
Q. HALF OF THE TOP 10 STOCKS IN THE PORTFOLIO HAVE CHANGED FROM THE LAST
REPORT. DOES THIS REPRESENT ANY SHIFT IN DIRECTION AMONG YOUR LARGEST
HOLDINGS?
A. Actually, no. I don't really focus on what the top 10 holdings are; I
look more closely at the top 30 or so, and most of them haven't changed.
What you see is the result of what I mentioned earlier in the report - some
merger and acquisition activity, as well as my adding to some of the larger
positions I already owned as they were available.
Q. WHAT'S YOUR OUTLOOK FOR THE REAL ESTATE INVESTING ENVIRONMENT?
A. I think there are two important aspects to keep in mind. First, this is
a maturing - not mature - industry. As it continues to mature, as evidenced
by the consolidation we've already seen, there will probably be bigger and
higher quality companies dominating it, and liquidity should also continue
to improve. The second trend, related to the first, is that pension
managers and other investors may look increasingly to the REIT market as
the equity investment of choice when they want to improve the liquidity of
their real estate holdings, compared to owning hard real estate asssets.
Taken together, these trends could act as a support and, quite possibly, a
driver of REIT valuations for some time.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

FUND FACTS
GOAL: above-average
income and long-term capital
growth by investing mainly in
the equity securities of
companies in the real estate
industry
START DATE: November
17, 1986
SIZE: as of July 31, 1996,
more than $826 million
MANAGER: Barry Greenfield,
since 1986; manager,
Fidelity Fund, 1982-1993;
joined Fidelity in 1968
(checkmark)
BARRY GREENFIELD ON THE
CALIFORNIA ECONOMY:
"The California economy is
now growing at a faster rate
than that of the U.S. The
entertainment, high-tech and
tourism industries have
replaced aerospace, defense
and state government as the
primary engines of economic
growth in the state. The
recovery that's characterized
the country's economy from
1991 to 1996 actually came
late to California. As a result,
occupancies are now rising
faster than they are in the rest
of the country. Through the
period, I have tried to
maintain, and in fact increase,
the fund's exposure to
California through investments
in apartments (specifically,
Bay, Essex, BRE and Irvine),
the office-related and
industrial sectors (Speiker and
Bedford) and retail, including
Chelsea GCA. I've taken the
same approach in hotels,
including Sunstone, Starwood
and Innkeepers. Some of
these companies, such as
Bay and Irvine, operate
exclusively in California, and
several of the others have a
significant and material
exposure to the state. I
anticipate that over the next
12 months rents may rise in
southern California after the
recent improvements in
occupancy rates. In fact,
rents have been rising in the
northern part of the state for
more than a year."
INVESTMENT CHANGES

TOP TEN STOCKS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

Duke Realty Investors, Inc. 5.8 5.2

Public Storage, Inc. 4.3 1.3

Bay Apartment Communities, Inc. 3.7 0.8

CenterPoint Properties Corp. 3.6 1.9

Equity Residential Properties Trust 3.5 2.7
(SBI)

Beacon Properties Corp. 3.4 1.7

Starwood Lodging Trust 2.9 2.2
combined
certificate (SBI)

Post Properties, Inc. 2.9 2.7

Storage USA, Inc. 2.8 2.4

Cali Realty Corp. 2.7 1.1

TOP FIVE REIT SECTORS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECTORS
6 MONTHS AGO

Industrial Buildings 23.2 22.0

Apartments 17.5 16.4

Office Buildings 13.6 11.8

Hotels 10.1 9.1

Shopping Centers 6.6 9.2

ASSET ALLOCATION
AS OF JULY 31, 1996 AS OF JANUARY 31, 1996
Row: 1, Col: 1, Value: 9.1
Row: 1, Col: 2, Value: 1.3
Row: 1, Col: 3, Value: 40.06
Row: 1, Col: 4, Value: 49.0
Row: 1, Col: 1, Value: 9.9
Row: 1, Col: 2, Value: 1.3
Row: 1, Col: 3, Value: 49.8
Row: 1, Col: 4, Value: 39.0
Stocks 90.6%
Convertibles 0.3%
Short-term
investments 9.1%
Stocks 89.8%
Convertibles 0.3%
Short-term
investments 9.9%
INVESTMENTS JULY 31, 1996 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 90.6%
SHARES VALUE (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS (REITS) - 86.1%
REITS - APARTMENTS - 17.5%
Ambassador Apartments, Inc. 143,800 $ 2,444,600
Avalon Properties, Inc. 351,600 7,911,000
BRE Properties, Inc. Class A 446,000 9,477,500
Bay Apartment Communities, Inc. (b) 1,226,820 31,130,558
Berkshire Realty, Inc. 461,000 4,955,750
Colonial Properties Trust (SBI) 162,400 4,019,400
Equity Residential Properties Trust (SBI) 859,200 28,998,000
Essex Property Trust, Inc. 266,300 5,925,175
Home Properties of NY, Inc. 237,100 4,742,000
Irvine Apartment Communities, Inc. 268,400 5,636,400
Pacific Gulf Properties, Inc. 200,000 3,425,000
Post Properties, Inc. 708,100 24,517,963
Security Capital Pacific Trust (SBI) 334,200 6,934,650
Summit Property Trust 70,900 1,293,925
Wellsford Residential Property Trust 245,100 5,330,925
146,742,846
REITS - FACTORY OUTLETS - 1.6%
Chelsea GCA Realty, Inc. 430,100 12,419,138
Mills Corp. 44,500 823,250
13,242,388
REITS - HEALTH CARE FACILITIES - 2.2%
Health & Rehabilitation Properties Trust 150,000 2,512,500
LTC Properties, Inc. 540,800 8,855,600
Nationwide Health Properties, Inc. 331,500 7,375,875
18,743,975
REITS - HOTELS - 10.1%
Felcor Suite Hotels, Inc. 614,470 17,205,160
Hospitality Properties Trust (SBI) 60,000 1,582,500
Innkeepers USA Trust (b) 932,100 9,787,050
Jameson Co. 130,000 1,283,750
Patriot American Hospitality, Inc. 778,900 22,101,288
RFS Hotel Investors, Inc. 337,200 5,395,200
Starwood Lodging Trust combined certificate (SBI) 724,289 24,625,826
Sunstone Hotel Investors, Inc. 220,200 2,312,100
84,292,874
REITS - INDUSTRIAL BUILDINGS - 23.2%
Bedford Property Investors, Inc. 208,900 2,820,150
CenterPoint Properties Corp. (b) 1,104,200 29,813,400
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - INDUSTRIAL BUILDINGS - CONTINUED
Duke Realty Investors, Inc. (b) 1,628,809 $ 48,457,068
East Group Properties (SBI) 108,100 2,324,150
First Industrial Realty Trust, Inc. 456,100 10,718,350
Meridian Industrial Trust, Inc. 35,000 625,625
Public Storage, Inc. 1,670,600 35,709,075
Security Capital Industrial Trust, Inc. 282,930 5,057,374
Shurgard Storage Centers, Inc. 43,100 1,018,238
Sovran Self Storage, Inc. 152,000 3,781,000
Speiker Properties, Inc. 566,800 16,153,800
Storage USA, Inc. 690,078 23,117,613
Storage Trust Realty (SBI) 84,800 1,717,200
Weeks Corp. 491,300 12,958,038
194,271,081
REITS - LEISURE - 2.7%
Franchise Finance Corp. of America 694,900 16,677,600
National Golf Properties, Inc. 232,700 6,021,113
22,698,713
REITS - MALLS - 3.3%
CBL & Associates Properties, Inc. 577,500 12,488,438
General Growth Properties, Inc. 111,900 2,755,538
Macerich Co. 160,100 3,342,088
Taubman Centers, Inc. 430,300 4,518,150
Urban Shopping Centers, Inc. 200,300 4,606,900
27,711,114
REITS - MOBILE HOME PARKS - 2.9%
Manufactured Home Communities, Inc. 349,200 6,372,900
Sun Communities, Inc. 632,700 17,715,600
24,088,500
REITS - MORTGAGE - 2.4%
CWM Mortgage Holdings, Inc. 105,000 1,811,250
Capstead Mortgage Corp. 230,128 6,903,840
Realty Income Corp. 405,000 8,758,125
Thornburg Mortgage Asset Corp. 140,000 2,187,500
19,660,715
REITS - OFFICE BUILDINGS - 13.6%
Beacon Properties Corp. 1,070,100 28,090,125
Cali Realty Corp. (b) 984,200 22,759,625
Carr Realty Corp. 188,300 4,519,200
Cousins Properties, Inc. 132,500 2,749,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - OFFICE BUILDINGS - CONTINUED
Crescent Real Estate Equities, Inc. 341,200 $ 12,709,700
Crocker Realty Trust, Inc. 168,300 1,935,450
Highwoods Properties, Inc. 513,100 14,174,388
MGI Properties, Inc. 204,000 3,544,500
Reckson Associates Realty Corp. 485,200 16,436,150
Trinet Corporate Realty Trust, Inc. 218,600 6,558,000
113,476,513
REITS - SHOPPING CENTERS - 6.6%
Developers Diversified Realty Corp. 522,900 16,405,988
Excel Realty Trust, Inc. 730,000 14,965,000
Haagen Alexander Properties, Inc. 266,500 3,497,813
JP Realty, Inc. 123,900 2,617,388
Kimco Realty Corp. 348,400 9,711,650
Lexington Corporate Properties, Inc. 225,000 2,671,875
Malan Realty Investors, Inc. 81,958 1,178,146
Regency Realty Group 92,500 1,896,250
Western Investment Real Estate Trust (SBI) 175,000 2,187,500
55,131,610
TOTAL REAl ESTATE INVESTMENT TRUSTS 720,060,329
CONSTRUCTION & REAL ESTATE - 1.6%
REAL ESTATE - 1.6%
Bluegreen Corp. 445,965 1,393,633
Catellus Development Corp. (a) 260,000 2,275,000
Rouse Co. (The) 394,500 9,862,500
13,531,133
CREDIT & OTHER FINANCE - 0.6%
MORTGAGE BANKERS - 0.6%
Resource Mortgage Capital, Inc. 190,800 4,603,050
LODGING & GAMING - 2.3%
HOTELS, MOTELS, & TOURIST COURTS - 2.3%
Host Marriott Corp. 495,000 6,496,875
Prime Hospitality Corp. (a) 390,000 6,922,500
Red Lion Inns LP (b) 254,900 5,958,288
19,377,663
TOTAL COMMON STOCKS
(Cost $680,442,229) 757,572,175
CONVERTIBLE BONDS - 0.3%
MOODY'S PRINCIPAL VALUE
RATINGS AMOUNT (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS (REITS)- 0.3%
REITS - HEALTH CARE FACILITIES - 0.3%
Omega Healthcare Investors, Inc.
8 1/2%, 2/1/01
(Cost $2,500,000) B1 $ 2,500,000 $ 2,525,000
REPURCHASE AGREEMENTS - 9.1%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 5.65%,
dated 7/31/96 due 8/1/96 $ 76,507,005 76,495,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $759,437,229) $ 836,592,175
LEGEND
1. Non-income producing
2. Affiliated company (see Note 6 of Notes to Financial Statements).
INCOME TAX INFORMATION
At July 31, 1996, the aggregate cost of investment securities for income
tax purposes was $760,013,549. Net unrealized appreciation aggregated
$76,578,626, of which $81,006,657 related to appreciated investment
securities and $4,428,031 related to depreciated investment securities.
At January 31, 1996, the fund had a capital loss carryforward of
approximately $18,614,000 of which $9,421,000 and $9,193,000 will expire on
January 31, 2003 and 2004, respectively.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
JULY 31, 1996 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 836,592,175
agreements of $76,495,000) (cost $759,437,229) -
See accompanying schedule

Cash 120

Receivable for investments sold 20,714,883

Receivable for fund shares sold 3,115,172

Dividends receivable 863,076

Interest receivable 109,792

Redemption fees receivable 1,142

Other receivables 4,150

TOTAL ASSETS 861,400,510

LIABILITIES

Payable for investments purchased $ 29,469,173

Payable for fund shares redeemed 5,036,708

Accrued management fee 411,027

Other payables and accrued expenses 261,562

TOTAL LIABILITIES 35,178,470

NET ASSETS $ 826,222,040

Net Assets consist of:

Paid in capital $ 760,634,162

Undistributed net investment income 8,220,571

Accumulated undistributed net realized gain (loss) (19,787,639)
on investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 77,154,946
investments

NET ASSETS, for 57,361,472 shares outstanding $ 826,222,040

NET ASSET VALUE, offering price and redemption price $14.40
per share ($826,222,040 (divided by) 57,361,472 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JULY 31, 1996 (UNAUDITED)

INVESTMENT INCOME $ 23,916,490
Dividends (including $2,887,213 received from
affiliated issuers)

Interest 1,604,275

TOTAL INCOME 25,520,765

EXPENSES

Management fee $ 2,283,838

Transfer agent fees 928,557

Accounting fees and expenses 187,500

Non-interested trustees' compensation 1,478

Custodian fees and expenses 20,944

Registration fees 30,083

Audit 24,275

Legal 3,319

Miscellaneous 9,679

Total expenses before reductions 3,489,673

Expense reductions (115,627) 3,374,046

NET INVESTMENT INCOME 22,146,719

REALIZED AND UNREALIZED GAIN (LOSS) 815,867
Net realized gain (loss) on investment securities
(including realized loss of $643,817 on sales of
investments in affiliated issuers)

Change in net unrealized appreciation (depreciation) on:

Investment securities 9,616,374

Assets and liabilities in foreign currencies (169) 9,616,205

NET GAIN (LOSS) 10,432,072

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 32,578,791
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JULY 31, JANUARY 31,
1996 1996
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 22,146,719 $ 35,168,177
Net investment income

Net realized gain (loss) 815,867 (12,677,638)

Change in net unrealized appreciation (depreciation) 9,616,205 73,886,561

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 32,578,791 96,377,100
FROM OPERATIONS

Distributions to shareholders from net investment income (17,859,365) (29,753,038)

Share transactions 201,442,549 901,490,727
Net proceeds from sales of shares

Reinvestment of distributions 16,233,262 27,134,770

Cost of shares redeemed (137,594,846) (754,025,719)

Redemption fees 114,529 -

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 80,195,494 174,599,778
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 94,914,920 241,223,840

NET ASSETS

Beginning of period 731,307,120 490,083,280

End of period (including undistributed net investment $ 826,222,040 $ 731,307,120
income of $8,220,571 and $3,933,217, respectively)

OTHER INFORMATION
Shares

Sold 14,228,013 67,716,036

Issued in reinvestment of distributions 1,156,687 2,049,838

Redeemed (9,767,056) (56,842,271)

Net increase (decrease) 5,617,644 12,923,603

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED JANUARY 31,
ENDED
JULY 31, 1996

(UNAUDITED) 1996 1995 1994 E 1993 1992

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

Net asset value, $ 14.13 $ 12.62 $ 13.68 $ 13.22 $ 11.60 $ 9.03
beginning of period

Income from
Investment
Operations

Net investment .41 .72 .67 .54 .68 D .43
income

Net realized and .20 1.50 (1.10) .52 1.37 2.63
unrealized gain
(loss)

Total from investment .61 2.22 (.43) 1.06 2.05 3.06
operations

Less Distributions

From net investment (.34) (.71) (.63) (.60) (.43) (.49)
income

Net asset value, $ 14.40 $ 14.13 $ 12.62 $ 13.68 $ 13.22 $ 11.60
end of period

TOTAL RETURN B, C 4.39% 18.10% (3.23) 8.10% 18.26% 35.00%
%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 826 $ 731 $ 490 $ 431 $ 247 $ 76
period (in millions)

Ratio of expenses to .93% A .99% 1.06% 1.17% 1.16% 1.24%
average net assets

Ratio of expenses to .90% A .95% 1.03% 1.13% 1.16% 1.24%
average net assets , F F F F
after expense
reductions

Ratio of net investment 5.92% A 6.28% 5.67% 4.34% 5.81% 5.84%
income to average
net assets

Portfolio turnover rate 80% A 85% 75% 110% 82% 84%

Average commission $ .0421
rate G

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E EFFECTIVE FEBRUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1996 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Real Estate Investment Portfolio is a fund of Fidelity Devonshire
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 financial statements have been prepared
in conformity with generally accepted accounting principles which permit
management to make certain estimates and assumptions at the date of the
financial statements. 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.
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 substantially 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.
Interest income is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for
partnerships, non-taxable dividends, capital loss carryforwards, and
losses deferred due to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
REDEMPTION FEES. Shares held in the fund less than 90 days are subject to a
redemption fee equal to 0.75% of the proceeds of the redeemed shares. The
fee, which is retained by the fund, is accounted for as an addition to paid
in capital.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (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 for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $354,172,240 and $280,019,543, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
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 annualized rate of .61%
of average net assets .
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives 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. For the
period, the transfer agent fees were equivalent to an annualized rate of
.25% of average net assets.
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 $231,781 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$94,309 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $2,743 and $18,575,
respectively, under these arrangements.
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 during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Bay Apartment Communities, Inc. $ - $ - $ - $ 31,130,558
Bedford Property Investors, Inc. - - - -
Cali Realty Corp. 2,066,292 - 767,040 22,759,625
CenterPoint Properties Corp. 6,757,138 - 409,779 29,813,400
Duke Realty Investors, Inc. 7,715,827 3,064,865 837,316 48,457,068
Innkeepers USA Trust 1,895,223 461,000 353,813 9,787,050 Malan Realty
Investors, Inc. - 864,580 - -
Red Lion Inns LP 988,764 - 280,390 5,958,288
Sun Communities, Inc. - - 238,875 -Weeks Corp. 523,500 4,672,257 -
- -
TOTALS $ 19,946,744 $ 9,062,702 $ 2,887,213 $ 147,905,989
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)
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you
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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.

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5.
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* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
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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.
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(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
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OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
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
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc. London, England
Fidelity Management & Research
(Far East) Inc. Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Barry Greenfield, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
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 *
ADVISORY BOARD
William O. McCoy
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 1-800-544-0118
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)
EQUITY-INCOME
FUND
SEMIANNUAL REPORT
JULY 31, 1996
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 36 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 40 Notes to the financial statements.

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE

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 securities that have grown in value). Effective January 1, 1996, the
fund's 2% sales charge was eliminated. If this sales charge was taken into
account, total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Equity-Income 1.98% 15.68% 106.42% 221.96%

S&P 500(registered trademark) 1.77% 16.57% 89.62% 269.48%

Equity Income Funds Average 1.39% 14.65% 79.89% 188.57%

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one, five, or 10 years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's return to the performance of the Standard & Poor's 500 Index - a
widely recognized, unmanaged index of common stocks. To measure how the
fund's performance stacked up against its peers, you can compare it to the
equity income funds average, which reflects the performance of 165 mutual
funds with similar objectives tracked by Lipper Analytical Services, Inc.
over the past six months. Both benchmarks reflect reinvestment of dividends
and capital gains, if any, but do not reflect any sales charges, brokerage
commissions, or other costs of investing.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Equity-Income 15.68% 15.60% 12.40%

S&P 500 16.57% 13.65% 13.94%

Equity Income Funds Average 14.65% 12.37% 10.83%

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
IMAHDR PRASUN SHR__CHT 19960731 19960809 164034 S00000000000001
Equity Income SP Standard & Poor 500
00023 SP001
1986/07/31 10000.00 10000.00
1986/08/31 10565.97 10742.00
1986/09/30 10069.91 9853.64
1986/10/31 10503.06 10422.19
1986/11/30 10610.46 10675.45
1986/12/31 10460.55 10403.23
1987/01/31 11472.49 11804.54
1987/02/28 11809.80 12270.82
1987/03/31 12017.47 12625.45
1987/04/30 11865.20 12513.08
1987/05/31 11795.23 12621.94
1987/06/30 12124.25 13259.35
1987/07/31 12486.23 13931.60
1987/08/31 12839.89 14451.25
1987/09/30 12554.52 14134.77
1987/10/31 10350.64 11090.14
1987/11/30 9892.21 10176.31
1987/12/31 10289.28 10950.73
1988/01/31 10976.81 11411.75
1988/02/29 11490.09 11943.54
1988/03/31 11351.48 11574.49
1988/04/30 11508.81 11702.96
1988/05/31 11642.30 11804.78
1988/06/30 12302.10 12346.62
1988/07/31 12277.98 12299.70
1988/08/31 12031.93 11881.51
1988/09/30 12386.37 12387.66
1988/10/31 12606.07 12732.04
1988/11/30 12484.02 12549.97
1988/12/31 12603.45 12769.60
1989/01/31 13408.68 13704.33
1989/02/28 13288.64 13363.09
1989/03/31 13546.47 13674.45
1989/04/30 14051.63 14384.16
1989/05/31 14386.68 14966.72
1989/06/30 14430.87 14881.41
1989/07/31 15368.62 16225.20
1989/08/31 15556.17 16543.21
1989/09/30 15366.98 16475.38
1989/10/31 14551.27 16093.16
1989/11/30 14745.98 16421.46
1989/12/31 14956.58 16815.57
1990/01/31 14039.17 15687.25
1990/02/28 14061.41 15889.61
1990/03/31 14071.01 16310.69
1990/04/30 13542.15 15902.92
1990/05/31 14414.21 17453.45
1990/06/30 14355.83 17334.77
1990/07/31 14150.91 17279.30
1990/08/31 13052.31 15717.25
1990/09/30 12107.89 14951.82
1990/10/31 11865.61 14887.53
1990/11/30 12609.74 15849.26
1990/12/31 12859.58 16291.46
1991/01/31 13486.29 17001.76
1991/02/28 14432.38 18217.39
1991/03/31 14642.39 18658.25
1991/04/30 14715.61 18703.03
1991/05/31 15484.33 19511.00
1991/06/30 14807.17 18617.40
1991/07/31 15597.54 19484.97
1991/08/31 15949.51 19946.76
1991/09/30 15871.52 19613.65
1991/10/31 16115.22 19876.47
1991/11/30 15477.86 19075.45
1991/12/31 16640.72 21257.68
1992/01/31 16805.17 20862.29
1992/02/29 17317.48 21133.50
1992/03/31 17084.03 20721.40
1992/04/30 17659.68 21330.61
1992/05/31 17832.38 21435.13
1992/06/30 17626.91 21115.74
1992/07/31 18065.97 21979.38
1992/08/31 17704.39 21528.80
1992/09/30 17847.00 21782.84
1992/10/31 18029.51 21859.08
1992/11/30 18622.67 22604.47
1992/12/31 19082.83 22882.51
1993/01/31 19648.54 23074.72
1993/02/28 20122.16 23388.54
1993/03/31 20783.98 23882.04
1993/04/30 20744.18 23304.09
1993/05/31 21115.68 23928.64
1993/06/30 21370.84 23998.03
1993/07/31 21698.60 23902.04
1993/08/31 22427.68 24807.93
1993/09/30 22395.50 24616.91
1993/10/31 22779.77 25126.48
1993/11/30 22415.73 24887.78
1993/12/31 23149.27 25188.92
1994/01/31 24072.78 26045.34
1994/02/28 23416.06 25339.51
1994/03/31 22397.83 24234.71
1994/04/30 22888.45 24544.92
1994/05/31 23179.97 24947.45
1994/06/30 22870.71 24336.24
1994/07/31 23514.55 25134.47
1994/08/31 24337.24 26164.98
1994/09/30 23769.96 25523.94
1994/10/31 23993.05 26098.23
1994/11/30 23007.13 25147.73
1994/12/31 23205.57 25520.67
1995/01/31 23349.19 26182.42
1995/02/28 24218.45 27202.75
1995/03/31 24827.70 28005.50
1995/04/30 25642.74 28830.27
1995/05/31 26480.83 29982.61
1995/06/30 26878.24 30679.11
1995/07/31 27831.26 31696.43
1995/08/31 28040.45 31775.99
1995/09/30 28910.27 33116.93
1995/10/31 28411.69 32998.70
1995/11/30 29767.22 34447.35
1995/12/31 30587.28 35110.80
1996/01/31 31571.10 36305.98
1996/02/29 31877.54 36642.53
1996/03/31 32474.41 36995.40
1996/04/30 32877.36 37540.71
1996/05/31 33288.53 38508.89
1996/06/30 33329.65 38655.61
1996/07/31 32195.76 36947.80
IMATRL PRASUN SHR__CHT 19960731 19960809 164039 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Equity-Income Fund on July 31, 1986. As the chart shows, by
July 31, 1996, the value of the investment would have grown to $32,196 - a
221.96% increase on the initial investment. For comparison, look at how the
S&P 500 did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $36,948 - a
269.48% increase
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. The stock
market, for example, has a
history of growth in the long
run and volatility in the short
run. In turn, the share price
and return of a fund that
invests in stocks will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW

An interview with Stephen Petersen, Portfolio Manager of Fidelity
Equity-Income Fund
Q. HOW DID THE FUND PERFORM, STEVE?
A. For the six months ended July 31, 1996, the fund had a total return of
1.98% and 15.68% for the past year. This compares favorably with the 1.77%
return of the Standard & Poor's 500 Index (16.57% for the year) and the
1.39% return of the equity income funds average (14.65% for the year) as
tracked by Lipper Analytical Services.
Q. WHAT'S HAPPENED IN THE STOCK MARKET OVER THE PAST SIX MONTHS?
A. The market turned in a strong performance in the first quarter of 1996
as corporate earnings were stronger than investors anticipated at the
beginning of the year. What's hindered the market as of late, however, is
the belief that we are near the end of the expansionary economy that began
about five years ago. As the economy matures, it becomes more difficult for
companies to consistently increase earnings. Therefore, with every
disappointing corporate earnings announcement, investors grow more
squeamish and the market becomes more volatile.
Q. LOOKING AT SOME OF THE FUND'S SECTOR EQUITY ALLOCATIONS, ITS LARGEST
SECTOR WEIGHTING IS IN FINANCIAL STOCKS. DOES THIS IMPLY YOU THINK INTEREST
RATES MAY FALL?
A. No. It often appears that the prices of financial stocks track the
market's interest rate outlook. Fidelity's research, however, proves that,
historically, this has not been the case. Like other sectors of the market,
stock prices of financial companies follow their earnings growth over time.
As for the performance of the financial sector over the past six months, it
has been somewhat of a roller coaster ride as many financial stocks rose in
the first quarter and then came back down in the second.
Q. DO YOU THINK BANK STOCKS HAD SOMETHING TO DO WITH THE TOPSY-TURVY
PERFORMANCE OF THE FINANCIAL SECTOR?
A. Yes, I think banks were one issue. In the past five or six years, the
banking industry has gone from being undercapitalized, having inadequate
loan-loss reserves and unable to offer competitive financial products to
either adequately capitalized or overcapitalized, having sufficient
reserves and offering better financial services. From the fund's
perspective, I've concentrated on banks with particularly effective
cost-cutting and consolidation programs - including NationsBank and
BankAmerica - as well as banks that have become more efficient through
acquisition - such as Wells Fargo's acquisition of First Interstate earlier
this year. What's become a concern in the banking industry is the
astronomical levels of consumer debt. Many banks have seen a steady
increase in write-offs of credit card receivables. To address this concern,
I've tried to balance the fund's bank holdings between consumer-oriented
banks and those with businesses that cater to institutional customers.
Q. WHY HAVE THE OIL PRODUCTION AND OIL SERVICE COMPANY STOCKS IN THE ENERGY
SECTOR REMAINED A SIGNIFICANT PART OF THE FUND?
A. Over the past few years, most oil producers have gone to great lengths
to cut costs, streamline operations and rid themselves of inefficient
divisions. If you look across the industry, every major oil company has
gone through a restructuring program to increase its profitability per
barrel of oil produced. Some of the fund's major holdings in oil producers
were British Petroleum and Royal Dutch Petroleum. As for oil service
companies, I've favored the larger firms - such as Schlumberger and
Halliburton - because they provide a greater variety of services than
smaller players - everything from drilling and providing drilling equipment
to conducting seismic data work.
Q. WHY WAS PHILIP MORRIS THE FUND'S TOP HOLDING WHEN TOBACCO LITIGATION HAS
PUT SUCH PRESSURE ON THE STOCK?
A. If Philip Morris hadn't been hurt by concerns over tobacco litigation, I
believe it would have been more fairly valued by the market given that it
had such strong growth attributes in so many of its respective businesses,
a substantial cash flow, an attractive dividend yield and that it traded at
such a low price relative to its earnings. The company has had the ability
to generate good cash flow, consistently increase its dividend, pay down
debt, repurchase stock and grow earnings at a rate of about 15% to 20% a
year.
Q. STEVE, WOULD YOU DESCRIBE THE FUND'S FOREIGN POSITION?
A. Sure. In Japan, I've reduced the fund's exposure to semiconductor
companies because a worldwide supply glut has depressed semiconductor
prices. I've also rotated out of some consumer electronics companies as
their stocks became less attractive. Instead, I've owned some of the major
auto-related stocks, such as Toyota, Honda and Bridgestone.
Q. WHAT ABOUT EUROPE?
A. As investors wait for an economic recovery in Europe, many quality
companies are trading at low price levels. Additionally, many of these
companies have shown a greater willingness to raise shareholder value by
divesting themselves of unprofitable operations and focusing on core
businesses. Some companies the fund owned that exemplified these attributes
were Volvo, Pechiney and Veba.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. In general, cyclical industries - such as steel, construction and
chemicals - were hurt by concerns about the sustainability of the economic
recovery. More specifically, I was disappointed by the performance of WMX
Technologies, the company formally known as Waste Management. While I
thought the company was fundamentally sound, it was hurt by the falling
prices of the recycled materials it processes.
Q. WHAT'S YOUR OUTLOOK?
A. As I pointed out before, corporate earnings play a big part in the
direction of the stock market. If the current trend of fewer and fewer
companies reporting positive earnings surprises continues, we could see
continued choppiness in the market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

TOP TEN STOCKS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

Philip Morris Companies, Inc. 2.9 2.9

General Electric Co. 2.4 2.6

British Petroleum PLC ADR 2.2 2.1

Federal National Mortgage Association 1.9 2.2

American Express Co. 1.7 1.9

General Motors Corp. 1.5 1.6

Allstate Corp. 1.2 1.3

Chrysler Corp. 1.1 1.6

Wal-Mart Stores, Inc. 1.1 0.5

Royal Dutch Petroleum Co. ADR 1.0 0.3

TOP FIVE MARKET SECTORS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO

Finance 19.7 19.0

Energy 12.2 11.4

Utilities 8.3 9.2

Durables 8.3 7.2

Basic Industries 7.6 8.8

ASSET ALLOCATION
AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 **
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 8.699999999999999
Row: 1, Col: 3, Value: 2.0
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 42.0
Stocks 84.4%
Bonds 0.9%
Convertible
securities 7.7%
Other securities
and short-term
investments 7.0%
FOREIGN
INVESTMENTS 12.6%
Stocks 83.3%
Bonds 0.9%
Convertible
securities 8.7%
Other securities
and short-term
investments 7.1%
FOREIGN
INVESTMENTS 14.0%
Row: 1, Col: 1, Value: 7.0
Row: 1, Col: 2, Value: 7.7
Row: 1, Col: 3, Value: 2.0
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 43.3
*
**
INVESTMENTS JULY 31, 1996 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 83.0%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 2.2%
AEROSPACE & DEFENSE - 1.9%
Harsco Corp. 429,800 $ 25,466
Lockheed Martin Corp. 1,081,600 89,638
Northrop Grumman Corp. 568,000 39,050
Rockwell International Corp. 1,364,400 71,631
Thiokol Corp. 230,900 8,139
233,924
DEFENSE ELECTRONICS - 0.3%
Raytheon Co. 743,800 36,074
TOTAL AEROSPACE & DEFENSE 269,998
BASIC INDUSTRIES - 6.5%
CHEMICALS & PLASTICS - 3.4%
Bayer AG 235,000 7,901
Betz Laboratories, Inc. 123,800 5,617
DSM NV 68,500 6,256
Dow Chemical Co. 323,100 24,031
du Pont (E.I.) de Nemours & Co. 1,479,400 119,462
Ethyl Corp. 1,084,900 9,764
Goodrich (B.F.) Co. 140,400 5,090
Great Lakes Chemical Corp. 251,000 14,464
Hoechst AG Ord. 385,000 12,690
IMC Fertilizer Group, Inc. 611,000 24,135
Imperial Chemical Industries PLC:
ADR 192,900 8,994
Ord. 1,335,300 15,521
Lubrizol Corp. 259,000 7,414
Lyondell Petrochemical Co. 557,900 12,483
Nalco Chemical Co. 1,080,700 32,421
Union Carbide Corp. 1,603,600 67,350
Witco Corp. 1,223,700 35,486
409,079
IRON & STEEL - 0.2%
Allegheny Ludlum Industries, Inc. 316,200 5,929
Armco, Inc. (a) 991,600 4,462
Lukens, Inc. 520,100 10,857
21,248
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 1.6%
Aluminum Co. of America 1,452,248 $ 84,230
Inco Ltd. 995,000 30,505
Kaiser Aluminum Corp. (a) 681,900 7,501
Metallgesellschaft AG Ord. (a) 288,600 4,824
Noranda, Inc. 621,200 12,448
Pechiney SA Class A 672,647 27,668
Reynolds Metals Co. 673,200 34,165
201,341
PACKAGING & CONTAINERS - 0.4%
Corning, Inc. 699,900 25,809
Tupperware Corp. 488,300 20,875
46,684
PAPER & FOREST PRODUCTS - 0.9%
Champion International Corp. 449,300 18,982
International Paper Co. 989,130 37,462
Weyerhaeuser Co. 1,208,300 50,446
106,890
TOTAL BASIC INDUSTRIES 785,242
CONGLOMERATES - 3.4%
AlliedSignal, Inc. 1,294,200 76,034
American Standard Companies, Inc. (a) 1,111,700 35,713
Brascan Ltd. Class A 2,448,900 47,202
Crane Co. 455,800 16,637
Dial Corp. (The) 46,900 1,372
GenCorp, Inc. 684,200 8,809
Hanson PLC sponsored ADR 1,343,400 17,128
Harris Corp. 468,700 26,950
Textron, Inc. 519,100 41,529
Tyco International Ltd. 1,437,200 58,926
United Technologies Corp. 733,500 82,610
412,910
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 1.1%
BUILDING MATERIALS - 0.4%
Armstrong World Industries, Inc. 231,500 $ 12,848
Dexter Corp. 587,700 17,264
Masco Corp. 751,800 20,956
51,068
CONSTRUCTION - 0.2%
Kaufman & Broad Home Corp. 283,000 3,361
Lennar Corp. 467,100 10,451
Ryland Group, Inc. 512,600 7,625
21,437
REAL ESTATE - 0.0%
Fastighets AB Tornet 115,630 1,026
REAL ESTATE INVESTMENT TRUSTS - 0.5%
Cali Realty Corp. 49,000 1,133
Equity Residential Properties Trust (SBI) 873,500 29,481
First Industrial Realty Trust, Inc. 85,500 2,009
Liberty Property Trust (SBI) 135,500 2,693
Macerich Co. 299,200 6,246
Patriot American Hospitality, Inc. 218,900 6,211
Public Storage, Inc. 328,700 7,026
Simon Properties Group, Inc. 185,700 4,364
Speiker Properties, Inc. 80,300 2,289
Weeks Corp. 52,100 1,374
62,826
TOTAL CONSTRUCTION & REAL ESTATE 136,357
DURABLES - 7.8%
AUTOS, TIRES, & ACCESSORIES - 6.7%
Bridgestone Corp. 1,199,000 21,774
Chrysler Corp. 4,612,000 130,866
Continental Gummi-Werke AG 841,000 13,452
Cummins Engine Co., Inc. 189,500 7,083
Daimler-Benz AG:
Ord. 235,000 12,509
sponsored ADR 24,300 1,312
Dana Corp. 914,700 25,497
Eaton Corp. 574,300 32,017
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES - CONTINUED
Federal-Mogul Corp. 438,100 $ 7,393
Ford Motor Co. 916,200 29,777
General Motors Corp. 3,697,135 180,235
Genuine Parts Co. 1,139,700 48,295
Goodyear Tire & Rubber Co. 400,400 17,718
Honda Motor Co. Ltd. 1,034,000 24,973
Johnson Controls, Inc. 585,100 42,127
Modine Manufacturing Co. 413,000 10,841
Scania AB:
Class A 228,700 6,122
Class B 763,400 20,434
Series B sponsored ADR 54,800 1,452
Snap-on Tools Corp. 823,200 36,530
Standard Products Co. 209,800 5,009
TRW, Inc. 245,600 22,196
Toyota Motor Corp. 1,801,000 43,666
Volkswagen AG 40,600 13,787
Volvo AB:
Class B 2,030,600 44,037
Class B ADR 396,900 8,533
807,635
CONSUMER DURABLES - 0.1%
Swedish Match Co. 2,042,400 6,040
Swedish Match Co. ADR 39,690 1,156
7,196
CONSUMER ELECTRONICS - 0.5%
Matsushita Electric Industrial Co. Ltd. 1,272,000 22,148
Maytag Co. 146,500 2,930
Whirlpool Corp. 802,400 39,518
64,596
TEXTILES & APPAREL - 0.5%
Burlington Industries, Inc. (a) 828,500 11,185
Kellwood Co. (j) 1,255,400 20,086
Stride Rite Corp. 593,300 4,301
Unifi, Inc. 1,142,000 31,548
67,120
TOTAL DURABLES 946,547
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 10.6%
ENERGY SERVICES - 2.0%
Baker Hughes, Inc. 908,300 $ 26,681
Dresser Industries, Inc. 1,719,700 46,432
Halliburton Co. 817,800 42,628
McDermott International, Inc. 591,300 10,717
Schlumberger Ltd. 1,380,100 110,408
236,866
OIL & GAS - 8.6%
Amerada Hess Corp. 547,500 26,622
Amoco Corp. 1,012,500 67,711
Atlantic Richfield Co. 883,600 102,498
British Petroleum PLC:
ADR 2,398,182 263,500
Ord. 6,761,003 61,229
Burlington Resources, Inc. 226,600 9,687
Coastal Corp. (The) 94,500 3,520
Exxon Corp. 276,300 22,726
Kerr-McGee Corp. 458,600 26,140
Mobil Corp. 521,500 57,561
Occidental Petroleum Corp. 1,369,200 30,636
Petro-Canada 1st Installment Receipt (h) 532,300 3,368
Phillips Petroleum Co. 714,600 28,227
Royal Dutch Petroleum Co. ADR 797,900 120,383
Santa Fe Energy Resources, Inc. (a) 751,600 8,549
Total SA:
Class B 939,443 67,506
sponsored ADR 1,345,493 48,101
USX-Marathon Group 2,081,700 42,675
Union Pacific Resources Group, Inc. 331,200 8,735
Unocal Corp. 1,384,252 45,161
1,044,535
TOTAL ENERGY 1,281,401
FINANCE - 17.9%
BANKS - 7.2%
Banc One Corp. 592,652 20,521
Bank of Boston Corp. 895,600 47,467
Bank of New York Co., Inc. 2,126,794 109,530
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
BankAmerica Corp. 710,800 $ 56,686
Boatmen's Bancshares, Inc. 137,900 5,516
Canadian Imperial Bank of Commerce 852,200 28,327
Chase Manhattan Corp. 859,000 59,701
Citicorp 458,500 37,540
Comerica, Inc. 987,526 43,328
CoreStates Financial Corp. 298,502 11,716
Den Norske Bank AS (a)(g) 7,723,100 24,507
Den Norske Bank AS Class A Free shares 508,100 1,612
Deutsche Bank AG 270,600 13,705
First Bank System, Inc. 1,055,000 64,619
First Tennessee National Corp. 537,800 15,865
Fleet Financial Group, Inc. 1,571,498 63,646
HSBC Holdings PLC 770,000 12,425
National Bank of Canada 3,794,400 30,634
NationsBank Corp. 684,000 58,739
Norwest Corp. 1,089,734 38,686
Nordbanken AB (g) 384,000 7,454
Royal Bank of Canada 1,689,300 40,855
Sparbanken Sverige Ab Class A (g) 1,156,300 13,941
Sparebanken Norway primary shares certificates 385,100 9,649
Toronto Dominion Bank 651,708 12,158
Wells Fargo & Co. 149,566 34,830
863,657
CLOSED END INVESTMENT COMPANY - 0.0%
Latin American Investment Fund, Inc. 64,900 1,022
CREDIT & OTHER FINANCE - 3.3%
American Express Co. 4,759,800 208,241
Associates First Capital Corp. (a) 77,900 2,989
Beneficial Corp. 532,200 28,739
First Chicago NBD Corp. 2,246,553 86,492
Hees International Corp. 1,600,900 18,631
Household International, Inc. 518,378 38,619
Transamerica Corp. 132,200 9,138
Trilon Financial Corp. Class A 2,471,100 9,885
402,734
FEDERAL SPONSORED CREDIT - 1.9%
Federal National Mortgage Association 7,160,000 227,330
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - 4.4%
Aetna, Inc. 1,110,300 $ 64,536
Allmerica Financial Corp. 39,800 1,179
Allstate Corp. 3,269,285 146,301
American Bankers Insurance Group, Inc. 936,220 37,449
American Financial Group, Inc. 1,544,200 45,554
CIGNA Corp. 301,500 32,110
Capital Re Corp. 84,700 2,859
Fremont General Corp. 154,815 3,870
General Re Corp. 194,300 28,514
Highlands Insurance Group, Inc. (a)(j) 745,190 12,668
ITT Hartford Group, Inc. 1,502,600 79,450
MBIA, Inc. 133,100 10,066
Provident Companies, Inc. 165,600 6,044
Providian Corp. 337,700 13,381
Reliastar Financial Corp. 1,014,832 42,496
526,477
SAVINGS & LOANS - 0.5%
Washington Mutual, Inc. 1,567,300 57,011
SECURITIES INDUSTRY - 0.6%
Bear Stearns Companies, Inc. 590,609 13,289
First Marathon, Inc. Class A (non-vtg.) 1,105,300 10,491
Lehman Brothers Holdings, Inc. 888,760 20,553
Nomura Securities Co. Ltd. 2,059,000 36,043
80,376
TOTAL FINANCE 2,158,607
HEALTH - 3.0%
DRUGS & PHARMACEUTICALS - 2.0%
American Home Products Corp. 475,600 26,990
Bristol-Myers Squibb Co. 823,400 71,327
Pharmacia & Upjohn, Inc. 1,289,000 53,171
Pfizer, Inc. 475,100 33,198
Schering-Plough Corp. 920,300 50,732
235,418
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 0.8%
Bausch & Lomb, Inc. 380,800 $ 13,518
Baxter International, Inc. 884,100 36,801
Hillenbrand Industries, Inc. 62,500 2,094
Johnson & Johnson 928,800 44,350
Pall Corp. 145,800 3,517
100,280
MEDICAL FACILITIES MANAGEMENT - 0.2%
Foundation Health Corp. (a) 381,000 9,335
Health Systems International, Inc. (a) 662,200 13,078
Tenet Healthcare Corp. (a) 332,100 6,434
28,847
TOTAL HEALTH 364,545
HOLDING COMPANIES - 0.3%
CINergy Corp. 356,898 10,573
U.S. Industries, Inc. (a) 1,006,580 22,648
33,221
INDUSTRIAL MACHINERY & EQUIPMENT - 6.2%
ELECTRICAL EQUIPMENT - 3.2%
Alcatel Alsthom Compagnie Generale d'Electricite SA 308,765 25,277
Emerson Electric Co. 297,500 25,102
General Electric Co. 3,567,000 293,832
Mitsubishi Electric Co. Ord. 193,000 1,265
Omron Corp. 1,018,000 18,678
Westinghouse Electric Corp. 1,323,200 22,164
386,318
INDUSTRIAL MACHINERY & EQUIPMENT - 1.6%
Caterpillar, Inc. 579,800 38,194
Cooper Industries, Inc. 949,872 37,401
Deere & Co. 628,900 22,483
Goulds Pumps, Inc. 107,200 2,385
Ingersoll-Rand Co. 745,900 31,794
Keystone International, Inc. 1,295,900 22,840
Parker-Hannifin Corp. 819,600 28,584
Tenneco, Inc. 224,500 11,057
194,738
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 1.4%
Browning-Ferris Industries, Inc. 2,246,900 $ 50,274
Safety Kleen Corp. 971,800 16,885
WMX Technologies, Inc. 2,660,200 78,808
Zurn Industries, Inc. (j) 760,800 15,501
161,468
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 742,524
MEDIA & LEISURE - 1.0%
BROADCASTING - 0.0%
Jacor Communications, Inc. Class A (a) 170,400 5,197
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 112,400 2,136
Hasbro, Inc. 763,600 27,394
29,530
LODGING & GAMING - 0.3%
ITT Corp. 569,300 32,308
PUBLISHING - 0.2%
Dun & Bradstreet Corp. 496,000 28,520
RESTAURANTS - 0.2%
Brinker International, Inc. (a) 666,400 8,747
Darden Restaurants, Inc. 1,603,200 12,625
21,372
TOTAL MEDIA & LEISURE 116,927
NONDURABLES - 6.1%
BEVERAGES - 0.4%
Heileman G Brewing, Inc. Unit Class 1 (non-vtg.) (a)(f) 100 100
PepsiCo, Inc. 1,297,000 41,018
Seagram Co. Ltd. 305,500 10,088
51,206
FOODS - 1.3%
General Mills, Inc. 853,000 46,275
Goodman Fielder Ltd. Ord. 23,051,169 23,537
Grand Metropolitan PLC 1,982,100 13,401
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
FOODS - CONTINUED
Kellogg Co. 293,500 $ 21,939
RalCorp Holdings, Inc. (a) 670,300 14,495
Ralston Purina Group 522,400 32,781
152,428
HOUSEHOLD PRODUCTS - 0.5%
Premark International, Inc. 882,200 15,880
Rubbermaid, Inc. 1,669,100 47,987
63,867
TOBACCO - 3.9%
BAT Industries PLC:
Ord. 1,432,900 11,238
sponsored ADR 105,000 1,680
Dimon, Inc. 458,450 8,653
Philip Morris Companies, Inc. 3,351,900 350,693
RJR Nabisco Holdings Corp. 2,427,160 74,635
Universal Corp. 740,500 20,549
467,448
TOTAL NONDURABLES 734,949
PRECIOUS METALS - 0.1%
Newmont Mining Corp. 218,000 10,764
RETAIL & WHOLESALE - 4.4%
APPAREL STORES - 1.0%
Limited, Inc. (The) 814,539 15,680
Melville Corp. 874,800 34,227
Payless Shoe Source, Inc. (a) 811,328 26,267
TJX Companies, Inc. 1,223,600 36,861
113,035
GENERAL MERCHANDISE STORES - 2.6%
Coles Myer Ltd. 927,100 3,184
Dayton Hudson Corp. 539,100 16,308
Dillard Department Stores, Inc. Class A 481,700 15,113
Federated Department Stores, Inc. (a) 1,633,467 49,412
K mart Corp. 299,100 2,991
May Department Stores Co. (The) 835,700 37,502
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - CONTINUED
Sears, Roebuck & Co. 1,396,200 $ 57,244
Wal-Mart Stores, Inc. 5,327,900 127,870
Woolworth Corp. (a) 315,500 6,073
315,697
GROCERY STORES - 0.2%
Grand Union Capital Corp. Class B 6,979 -
Supervalu, Inc. 779,000 21,715
21,715
RETAIL & WHOLESALE, MISCELLANEOUS - 0.6%
Fingerhut Companies, Inc. 776,400 10,967
Tandy Corp. 524,400 22,156
Toys "R" Us, Inc. 1,647,700 43,458
76,581
TOTAL RETAIL & WHOLESALE 527,028
SERVICES - 1.5%
LEASING & RENTAL - 0.3%
GATX Corp. 792,900 35,681
PRINTING - 0.8%
Deluxe Corp. 986,100 36,362
Donnelley (R.R.) & Sons Co. 519,600 16,757
Harland (John H.) Co. 354,200 8,589
Moore Corporation Ltd. 405,100 6,998
New England Business Service, Inc. 577,800 9,895
Standard Register Co. 370,300 9,998
88,599
SERVICES - 0.4%
Block (H&R), Inc. 945,640 24,705
Jostens, Inc. 534,400 10,220
National Service Industries, Inc. 404,700 15,429
50,354
TOTAL SERVICES 174,634
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 1.9%
COMPUTER SERVICES & SOFTWARE - 0.1%
Softkey International, Inc. (a) 423,100 $ 7,827
COMPUTERS & OFFICE EQUIPMENT - 1.2%
Digital Equipment Corp. (a) 699,200 24,734
International Business Machines Corp. 509,700 54,984
Olivetti & Co. Spa Ord. (a) 16,084,800 7,568
Unisys Corp. (a) 752,500 4,421
Xerox Corp. 1,088,943 54,856
146,563
ELECTRONICS - 0.4%
AMP, Inc. 577,900 22,321
Nitto Denko Corp. 860,000 13,927
Thomas & Betts Corp. 447,600 16,337
52,585
PHOTOGRAPHIC EQUIPMENT - 0.2%
Fuji Photo Film Co. Ltd. 929,000 27,742
TOTAL TECHNOLOGY 234,717
TRANSPORTATION - 1.0%
RAILROADS - 1.0%
Burlington Northern Santa Fe Corp. 587,400 46,331
CSX Corp. 1,417,800 68,409
114,740
UTILITIES - 8.0%
ELECTRIC UTILITY - 2.3%
American Electric Power Co., Inc. 720,800 29,913
CILCORP, Inc. 157,200 6,563
DPL, Inc. 789,150 17,855
DQE, Inc. 235,700 6,452
El Paso Electric Co. (a) 198,641 1,068
Entergy Corp. 1,270,800 32,405
Illinova Corp. 1,689,700 43,510
PacifiCorp. 663,300 13,846
PECO Energy Co. 462,400 10,866
Pinnacle West Capital Corp. 914,800 25,843
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Portland General Corp. 308,900 $ 10,966
Unicom Corp. 574,900 13,510
Veba AG Ord. 1,358,900 69,175
281,972
GAS - 1.8%
Consolidated Natural Gas Co. 362,700 18,271
ENSERCH Corp. 958,300 18,926
Enron Corp. 463,300 18,242
MCN Corp. 893,000 20,986
Nova Corp. 1,914,300 16,291
Pacific Enterprises 1,692,800 49,726
Panenergy Corp. 1,307,500 41,513
Questar Corp. 1,107,400 34,883
218,838
TELEPHONE SERVICES - 3.9%
AT&T Corp. 720,300 37,546
Ameritech Corp. 1,630,900 90,515
BCE, Inc. 732,100 29,234
Bell Atlantic Corp. 1,026,300 60,680
BellSouth Corp. 1,782,400 73,078
Cam-Net Communications Network, Inc. (a)(f) 1,626,737 1,792
Frontier Corp. 933,900 26,266
Lucent Technologies, Inc. 234,400 8,702
NYNEX Corp. 1,842,500 82,682
SBC Communications, Inc. 1,231,500 60,190
470,685
TOTAL UTILITIES 971,495
TOTAL COMMON STOCKS
(Cost $7,848,532) 10,016,606
PREFERRED STOCKS - 4.9%
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - 4.6%
BASIC INDUSTRIES - 0.9%
IRON & STEEL - 0.1%
Armco, Inc. Class A, $3.625 276,200 $ 12,774
METALS & MINING - 0.6%
Alumax, Inc., Series A, $4.00 370,067 46,628
Kaiser Aluminum Corp. $0.97 954,400 10,618
Reynolds Metals Co. $3.31 236,300 10,663
67,909
PACKAGING & CONTAINERS - 0.1%
Crown Cork & Seal, Inc. $1.88 274,500 12,044
PAPER & FOREST PRODUCTS - 0.1%
International Paper Co. $2.625 (g) 302,600 13,466
TOTAL BASIC INDUSTRIES 106,193
ENERGY - 0.7%
OIL & GAS - 0.7%
Atlantic Richfield Co. exchangeable $2.23 579,200 13,249
Diamond Shamrock, Inc. $2.50 (g) 103,900 6,052
Occidental Petroleum Corp. Indexed $3.00 684,900 40,495
Santa Fe Energy Resources, Inc. $0.732 332,400 3,407
Unocal Corp. $3.50 (g) 423,900 23,844
87,047
FINANCE - 0.8%
BANKS - 0.1%
Boatmen's Bancshares, Inc. $1.75 321,100 10,998
CREDIT & OTHER FINANCE - 0.1%
Continental Airlines Finance Trust $4.25 (g) 103,700 6,222
INSURANCE - 0.4%
Aetna, Inc. Class C $4.7578 114,100 7,146
Alexander & Alexander Services, Inc.,
Series A, $3.625 (g) 44,100 2,051
American Bankers Insurance Group, Inc., Series B, $3.125 37,900 1,923
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - CONTINUED
INSURANCE - CONTINUED
Conseco, Inc.:
Series D, $3.25 253,900 $ 15,900
$4.27875 233,900 17,776
St. Paul Capital LLC $3.00 162,900 8,450
53,246
SAVINGS & LOANS - 0.0%
Washington Mutual, Inc., Series D, $6.00 20,600 2,894
SECURITIES INDUSTRY - 0.2%
Merrill Lynch & Co, Inc. exchangeable $2.3906 329,100 13,164
Salomon, Inc. $2.03 490,100 12,743
25,907
TOTAL FINANCE 99,267
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
U.S. Surgical Corp. $2.20 (g) 462,500 15,725
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.3%
Westinghouse Electric Corp. $1.30 (g) 2,056,400 32,131
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.1%
Evergreen Media Corp. exchangeable $3.00 (a) 106,600 9,844
ENTERTAINMENT - 0.2%
Time Warner Financing Trust $1.24 704,800 25,109
LEISURE DURABLES & TOYS - 0.1%
Tyco Toys, Inc. $0.4125 depositary share
representing 1/20 pfd., Series C 931,500 5,123
LODGING & GAMING - 0.1%
Bally Entertainment Corp. $0.89 602,400 14,834
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.0%
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 956,400 $ -
TOTAL MEDIA & LEISURE 54,910
NONDURABLES - 0.6%
FOODS - 0.3%
Chiquita Brands International, Inc.:
Series B, $3.75 200,100 10,055
$2.875 497,300 20,514
30,569
TOBACCO - 0.3%
RJR Nabisco Holdings Corp. depositary shares
representing 1/10 pfd., Series C 7,750,800 47,474
TOTAL NONDURABLES 78,043
RETAIL & WHOLESALE - 0.3%
APPAREL STORES - 0.1%
TJX Companies, Inc.:
Series C, $3.125 45,200 2,723
Series E, $7.00 47,800 7,887
10,610
GENERAL MERCHANDISE STORES - 0.2%
K mart Financing I $3.875 448,200 21,794
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 100,562 2,615
TOTAL RETAIL & WHOLESALE 35,019
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (g) 53,600 2,358
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Trans World Airlines, Inc. $4.00 (g) 175,500 $ 6,801
UTILITIES - 0.3%
GAS - 0.2%
Enron Corp. Series J, $10.50 31,800 17,037
Williams Companies, Inc. $3.50 166,600 12,245
29,282
TELEPHONE SERVICES - 0.1%
Enhance Financial Services Group $7.625 378,300 10,309
Sprint Corp. $2.63 75,100 2,807
13,116
TOTAL UTILITIES 42,398
TOTAL CONVERTIBLE PREFERRED STOCKS 559,892
NONCONVERTIBLE PREFERRED STOCKS - 0.3%
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES - 0.2%
Volkswagen AG 84,600 21,777
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Cablevision System Corp. $11.125 pay-in-kind (g) 72,384 6,732
Time Warner, Inc., Series K exchangeable 3,066 3,043
9,775
TOTAL NONCONVERTIBLE PREFERRED STOCKS 31,552
TOTAL PREFERRED STOCKS
(Cost $544,321) 591,444
CORPORATE BONDS - 5.0%
MOODY'S PRINCIPAL VALUE
RATINGS AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 4.1%
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
Hexcel Corp. 7%, 8/1/03 B2 $ 10,898 $ 12,642
CONGLOMERATES - 0.0%
Gencorp, Inc. 8%, 8/1/02 B1 3,415 3,449
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Liberty Property exchangeable 8%, 7/1/01 B1 1,358 1,361
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Bridgestone 3.70%, 12/31/98 - JPY 724,000 10,898
ENERGY - 0.8%
ENERGY SERVICES - 0.0%
Baker Hughes, Inc. 0%, 5/5/08 A2 7,990 5,383
OIL & GAS - 0.8%
Horsham Corp. 3%, 1/29/21 - 9,390 9,014
Pennzoil Co. exchangeable 6 1/2%, 1/15/03 Baa3 60,212 83,695
92,709
TOTAL ENERGY 98,092
FINANCE - 0.9%
BANKS - 0.1%
Bank of New York Co., Inc. 7 1/2%, 8/15/01 A2 6,370 16,801
CREDIT & OTHER FINANCE - 0.4%
Edper Group Ltd. 7%, 5/31/06 (g) - CAD 14,000 5,244
Huntingdon International Holdings
PLC euro 7 1/2%, 9/25/06 - 1,000 745
MBL International Finance of
Bermuda 3%, 11/30/02 Aa3 38,250 41,979
47,968
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
FINANCE - CONTINUED
INSURANCE - 0.4%
Fremont General Corp. liquid yield
option notes 0%, 10/12/13 Ba2 $ 85,910 $ 41,666
TOTAL FINANCE 106,435
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
POLLUTION CONTROL - 0.2%
WMX Technologies, Inc. 2%, 1/24/05 A2 22,111 18,905
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.3%
Comcast Corp. 1 1/8%, 4/15/07 B1 25,390 11,330
Home Shopping Network, Inc.
5 7/8%, 3/1/06 (g) B- 3,350 3,384
Jacor Communications, Inc.
liquid yield option notes 0%, 6/12/11 B3 3,822 1,772
Time Warner, Inc. liquid yield option notes
0%, 6/22/13 Ba1 50,770 21,070
37,556
LEISURE DURABLES & TOYS - 0.1%
Outboard Marine Corp. 7%, 8/1/02 B1 18,790 17,804
LODGING & GAMING - 0.1%
Hilton Hotels Corp. 5%, 5/15/06 Baa2 6,610 6,643
PUBLISHING - 0.1%
News America Holdings, Inc. liquid yield
option notes 0%, 3/11/13 Baa3 19,220 8,313
TOTAL MEDIA & LEISURE 70,316
PRECIOUS METALS - 0.1%
Pegasus Gold, Inc. 6 1/4%, 4/30/02 - 9,120 9,302
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 0.3%
APPAREL STORES - 0.1%
Baker (J.), Inc. 7%, 6/1/02 B3 $ 13,170 $ 10,437
Charming Shoppers, Inc. 7 1/2%, 7/15/06 B2 3,788 4,053
14,490
GENERAL MERCHANDISE STORES - 0.2%
Federated Department Stores, Inc.
5%, 10/1/03 Ba3 25,720 27,070
TOTAL RETAIL & WHOLESALE 41,560
SERVICES - 0.1%
ADT Operations, Inc. liquid yield
option notes 0%, 7/6/10 Ba3 19,295 10,950
TECHNOLOGY - 0.8%
COMPUTER SERVICES & SOFTWARE - 0.3%
Automatic Data Processing, Inc. 0%, 2/20/12 Aa3 23,800 12,465
Softkey International, Inc.
5 1/2%, 11/1/00 (g) - 28,760 22,433
34,898
COMPUTERS & OFFICE EQUIPMENT - 0.5%
Apple Computer, Inc. 6%, 6/1/01 (g) B- 17,780 17,024
Silicon Graphics, Inc. 0%, 11/2/13 (g) B1 37,120 18,838
Unisys Corp.:
8 1/4%, 8/1/00 B3 9,315 8,616
8 1/4%, 3/15/06 B3 16,169 17,463
61,941
TOTAL TECHNOLOGY 96,839
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Continental Airlines, Inc.
6 3/4%, 4/15/06 (g) Caa 9,150 9,219
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc. exchangeable
0%, 8/15/10 Baa3 $ 3,690 $ 4,391
TELEPHONE SERVICES - 0.0%
Cam-Net Communications Network, Inc.
11 1/2%, 4/4/98 (f) - 4,225 3,169
TOTAL UTILITIES 7,560
TOTAL CONVERTIBLE BONDS 497,528
NONCONVERTIBLE BONDS - 0.9%
AEROSPACE & DEFENSE - 0.0%
Be Aerospace, Inc. 9 7/8%, 2/1/06 B2 1,120 1,117
Rohr, Inc. 11 5/8%, 5/15/03 Ba3 80 88
1,205
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
American Pacific Corp. 11%, 2/21/02 (g) - 2,625 2,494
PACKAGING & CONTAINERS - 0.0%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (d) Caa 3,366 1,279
PAPER & FOREST PRODUCTS - 0.1%
Stone Container Corp.:
10 3/4%, 6/15/97 B2 1,150 1,173
11 7/8%, 12/1/98 B1 3,670 3,835
5,008
TOTAL BASIC INDUSTRIES 8,781
CONSTRUCTION & REAL ESTATE - 0.0%
CONSTRUCTION - 0.0%
WCI Communities LP 17%, 7/24/98 (f) - 1,280 1,279
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES - 0.2%
Daimler-Benz Capital AG 4 1/8%,
7/5/03 unit - DEM 27,630 $ 18,766
HOME FURNISHINGS - 0.0%
Knoll, Inc. 10 7/8%, 3/15/06 B3 580 592
TOTAL DURABLES 19,358
ENERGY - 0.1%
OIL & GAS - 0.1%
Flores & Rucks, Inc. 13 1/2%, 12/1/04 B3 6,900 7,935
Wainoco Oil Corp. 12%, 8/1/02 B1 2,000 2,020
9,955
FINANCE - 0.1%
ASSET-BACKED SECURITIES - 0.0%
Airplanes Pass Thru Trust Class D
10 7/8%, 3/15/19 Ba2 2,120 2,210
SAVINGS & LOANS - 0.1%
Anchor Bancorp, Inc. 8 7/8%, 7/9/03 Ba3 2,000 1,980
First Nationwide Parent Holdings Ltd.
12 1/2%, 4/15/03 B2 4,000 4,140
6,120
TOTAL FINANCE 8,330
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Exide Corp. 10 3/4%, 12/15/02 B1 2,250 2,295
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.1%
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 1,520 1,520
SCI Television, Inc. secured 11%, 6/30/05 B2 3,488 3,728
SFX Broadcasting, Inc. 10 3/4%, 5/15/06 (g) B3 3,500 3,518
Telemundo Group, Inc. 7%, 2/15/06 (e) B1 1,540 1,405
Telewest PLC 0%, 10/1/07 (d) B1 2,000 1,170
11,341
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
American Media, Inc. Unit 0%, 5/15/97 B1 $ 8,230 $ 7,325
TOTAL MEDIA & LEISURE 18,666
NONDURABLES - 0.2%
FOODS - 0.0%
Chiquita Brands International, Inc.
9 5/8%, 1/15/04 B1 2,960 2,886
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 1,000 925
11 1/8%, 10/1/02 B3 2,000 1,880
5,691
HOUSEHOLD PRODUCTS - 0.2%
Revlon Consumer Products Corp. 9 3/8%, 4/1/01 B2 5,550 5,522
Revlon Worldwide Corp. secured 0%, 3/15/98 B3 13,625 11,411
16,933
TOTAL NONDURABLES 22,624
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Pathmark Stores, Inc.:
9 5/8%, 5/1/03 B2 3,050 2,875
0%, 11/1/03 (d) B3 3,000 1,834
4,709
TECHNOLOGY - 0.0%
COMMUNICATIONS EQUIPMENT - 0.0%
Echostar Communications Corp.
0%, 6/1/04 (d) B2 1,500 1,095
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Unisys Corp. Series B, 12%, 4/15/03 B1 $ 2,000 $ 2,010
TOTAL TECHNOLOGY 3,105
TOTAL NONCONVERTIBLE BONDS 100,307
TOTAL CORPORATE BONDS
(Cost $577,033) 597,835
COMMERCIAL MORTGAGE SECURITIES - 0.1%
ACP Mortgage LP commercial floater Series F,
7.44%, 2/28/28 (g)(i) B 2,778 2,265
Bardell Associates Note Trust
12 1/2%, 11/1/08 (f) - 2,808 2,983
CS First Boston Mortgage Securities Corp.
commercial Series 1994-M1 Class E,
12.60%, 2/15/02 (g) - 3,000 2,993
Resolution Trust Corp. commercial Series:
1994-N2 Class 5-B, 10 5/8%, 12/15/04 (e)(g) B2 2,750 2,751
1994-C2 Class G, 8%, 4/25/25 B 3,420 2,861
1994-C1 Class E, 8%, 6/25/26 BB 3,594 3,065
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $15,756) 16,918
INDEXED SECURITIES - 0.0%
OTHER - 0.0%
Merrill Lynch & Co. Inc. Japan Index equity
participation securities 0%,
1/31/00 (Cost $4,188) A1 5,000 4,975
PURCHASED BANK DEBT - 0.0%
GPA Group PLC term loan 6.40%, 11/19/98
(Cost $341) 450 419
REPURCHASE AGREEMENTS - 7.0%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 5.65%,
dated 7/31/96 due 8/1/96 $ 843,383 $ 843,251
PURCHASED OPTIONS - 0.0%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
(000S)
Bank of America OTC Put Option Aug. 96/
on 14,093,250,000 Japanese Yen 109.25 $ 131,934 96
Swiss Bank Corp. OTC Put Option Jan. 97/
on 4,480,000,000 Japanese Yen 112 41,939 224
TOTAL PURCHASED OPTIONS
(Cost $2,078) 320
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $9,835,500) $ 12,071,768
CURRENCY ABBREVIATIONS
CAD - Canadian dollar
DEM - German deutsche mark
JPY - Japanese yen
LEGEND
1. Non-income producing
2. Principal amount is stated in United States dollars unless otherwise
noted.
3. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
4. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
5. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
6. 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 (000S)
Bardell Associates Note
Trust 12 1/2%,
11/1/08 4/19/94 $ 2,861
Cam-Net Communications
Network, Inc. 4/12/96 $ 1,271
Cam-Net Communications
Network, Inc. 11 1/2%,
4/4/98 4/12/96 $ 3,381
Heileman G Brewing,
Inc. Unit Class 1
(non-vtg.) 1/21/94 $ 2,013
WCI Communities LP
17%, 7/24/98 7/24/95 $ 1,264
7. 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 $251,447,000 or 2.1% of net
assets.
8. Purchased on an installment basis. Market value reflects only those
payments made through July 31, 1996. The remaining installments aggregating
CAD 4,525,000 are due September 23,1996 and March 24, 1997.
9. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
10. Affiliated company (see Note 7 of Notes to Financial Statements).
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 1.0% AAA, AA, A 0.8%
Baa 0.9% BBB 1.3%
Ba 0.9% BB 0.7%
B 1.6% B 1.5%
Caa 0.0% 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 0.6%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 86.0%
United Kingdom 3.3
Canada 2.8
Japan 1.8
Germany 1.4
France 1.4
Netherlands 1.1
Others (individually less than 1%) 2.2
TOTAL 100.0%
INCOME TAX INFORMATION
At July 31, 1996, the aggregate cost of investment securities for income
tax purposes was $9,840,141,000. Net unrealized appre- ciation aggregated
$2,231,627,000, of which $2,486,302,000 related to appreciated invest- ment
securities and $254,675,000 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
(EXCEPT PER-SHARE AMOUNTS) JULY 31, 1996 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 12,071,768
agreements of $843,251) (cost $9,835,500) -
See accompanying schedule

Receivable for investments sold 34,546

Receivable for fund shares sold 17,666

Dividends receivable 23,945

Interest receivable 5,842

Other receivables 1,809

TOTAL ASSETS 12,155,576

LIABILITIES

Payable for investments purchased $ 58,495

Payable for fund shares redeemed 14,241

Accrued management fee 4,478

Other payables and accrued expenses 4,249

Collateral on securities loaned, at value 90,619

TOTAL LIABILITIES 172,082

NET ASSETS $ 11,983,494

Net Assets consist of:

Paid in capital $ 9,338,408

Undistributed net investment income 29,723

Accumulated undistributed net realized gain (loss) on 379,035
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 2,236,328
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 308,095 shares outstanding $ 11,983,494

NET ASSET VALUE, offering price and redemption price per $38.90
share ($11,983,494 (divided by) 308,095 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JULY 31, 1996 (UNAUDITED)

INVESTMENT INCOME $ 158,831
Dividends (including $355 received from affiliated issuers)

Interest (including income on securities loaned of $207) 39,972

TOTAL INCOME 198,803

EXPENSES

Management fee $ 26,372

Transfer agent fees 12,243

Accounting and security lending fees 419

Non-interested trustees' compensation 24

Custodian fees and expenses 292

Registration fees 481

Audit 54

Legal 73

Miscellaneous 61

Total expenses before reductions 40,019

Expense reductions (909) 39,110

NET INVESTMENT INCOME 159,693

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 365,108

Foreign currency transactions 16,341 381,449

Change in net unrealized appreciation (depreciation) on:

Investment securities (319,592)

Assets and liabilities in foreign currencies (16,811) (336,403)

NET GAIN (LOSS) 45,046

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 204,739
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JULY JANUARY 31,
31,1996 1996
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 159,693 $ 259,285
Net investment income

Net realized gain (loss) 381,449 434,135

Change in net unrealized appreciation (depreciation) (336,403) 2,025,512

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 204,739 2,718,932
FROM OPERATIONS

Distributions to shareholders (147,830) (243,784)
From net investment income

From net realized gain (148,865) (355,672)

TOTAL DISTRIBUTIONS (296,695) (599,456)

Share transactions 2,105,898 2,872,809
Net proceeds from sales of shares

Reinvestment of distributions 287,605 580,343

Cost of shares redeemed (1,327,653) (2,002,485)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,065,850 1,450,667
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 973,894 3,570,143

NET ASSETS

Beginning of period 11,009,600 7,439,457

End of period (including undistributed net investment $ 11,983,494 $ 11,009,600
income of $29,723 and $17,860, respectively)

OTHER INFORMATION
Shares

Sold 52,958 80,515

Issued in reinvestment of distributions 7,387 16,332

Redeemed (33,499) (56,429)

Net increase (decrease) 26,846 40,418

</TABLE>

FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED JANUARY 31,
ENDED JULY 31,
1996

(UNAUDITED) 1996 1995 1994 D, 1993 1992
F

</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

Net asset value, $ 39.15 $ 30.89 $ 35.19 $ 29.87 $ 26.57 $ 22.38
beginning of period

Income from Investment
Operations

Net investment income .53 .93 1.02 1.11 1.11 E 1.18

Net realized and .24 9.65 (2.12) 5.48 3.27 4.21
unrealized gain (loss)

Total from investment .77 10.58 (1.10) 6.59 4.38 5.39
operations

Less Distributions (.50) (.96) (.98) (1.15) (1.08) (1.20)
From net investment
income

From net realized gain (.52) (1.36) (2.22) (.12) - -

Total distributions (1.02) (2.32) (3.20) (1.27) (1.08) (1.20)

Net asset value, end of $ 38.90 $ 39.15 $ 30.89 $ 35.19 $ 29.87 $ 26.57
period

TOTAL RETURN B, C 1.98% 35.21% (3.01) 22.52 16.92 24.61
% % % %

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 11,983 $ 11,010 $ 7,439 $ 6,943 $ 5,123 $ 4,421
(in millions)

Ratio of expenses to .68% A .68% .70% .66 .67 .68
average net assets % % %

Ratio of expenses to .67% A, .67% .69% .66 .67 .68
average net assets G G G % % %
after expense
reductions

Ratio of net investment 2.72% A 2.86% 3.37% 3.55 4.02 4.81
income to average % % %
net assets

Portfolio turnover rate 40% A 39% 50% 70 84 111
% % %

Average commission $ 0.0237
rate H

</TABLE>

A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D AS OF FEBRUARY 1, 1993 THE FUND DISCONTINUED THE USE OF EQUALIZATION
ACCOUNTING.
E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F EFFECTIVE FEBRUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT
COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1996 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Equity-Income Fund (the fund) is a fund of Fidelity Devonshire
Trust (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. 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.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts and foreign currency options, 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 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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes 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 litigation
proceeds, paydown gains/losses on certain securities, futures and options
transactions, foreign currency transactions, passive foreign investment
companies (PFIC), defaulted bonds, 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 the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions 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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
(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 for U.S. Treasury
or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
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. The underlying face amount at value is shown in the
schedule of investments under the caption "Purchased Options." This amount
reflects each contract's exposure to the underlying instrument at period
end. 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.
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
different underlying instruments and to gain 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 securities that
are subject to legal or contractual restrictions on resale. These
securities generally 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
2. OPERATING POLICIES -
CONTINUED
RESTRICTED SECURITIES - CONTINUED
the period, restricted securities (excluding 144A issues) amounted to
$9,323,000 or 0.1% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $3,080,557,000 and $2,149,408,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .14%. For
the period, the management fee was equivalent to an annualized rate of .45%
of average net assets.
In accordance with the management contract currently in effect, the annual
individual fund fee rate is scheduled to increase
to .16%, .18%, and .20% on December 1, 1996, December 1, 1997, and
December 1, 1998, respectively.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
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. For the
period, the transfer agent fees were equivalent to an annualized rate of
.21% of average net assets.
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 $997,000 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
5. SECURITY LENDING - CONTINUED
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
$87,195,000 and $90,619,000, respectively.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$391,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $5,000 and $513,000,
respectively, under these arrangements.
7. 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 during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Highlands Insurance Group, Inc. $ 2,532 $ - $ - $ 12,668
Kellwood Co. 2,149 - 355 20,086
Zurn Industries, Inc. 2,121 - - 15,501
TOTALS $ 6,802 $ - $ 355 $ 48,255
TO CALL FIDELITY

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
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
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 *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan Fund
Real Estate Investment Portfolio
Utilities 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
SEMIANNUAL REPORT
JULY 31, 1996
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 17 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 21 Notes to the financial statements.

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
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.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE

CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND

Utilities Fund -2.72% 12.42% 77.75% 181.15%

S&P 500(registered trademark) 1.77% 16.57% 89.62% 242.70%

S&P Utilities Index -7.52% 12.85% 71.68% 186.14%

Utility Funds Average -2.90% 11.43% 63.79% n/a

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 27, 1987. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Standard & Poor's Utilities Index, an unmanaged index of
49 gas, electric, and telephone stocks that are included in the Standard &
Poor's 500 Index, a widely recognized, unmanaged index of common stocks. To
measure how the fund's performance stacked up against its peers, you can
compare it to the utility funds average, which reflects the performance of
87 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. over the past six months. All three benchmarks reflect
reinvestment of dividends and capital gains, if any, but do not reflect any
sales charges, brokerage commissions, or other costs of investing.

AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Utilities Fund 12.42% 12.19% 12.64%

S&P 500 16.57% 13.65% 15.24%

S&P Utilities Index 12.85% 11.41% 12.87%

Utility Funds Average 11.43% 10.34% 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
IMAHDR PRASUN SHR__CHT 19960731 19960809 153708 S00000000000001
Utilities SP Standard & Poor 500 SP
Utilities
00311 SP001 SP002
1987/11/27 10000.00 10000.00
10000.00
1987/11/30 10000.00 9438.71
9671.16
1987/12/31 10059.80 10157.00
9776.58
1988/01/31 10983.46 10584.61
10908.71
1988/02/29 10873.02 11077.85
10721.08
1988/03/31 10500.30 10735.55
10156.08
1988/04/30 10510.44 10854.71
10170.29
1988/05/31 10946.26 10949.15
10635.08
1988/06/30 11087.51 11451.71
10969.02
1988/07/31 10954.05 11408.20
10985.47
1988/08/31 10902.71 11020.32
10830.58
1988/09/30 11295.53 11489.78
11275.71
1988/10/31 11534.75 11809.20
11568.88
1988/11/30 11451.54 11640.33
11476.33
1988/12/31 11545.15 11844.03
11547.48
1989/01/31 11724.72 12711.02
12203.38
1989/02/28 11502.90 12394.51
11934.91
1989/03/31 11631.17 12683.30
12248.79
1989/04/30 11984.27 13341.57
13014.34
1989/05/31 12562.09 13881.90
13761.37
1989/06/30 12820.04 13802.77
13974.67
1989/07/31 13493.64 15049.17
15089.85
1989/08/31 13352.40 15344.13
14996.29
1989/09/30 13418.39 15281.22
15243.73
1989/10/31 13462.50 14926.69
15300.13
1989/11/30 13892.50 15231.20
15803.50
1989/12/31 14537.88 15596.75
16954.00
1990/01/31 13799.44 14550.21
15582.42
1990/02/28 13834.06 14737.90
15411.01
1990/03/31 13821.87 15128.46
15697.66
1990/04/30 13264.25 14750.25
15088.59
1990/05/31 13904.92 16188.40
16117.63
1990/06/30 13964.05 16078.31
15777.55
1990/07/31 13976.10 16026.86
15728.64
1990/08/31 13265.25 14578.03
14478.21
1990/09/30 13470.07 13868.08
15071.82
1990/10/31 14290.52 13808.45
16054.50
1990/11/30 14608.90 14700.48
16364.35
1990/12/31 14806.40 15110.62
16506.72
1991/01/31 14743.61 15769.44
16003.27
1991/02/28 15271.06 16896.96
16560.18
1991/03/31 15451.99 17305.87
16886.42
1991/04/30 15451.99 17347.40
16616.24
1991/05/31 15451.99 18096.81
16401.89
1991/06/30 15336.59 17267.97
16172.26
1991/07/31 15817.08 18072.66
16667.13
1991/08/31 16206.66 18500.98
17097.14
1991/09/30 16719.56 18192.02
17442.51
1991/10/31 16930.20 18435.79
17786.12
1991/11/30 17061.85 17692.83
17606.48
1991/12/31 17942.75 19716.89
18897.04
1992/01/31 17352.70 19350.15
17889.83
1992/02/29 17285.65 19601.71
17405.01
1992/03/31 17084.76 19219.47
17154.38
1992/04/30 17645.14 19784.52
18259.12
1992/05/31 18000.50 19881.47
18231.73
1992/06/30 18179.36 19585.23
18488.80
1992/07/31 19161.65 20386.27
19949.42
1992/08/31 19189.32 19968.35
19799.80
1992/09/30 19244.82 20203.98
19944.33
1992/10/31 19216.83 20274.69
19754.86
1992/11/30 19398.78 20966.06
19723.25
1992/12/31 19898.62 21223.94
20429.35
1993/01/31 20115.06 21402.22
20743.96
1993/02/28 21182.87 21693.29
22237.52
1993/03/31 21752.84 22151.02
22640.02
1993/04/30 21547.76 21614.97
22162.32
1993/05/31 21606.36 22194.25
22142.37
1993/06/30 22623.26 22258.61
23167.56
1993/07/31 22904.02 22169.58
23686.52
1993/08/31 23953.17 23009.80
24830.58
1993/09/30 23967.59 22832.63
24778.43
1993/10/31 23773.94 23305.26
24733.83
1993/11/30 22790.81 23083.86
23482.30
1993/12/31 23004.26 23363.18
23357.84
1994/01/31 24004.45 24157.53
23537.70
1994/02/28 23019.41 23502.86
22207.82
1994/03/31 22148.45 22478.13
21454.97
1994/04/30 22709.17 22765.85
21984.91
1994/05/31 22304.20 23139.21
21395.72
1994/06/30 22128.34 22572.30
21440.65
1994/07/31 22819.36 23312.67
22167.48
1994/08/31 22992.12 24268.49
22107.63
1994/09/30 22378.03 23673.92
21546.10
1994/10/31 22362.20 24206.58
21733.55
1994/11/30 21649.52 23324.98
21416.24
1994/12/31 21788.06 23670.88
21525.46
1995/01/31 22472.06 24284.67
23204.45
1995/02/28 22789.04 25231.04
23171.96
1995/03/31 22908.51 25975.61
23032.93
1995/04/30 23598.62 26740.59
23869.03
1995/05/31 24137.25 27809.42
24623.29
1995/06/30 24293.97 28455.43
24736.55
1995/07/31 25007.99 29399.01
25354.97
1995/08/31 25552.02 29472.80
25857.00
1995/09/30 26733.12 30716.55
27504.09
1995/10/31 26853.23 30606.90
28147.68
1995/11/30 27539.57 31950.54
28522.05
1995/12/31 28460.30 32565.91
30538.56
1996/01/31 28900.59 33674.45
30938.61
1996/02/29 28143.29 33986.61
29713.44
1996/03/31 27921.74 34313.90
29107.29
1996/04/30 28797.64 34819.69
29421.65
1996/05/31 28744.02 35717.69
29342.21
1996/06/30 29411.49 35853.77
30556.98
1996/07/31 28114.72 34269.75
28613.55
IMATRL PRASUN SHR__CHT 19960731 19960809 153714 R00000000000108

$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Utilities Fund on November 27, 1987, when the fund
started. As the chart shows, by July 31, 1996, the value of the investment
would have grown to $28,115 - a 181.15% increase on the 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 and capital gains, if any,
reinvested, the same $10,000 investment in the S&P 500 would have grown to
$34,270 - a 242.70% increase. A $10,000 investment in the S&P Utilities
Index would have grown to $28,614 - a 186.14% increase.
(checkmark)
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no guarantee of how it will do tomorrow. The
stock market, for example, has a history of growth in the long run and
volatility in the short run. In turn, the share price and return of a fund
that invests in stocks will vary. That means if you sell your shares during
a market downturn, you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
FUND TALK: THE MANAGER'S OVERVIEW

An interview with John Muresianu, Portfolio Manager of Fidelity Utilities
Fund
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. For the six months ended July 31, 1996, the fund had a total return of
- -2.72%. That beat both the -2.90% six-month return for the utility funds
average tracked by Lipper Analytical Services, and the Standard & Poor's
Utilities Index, which posted a -7.52% return for the same period. For the
12 months ended July 31, 1996, the fund posted a 12.42% return, while the
utility funds average returned 11.43%, and the Standard & Poor's Utilities
Index had a total return of 12.85%.
Q. WHAT HELPED THE FUND PERFORM BETTER THAN THE UTILITIES INDEX AND THE
LIPPER AVERAGE OVER THE PAST SIX MONTHS?
A. It came down to two reasons. First and foremost, I'd say individual
stock selection helped. That is, the stocks in the fund tended to perform
better than those stocks in other funds and those stocks included in the
index. Second, it helped that the fund was overweighted in gas utility
stocks compared to both the index and the funds that make up the Lipper
average. While electric and telephone utility stocks struggled, gas utility
stocks tended to post positive performances over the six-month period.
Q. LET'S TALK ABOUT THE INVESTING ENVIRONMENT FOR UTILITY STOCKS OVER THE
PAST SIX MONTHS. WHAT DROVE THE PERFORMANCE OF THE THREE MAIN UTILITY
SECTORS - GAS, ELECTRIC AND TELEPHONE?
A. In general, interest rates and the bond market tend to influence utility
stocks fairly strongly. When bonds do well, so do stocks in the utility
sectors. When bonds falter, utility stocks often do, too. The past six
months have seen a difficult bond market environment. At the beginning of
the year, sentiment in the market reflected the belief that the economy was
slowing, that inflation posed little threat and that - most importantly -
the Federal Reserve Board would continue the reductions in interest rates
it had pursued through much of 1995 and the beginning of 1996. However,
starting in February, statistics indicating stronger-than-expected economic
growth started to change that sentiment. The market reflected the fear that
economic strength would encourage the Fed to increase interest rates
instead. As a result, yields in the bond market rose, bond prices fell and
utility stocks dropped along with bonds. Especially affected were electric
utility stocks, which are historically the highest-yielding utility stocks,
and typically move more in tandem with bonds than gas or telephone stocks.
Q. AT THE SAME TIME, THERE MUST HAVE BEEN OTHER FACTORS THAT AFFECTED THE
INDIVIDUAL UTILITY SECTORS . . .
A. Deregulation remains a major influence on utility companies and their
stocks. The gas, electric and phone sectors all are undergoing some form of
deregulation. One of the main concerns is timing. When will the rules
change within these sectors? Another question is about what the specific
rules will be. In the telephone services sector, for instance, there has
been uncertainty as to the timing and specific rules that will govern the
entry of long distance companies into local service - and of regional Bell
operating companies (RBOCs or Baby Bells) into long distance service. This
uncertainty affected telephone stocks over the period. Gas stocks weren't
as affected by deregulation concerns and bucked the negative trend because
of a sharp increase in the price of natural gas. The increase resulted from
a cold winter and concerns about adequate supplies going forward.
Q. CAN YOU GIVE US AN EXAMPLE OF GAS STOCKS THAT BENEFITED FROM THIS
POSITIVE TREND?
A. Sonat was a particular beneficiary of the higher gas prices because its
exploration and production subsidiary made it the most sensitive to the
price of natural gas. Also, it had remarkable exploratory success during
the period. ENSERCH was another gas stock that did very well. Despite
disappointing results from its exploration and production division offshore
in the Gulf of Mexico, ENSERCH stock did well during the period because the
company sold its distribution and transmission business to Texas Utilities.
Q. TELEPHONE SERVICE STOCKS CONTINUED TO COMPRISE THE LARGEST WEIGHTING AT
THE END OF THE PERIOD. WHY THE CONTINUED INTEREST IN PHONE STOCKS?
A. I continued to concentrate on telephone stocks over gas and electrics
because their growth potential remained the best in the utility sector.
While the pace and structure of deregulation cast a cloud of uncertainty
over the telephone industry, the new telecommunications law enacted early
in the six-month period should create opportunities for growth that surpass
alternatives in the utilities sector. Long distance carriers, cable
operators and the RBOCs will be able to enter each others' business and
compete with one another. RBOCs, specifically, have the potential for
strong earnings growth, because they should be able to enter the long
distance business inexpensively.
Q. WHAT'S YOUR OUTLOOK?
A. It's very difficult to predict the direction of the economy and interest
rates. Witness the past six months, when market sentiment shifted rapidly
from an expectation of economic weakness and falling interest rates to a
fear of rapid economic growth and rising interest rates. While I'll keep an
eye on the economy and interest rates, my strategy will continue to be
based on individual stock picking. I intend to continue to look for those
companies poised to post the best earnings growth. For the moment, it
appears that more of these prospects are in the telephone industry, so I'll
probably continue to favor telephone stocks over gas and electric utility
stocks.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.

TOP TEN STOCKS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

GTE Corp. 4.8 4.3

Ameritech Corp. 4.7 4.1

BellSouth Corp. 4.5 3.8

SBC Communications, Inc. 4.1 4.0

Pacific Telesis Group 4.1 2.5

NYNEX Corp. 4.0 3.9

Bell Atlantic Corp. 3.9 3.7

U.S. West, Inc. 3.7 3.0

AirTouch Communications, Inc. 3.7 2.7

AT&T Corp. 3.7 3.0

TOP UTILITY INDUSTRIES AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE UTILITY
INDUSTRIES
6 MONTHS AGO

Telephone Services 42.0 41.5

Gas 27.5 14.2

Electric Utility 15.7 29.6

ASSET ALLOCATION
AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 **
Row: 1, Col: 1, Value: 4.7
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 45.3
Row: 1, Col: 4, Value: 50.0
Row: 1, Col: 1, Value: 3.7
Row: 1, Col: 2, Value: 2.4
Row: 1, Col: 3, Value: 43.9
Row: 1, Col: 4, Value: 50.0
Stocks 95.3%
Bonds 0.0%
Short-term
investments 4.7%
FOREIGN
INVESTMENTS 2.7%
Stocks 93.9%
Bonds 2.4%
Short-term
investments 3.7%
FOREIGN
INVESTMENTS 14.1%
*
**
INVESTMENTS JULY 31, 1996 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 94.5%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.0%
Harsco Corp. 7,900 $ 468
CONSTRUCTION & REAL ESTATE - 0.1%
CONSTRUCTION - 0.0%
YTL Corp. BHD 117,000 544
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Developers Diversified Realty Corp. 15,100 474
Summit Property Trust 5,800 106
580
TOTAL CONSTRUCTION & REAL ESTATE 1,124
ENERGY - 3.9%
COAL - 0.2%
MAPCO, Inc. 33,400 1,829
INDEPENDENT POWER - 0.0%
Trigen Energy Corp. 24,700 457
OIL & GAS - 3.7%
Coastal Corp. (The) 849,500 31,644
NGC Corp. 506,850 8,237
Norsk Hydro AS ADR 9,000 390
Nuevo Energy Corp. (a) 12,500 384
Occidental Petroleum Corp. 71,200 1,593
Pennzoil Co. 7,500 368
Petroleum Heat & Power, Inc. Class A 144,300 1,028
Petronas Gas BHD 128,000 500
Royal Dutch Petroleum Co. ADR 9,400 1,418
Texaco, Inc. 7,500 638
Total SA Class B 4,700 338
46,538
TOTAL ENERGY 48,824
HOLDING COMPANIES - 1.2%
CINergy Corp. 436,579 12,934
Citicorp Equity Investments SA Class B 157,504 590
Iven SA (a) 3,500,000 1,377
14,901
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
American Superconductor Corp. (a) 9,700 $ 113
MEDIA & LEISURE - 0.0%
BROADCASTING - 0.0%
People's Choice TV Corp. (a) 4,500 61
PRECIOUS METALS - 0.1%
Barrick Gold Corp. 23,200 645
SERVICES - 0.3%
Block (H & R), Inc. 70,900 1,852
Chemed Corp. 72,500 2,646
4,498
TECHNOLOGY - 0.3%
COMMUNICATIONS EQUIPMENT - 0.0%
Ericsson (L.M.) Telephone Co. Class B ADR 17,300 351
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Itron, Inc. (a) 118,800 3,802
TOTAL TECHNOLOGY 4,153
UTILITIES - 88.6%
CELLULAR - 3.8%
AirTouch Communications, Inc. (a) 1,687,700 46,412
Mobile Telecommunications Technologies, Inc. (a) 16,400 199
36O Degrees Communications Co. (a) 41,000 948
Vodafone Group PLC sponsored ADR 9,100 325
47,884
ELECTRIC UTILITY - 15.1%
AES Corp. (a) 243,384 7,758
AES China Generating Co. Class A (a) 15,600 142
Allegheny Power System, Inc. 556,600 16,281
American Electric Power Co., Inc. 405,300 16,820
Boston Edison Co. 50,600 1,145
British Energy PLC (b) 164,700 255
CILCORP, Inc. 199,800 8,342
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
CIPSCO, Inc. 102,300 $ 3,657
CMS Energy Corp. 18,800 571
CMS Energy Corp. Class G 42,100 774
Calenergy, Inc. (a) 27,600 725
Centerior Energy Corp. 31,300 231
Central & South West Corp. 41,400 1,108
Central Hudson Gas & Electric Corp. 53,300 1,586
Central Louisiana Electric Co., Inc. 102,400 2,624
Citizens Utilities Co. Class B 3,456 38
DPL, Inc. 480,400 10,869
DQE, Inc. 223,350 6,114
DTE Energy Co. 48,400 1,392
Dominion Resources, Inc. 29,700 1,117
Eastern Utilities Associates 48,734 774
Edison International 145,300 2,252
Electricidad de Caracas 597,274 440
Electricity Generating PCL (For. Reg.) 30,900 97
Enova Corp. 94,100 1,953
Entergy Corp. 200,561 5,114
Florida Progress Corp. 22,500 754
Hawaiian Electric Industries, Inc. 20,000 695
Houston Industries, Inc. 37,600 851
Hub Power Co. Ltd. GDR (a) 54,900 1,098
IES Industries, Inc. 60,200 1,776
Idaho Power Co. 131,600 3,932
Interstate Power Co. 8,100 249
KU Energy Corp. 63,800 1,866
Kansas City Power & Light Co. 34,100 912
Korea Electric Power Corp. ADR 110,200 2,273
LG&E Energy Corp. 82,400 1,844
Montana Power Co. 55,800 1,179
NIPSCO Industries, Inc. 147,700 5,520
National Power PLC (b) 121,100 745
New England Electric System 4,400 139
New York State Electric & Gas Corp. 94,700 2,048
Niagara Mohawk Power Corp. 638,100 4,626
Northeast Utilities 9,400 116
Northern States Power Co. 7,700 345
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Oklahoma Gas & Electric Co. 18,800 $ 738
Pacific Gas & Electric Co. 147,500 2,913
PacifiCorp. 325,600 6,797
Pinnacle West Capital Corp. 215,800 6,096
Portland General Corp. 219,800 7,803
Powergen PLC Ord. 130,800 980
Public Service Co. of Colorado 278,175 9,840
Public Service Co. of New Mexico 461,200 9,166
Rochester Gas & Electric Corp. 22,800 442
SCANA Corp. 7,700 199
Sierra Pacific Resources 9,700 244
Southern Co. 161,600 3,656
TECO Energy, Inc. 7,700 179
Tucson Electric Power Co. (a) 54,420 775
Unicom Corp. 20,000 470
Union Electric Co. 63,900 2,404
United Illuminating Co. 46,100 1,642
Utilicorp United, Inc. 101,231 2,721
Veba AG Ord. 193,700 9,860
Wisconsin Energy Corp. 16,000 426
190,498
GAS - 27.5%
AGL Resources, Inc. 37,000 675
Aquila Gas Pipeline Corp. 34,200 432
Bay State Gas Co. 5,100 136
British Gas PLC ADR 10,400 316
Brooklyn Union Gas Co. (The) 354,900 8,872
Colonial Gas Co. 10,000 215
Columbia Gas System, Inc. (The) 376,500 20,190
Connecticut Energy Corp. 400 8
Consolidated Natural Gas Co. 575,300 28,981
ENSERCH Corp. 704,400 13,912
Eastern Enterprises Co. 144,600 4,645
El Paso Natural Gas Co. 333,500 13,006
Energen Corp. 79,600 1,801
Enron Corp. 1,048,700 41,293
Enron Global Power & Pipelines 82,100 2,063
Equitable Resources, Inc. 45,600 1,157
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - CONTINUED
KN Energy, Inc. 349,900 $ 11,284
MCN Corp. 752,000 17,672
MDU Resources Group, Inc. 57,650 1,218
NICOR, Inc. 286,500 8,129
National Fuel Gas Co. 83,300 2,811
New Jersey Resources Corp. 500 14
Noram Energy Corp. 1,914,400 20,819
Northwest Natural Gas Co. 5,300 184
ONEOK, Inc. 217,900 5,747
Pacific Enterprises 682,400 20,046
Panenergy Corp. 644,900 20,476
Peoples Energy Corp. 100,000 3,112
Public Service Co. of North Carolina, Inc. 1,800 30
Questar Corp. 374,600 11,800
Sonat, Inc. 1,023,500 43,627
Southern Union Co. (a) 38,861 831
TPC Corp. (a) 317,500 2,103
Tejas Gas Corp. (a) 163,795 5,385
UGI Corp. 176,183 3,920
USX-Delhi Group 220,700 2,621
WICOR, Inc. 93,600 3,229
Washington Gas Light Co. 133,100 2,778
Western Resources, Inc. 10,600 303
Williams Companies, Inc. 401,700 18,428
Yankee Energy System, Inc. 57,500 1,279
345,548
TELEPHONE SERVICES - 41.9%
ALLTEL Corp. 217,900 5,965
AT&T Corp. 885,500 46,157
Ameritech Corp. 1,075,000 59,662
BCE, Inc. 205,300 8,198
Bell Atlantic Corp. 840,400 49,689
BellSouth Corp. 1,373,100 56,297
Cincinnati Bell, Inc. 7,500 365
Frontier Corp. 292,500 8,227
GTE Corp. 1,451,800 59,887
Hong Kong Telecommunication Ltd. ADR 75,700 1,249
Indosat (Indonesia Satellite) sponsored ADR 13,100 400
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
LCI International, Inc. (a) 129,800 $ 3,926
MCI Communications Corp. 76,400 1,881
NYNEX Corp. 1,132,500 50,821
Pacific Telesis Group 1,537,800 51,708
SBC Communications, Inc. 1,061,100 51,861
Sprint Corp. 208,000 7,618
Telecom Italia Mobile Spa 338,500 704
Telekomunikasiindo (Persero) PT, Series B sponsored ADR 12,100 327
Telepar PN 311,200 142
Telesp PN (Pfd. Reg.) 1,790,000 353
U.S. West, Inc. 1,528,624 46,432
U.S. West, Inc. (Media Group) (a) 796,824 13,745
WorldCom, Inc. (a) 38,600 999
526,613
WATER - 0.3%
American Water Works, Inc. 191,014 3,796
E Town Corp. 18,700 519
4,315
TOTAL UTILITIES 1,114,858
TOTAL COMMON STOCKS
(Cost $996,950) 1,189,645
PREFERRED STOCKS - 0.8%
CONVERTIBLE PREFERRED STOCKS - 0.7%
BASIC INDUSTRIES - 0.1%
METALS & MINING - 0.1%
Cyprus Amax Minerals Co., Series A, $4.00 18,733 984
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Kenetech Corp. 8 1/4% 49,000 21
UTILITIES - 0.6%
ELECTRIC UTILITY - 0.6%
Citizens Utilities Trust $2.50 160,000 7,540
TOTAL CONVERTIBLE PREFERRED STOCKS 8,545
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONCONVERTIBLE PREFERRED STOCKS - 0.1%
UTILITIES - 0.1%
TELEPHONE SERVICES - 0.1%
GTE North, Inc. $7.60 6,800 $ 686
TOTAL PREFERRED STOCKS
(Cost $10,408) 9,231
REPURCHASE AGREEMENTS - 4.7%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 5.65%,
dated 7/31/96 due 8/1/96 $ 59,390 59,381
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,066,739) $ 1,258,257
LEGEND
1. Non-income producing
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $1,000,000 or 0.1% of net
assets.
INCOME TAX INFORMATION
At July 31, 1996, the aggregate cost of investment securities for income
tax purposes was $1,068,817,000. Net unrealized appreciation aggregated
$189,440,000, of which $215,811,000 related to appreciated investment
securities and $26,371,000 related to depreciated investment securities.
On December 31, 1991, the fund acquired substantially all of the assets of
the 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 which approximately $15,395,000 (subject to certain
limitations) is available to offset future capital gains in Fidelity
Utilities Fund, to the extent provided by regulations.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
(EXCEPT PER-SHARE AMOUNT) JULY 31, 1996 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 1,258,257
agreements of $59,381) (cost $1,066,739) -
See accompanying schedule

Receivable for investments sold 4,512

Receivable for fund shares sold 983

Dividends receivable 8,109

Other receivables 1

TOTAL ASSETS 1,271,862

LIABILITIES

Payable to custodian bank $ 79

Payable for investments purchased 27,170

Payable for fund shares redeemed 2,691

Accrued management fee 538

Other payables and accrued expenses 384

Collateral on securities loaned, at value 2,318

TOTAL LIABILITIES 33,180

NET ASSETS $ 1,238,682

Net Assets consist of:

Paid in capital $ 1,010,276

Undistributed net investment income 6,901

Accumulated undistributed net realized gain (loss) on 30,017
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 191,488
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 79,353 shares outstanding $ 1,238,682

NET ASSET VALUE, offering price and redemption price $15.61
per share ($1,238,682 (divided by) 79,353 shares)

</TABLE>

STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JULY
31, 1996 (UNAUDITED)

INVESTMENT INCOME $ 27,792
Dividends

Interest (including income on securities loaned of $30) 989

TOTAL INCOME 28,781

EXPENSES

Management fee $ 3,468
Basic fee

Performance adjustment (193)

Transfer agent fees 1,558

Accounting and security lending fees 285

Non-interested trustees' compensation 3

Custodian fees and expenses 113

Registration fees 61

Audit 27

Legal 6

Miscellaneous 1

Total expenses before reductions 5,329

Expense reductions (235) 5,094

NET INVESTMENT INCOME 23,687

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 35,039

Foreign currency transactions (159) 34,880

Change in net unrealized appreciation (depreciation) (99,103)
on investment securities

NET GAIN (LOSS) (64,223)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (40,536)
FROM OPERATIONS

STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED JANUARY 31,
JULY 31, 1996 1996
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 23,687 $ 48,708
Net investment income

Net realized gain (loss) 34,880 47,352

Change in net unrealized appreciation (depreciation) (99,103) 236,747

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (40,536) 332,807
FROM OPERATIONS

Distributions to shareholders (20,539) (47,222)
From net investment income

From net realized gain (9,883) (25,123)

TOTAL DISTRIBUTIONS (30,422) (72,345)

Share transactions 321,974 1,087,869
Net proceeds from sales of shares

Reinvestment of distributions 27,231 64,451

Cost of shares redeemed (585,776) (1,037,753)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (236,571) 114,567
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS (307,529) 375,029

NET ASSETS

Beginning of period 1,546,211 1,171,182

End of period (including undistributed net investment $ 1,238,682 $ 1,546,211
income of $6,901 and $3,753, respectively)

OTHER INFORMATION
Shares

Sold 20,010 73,284

Issued in reinvestment of distributions 1,756 4,287

Redeemed (36,663) (70,298)

Net increase (decrease) (14,897) 7,273

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED JANUARY 31,
ENDED
JULY 31, 1996

(UNAUDITED) 1996 1995 1994 D 1993 1992

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA

Net asset value, $ 16.41 $ 13.47 $ 15.84 $ 13.94 $ 12.94 $ 11.74
beginning of period

Income from Investment
Operations

Net investment income .29 .54 .55 .50 .61 .63

Net realized and (.74) 3.22 (1.58) 2.14 1.37 1.38
unrealized gain (loss)

Total from investment (.45) 3.76 (1.03) 2.64 1.98 2.01
operations

Less Distributions

From net investment (.24) (.54) (.54) (.52) (.60) (.63)
income

From net realized gain (.11) (.28) (.68) (.22) (.38) (.18)

In excess of net - - (.12) - - -
realized gain

Total distributions (.35) (.82) (1.34) (.74) (.98) (.81)

Net asset value, $ 15.61 $ 16.41 $ 13.47 $ 15.84 $ 13.94 $ 12.94
end of period

TOTAL RETURN B, C (2.72)% 28.61% (6.38) 19.34% 15.92% 17.70%
%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 1,239 $ 1,546 $ 1,171 $ 1,456 $ 1,002 $ 647
(in millions)

Ratio of expenses to .79% A .80% .88% .87% .87% .95%
average net assets

Ratio of expenses to .75% A .77% .87% .86% .87% .95%
average net assets , E E E E
after expense
reductions

Ratio of net investment 3.49% A 3.69% 3.87% 3.39% 4.57% 5.11%
income to average net
assets

Portfolio turnover rate 77% A 98% 98% 47% 73% 39%

Average commission $ .0025
rate F

</TABLE>

A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
D EFFECTIVE FEBRUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY
TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD
TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN
VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY
DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1996 (Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Utilities 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 financial statements have been prepared
in conformity with generally accepted accounting principles which permit
management to make certain estimates and assumptions at the date of the
financial statements. 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.
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 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 substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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 litigation
proceeds, foreign currency transactions, non-taxable dividends,
partnerships, 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 the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions 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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR),
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 for U.S. Treasury
or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $512,530,000 and $760,619,000, respectively, of which U.S.
government and government agency obligations aggregated $0 and $23,928,000,
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 .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
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. For the period,
the management fee was equivalent to an annualized rate of .48% of average
net assets after the performance adjustment.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
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. For the
period, the transfer agent fees were equivalent to an annualized rate of
.23% of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting
records and administers the security lending program. The security lending
fee is based
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING AND SECURITY LENDING FEES - CONTINUED
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 $242,000 for the period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, the value of the
securities loaned and the value of collateral amounted to $2,277,000 and
$2,318,000, respectively.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$225,000 under this arrangement.
In addition, the fund has entered into an arrangement with its transfer
agent whereby interest earned on uninvested cash balances was used to
offset a portion of the fund's expenses. During the period, the fund's
transfer agent fees were reduced by $10,000 under this arrangement.
TO CALL 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
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, 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
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
56 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
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, 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
2701 Drexel Drive
Houston, TX
1010 Lamar Street
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
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI

TO WRITE FIDELITY

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc., London, Enland
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
William J. Hayes, Vice President
John M. Muresianu, Vice President
Kenneth A. Rathgeber, 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 *
ADVISORY BOARD
William O. McCoy
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