FIDELITY DEVONSHIRE TRUST, N-30D, 1997-09-25

FIDELITY DEVONSHIRE TRUST
N-30D, 1997-09-25

Previous: FBL SERIES FUND INC, NSAR-B, 1997-09-25

Next: FIDELITY MUNICIPAL TRUST, 497, 1997-09-25

FIDELITY

(REGISTERED TRADEMARK)
UTILITIES
FUND
SEMIANNUAL REPORT
JULY 31, 1997
CONTENTS

PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 6 The managers' review of fund
performance, strategy and outlook.

INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.

INVESTMENTS 10 A complete list of the fund's
investments with their market
values.

FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 22 Notes to the financial statements.

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.

(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
Through the first seven months of 1997, stock and bond markets experienced
the kind of short-term volatility that can affect them periodically. The
stock market rebounded strongly from its early spring correction to
continue on its record-setting pace, as seen by the roughly 30%
year-to-date gain by the Standard & Poor's 500 Index. The bond market
posted moderate returns over the past seven months, as positive news on the
inflation front helped soften the effects of a hike in short-term interest
rates by the Federal Reserve Board in late March.
While it's impossible to predict the future direction of the markets with
any degree of certainty, there are certain basic principles that can help
investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will greatly
reduce your vulnerability to any single decline. We know from experience,
for example, that stock prices have gone up over longer periods of time,
have significantly outperformed other types of investments and have stayed
ahead of inflation.
Second, you can further manage your investing risk through diversification.
A stock mutual fund, for instance, is already diversified, because it
invests in many different companies. You can increase your diversification
further by investing in a number of different stock funds, or in such other
investment categories 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, it's important to
remember that there is no assurance that a money market fund will achieve
its goal of maintaining a stable net asset value of $1.00 per share, and
that these types of funds are neither insured nor guaranteed by any agency
of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it makes
good sense to follow a regular investment plan, investing a certain amount
of money in a fund at the same time each month or quarter and periodically
reviewing your overall portfolio. By doing so, you won't get caught up in
the excitement of a rapidly rising market, nor will you buy all your shares
at market highs. While this strategy - known as dollar cost averaging -
won't assure a profit or protect you from a loss in a declining market, it
should help you lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are available
24 hours a day, seven days a week to provide you 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. Total return
reflects
the change in the value of an investment, assuming reinvestment of the
fund's dividend income and capital gains (the profits earned upon the sale
of securities that have grown in value).

CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1997 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND

Fidelity Utilities Fund 9.55% 26.95% 86.26% 256.91%

S&P 500(registered trademark) 22.55% 52.14% 155.75% 421.37%

S&P Utilities Index 4.00% 15.00% 64.99% 229.15%

Utility Funds Average 8.36% 22.50% 72.03% n/a

CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years or since
the fund started on November 27, 1987. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, 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 40 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
mutual funds with similar objectives tracked by Lipper Analytical Services,
Inc. The past six months average represents a peer group of 99 mutual
funds. These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.

AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1997 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND

Fidelity Utilities Fund 26.95% 13.25% 14.04%

S&P 500 52.14% 20.66% 18.59%

S&P Utilities Index 15.00% 10.53% 13.09%

Utility Funds Average 22.50% 11.36% n/a

$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19970731 19970808 094855 S00000000000001
Utilities S&P 500 S&P
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
28622.72
1996/08/31 28528.97 34992.50
29220.93
1996/09/30 28850.88 36961.88
29580.35
1996/10/31 29957.73 37981.29
30982.46
1996/11/30 31554.51 40852.30
31629.99
1996/12/31 31715.71 40043.01
31433.89
1997/01/31 32578.47 42544.90
31647.64
1997/02/28 32672.24 42878.45
31346.99
1997/03/31 31301.55 41116.58
30400.31
1997/04/30 32102.20 43571.24
29935.18
1997/05/31 33779.75 46223.85
31198.45
1997/06/30 34597.57 48294.68
32174.96
1997/07/31 35691.34 52137.49
32914.98
IMATRL PRASUN SHR__CHT 19970731 19970808 094858 R00000000000120
$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, 1997, the value of the investment
would have grown to $35,691 - a 256.91% 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
$52,137 - a 421.37% increase. If $10,000 was put in the S&P Utilities
Index, it would have grown to $32,915 - a 229.15% 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
long-term growth and
short-term volatility. 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 MANAGERS' OVERVIEW

NOTE TO SHAREHOLDERS: On August 18, 1997, Nick Thakore (right) became
Portfolio Manager of Fidelity Utilities Fund. The following is an interview
with John Muresianu (left), who managed the fund during the period covered
by this report, with comments from Nick Thakore on his outlook and
investment approach.
Q. JOHN, HOW DID THE FUND PERFORM?
J.M. The fund did pretty well. For the six months that ended July 31, 1997,
the fund had a total return of 9.55%. That beat both the 8.36% six-month
return for the utility funds average tracked by Lipper Analytical Services,
and the Standard & Poor's Utilities Index, which returned 4.00% over the
same period. For the 12 months that ended July 31, 1997, the fund posted a
26.95% return, while the utility funds average returned 22.50% and the S&P
Utilities Index had a return of 15.00%.
Q. WHAT HELPED THE FUND PERFORM BETTER THAN THE AVERAGE AND THE INDEX OVER
THE PAST SIX MONTHS?
J.M. The fund benefited from two factors. First, it had more invested in
telephone and gas utility stocks than both the average and the index. Over
the course of the past six months, telephone utility stocks performed the
best among the three industries, with gas stocks performing second best and
electric utility stocks lagging the other two industries. Second, the
fund's stock selection within each of the industries proved to have a
positive effect on performance as well.
Q. WHAT HELPED TELEPHONE STOCKS PERFORM THE BEST WITHIN THE UTILITY SECTOR?
J.M. In general, telephone companies posted the best earnings growth, even
though there was some concern about future competition due to deregulation.
Gas companies, on the other hand, after performing quite well in 1995 and
1996, were hurt by weaker-than-expected natural gas prices due to
unexpectedly mild weather. Nevertheless, the price of natural gas did not
fall to levels that would have caused major problems, and the expectation
of industry consolidation helped sustain stock prices somewhat. Stocks in
the electric utility industry were stalled by three factors. First, these
stocks tend to trade in concert with bonds. Because of an uncertain
interest-rate backdrop, the bond market proved to be fairly volatile, and
that affected electric utility stocks. Second, the Nuclear Regulatory
Commission has put pressure on many electric utilities. As a result,
operating costs have increased for most utilities with nuclear power
plants. Finally, earnings suffered due to the mild weather over the period.
Q. ELECTRIC UTILITY STOCKS LAGGED THE PHONE AND GAS UTILITIES, YET YOU
INCREASED THE FUND'S INVESTMENTS IN THE ELECTRICS. WHY WAS THAT?
J.M. In my judgment, selected electric utility stocks were oversold and
became too cheap to ignore. I took profits by selling stocks in other areas
to replace them with a higher weighting in these attractive electric
stocks.
Q. DEREGULATION IS CURRENTLY ONE OF THE MOST IMPORTANT ISSUES IN THE
UTILITY INDUSTRY. WERE THERE ANY DEVELOPMENTS OF NOTE OVER THE PERIOD?
J.M. There were many developments, but no watershed event. Deregulation is
quite complicated, and there is a fair amount of uncertainty over what the
final product of this continually evolving process will look like.
Q. WHAT WERE SOME OF THE FUND'S STRONGER-PERFORMING STOCKS OVER THE PERIOD?
J.M. WorldCom was one of the fund's top performers. It posted very strong
earnings growth as it consistently beat expectations. AirTouch
Communications also proved to be a positive contributor, turning around its
earnings more than the market expected. It was helped by strong domestic
and international subscriber additions for its wireless communications
services. Sprint also did well, as many investors anticipated that the
company would be acquired.
Q. HOW ABOUT DISAPPOINTMENTS?
J.M. Enron Corp. was hurt by declining natural gas prices and disappointing
earnings from its pipeline and trading operations. Sonat also disappointed,
as it is one of the gas companies most sensitive to changes in natural gas
prices.
Q. TURNING TO YOU, NICK, WHAT'S YOUR OUTLOOK?
N.T. Deregulation - in all of the utilities industries, but especially in
the telephones - should lead to tremendous changes in the competitive
landscape. My goal will be to find the companies that will be the net
beneficiaries of this competition and that show superior earnings growth
relative to their group. In the past, there hasn't been much of a
difference among many of the stocks in the sector, but we're entering an
era where the differences should become much more dramatic. With the sector
going through such significant changes, it will be important to
differentiate between the winners and the losers. There are two main themes
I intend to pursue. First, I'll focus on newer companies because I believe
existing companies with large market share will be more vulnerable to the
effects of deregulation than new entrants. Second, I'll look for those
companies that are likely to be acquired in what should be a consolidating
industry.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS'
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT
AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY
TIME BASED ON MARKET AND OTHER CONDITIONS.

FUND FACTS
GOAL: to seek a high total
return through a
combination of current
income and capital
appreciation
FUND NUMBER: 311
TRADING SYMBOL: FIUIX
START DATE: November 27,
1987
SIZE: as of July 31, 1997,
more than $1.2 billion
MANAGER: Nick Thakore,
since August 1997; manager,
Fidelity Select
Telecommunications
Portfolio, since 1996; Fidelity
Select Utilities Growth
Portfolio and Fidelity
Advisor Utilities Growth
Fund, since August 1997;
joined Fidelity in 1993
(checkmark)
NICK THAKORE ON HIS
INVESTMENT APPROACH:
"I'm a bottom-up stock picker,
looking at the merits of
individual stocks rather than
trying to make bets on sectors
or economic trends. When
looking for stocks for the fund,
I generally will try to find
companies that offer the best
growth prospects relative to
their valuations. In the utilities
sector that is changing so
rapidly, it's very important to
try to identify and invest in the
companies that are going to
meet or exceed expectations,
and to avoid those that are
not. In general, though, I'm
focused on companies that
can maintain strong earnings
growth, and that are
attractively valued relative to
that growth."
INVESTMENT CHANGES

TOP TEN STOCKS AS OF JULY 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

SBC Communications, Inc. 4.5 3.8

GTE Corp. 4.4 4.5

Ameritech Corp. 3.4 4.2

U S WEST Communications Group 3.4 2.8

BellSouth Corp. 3.3 3.9

AirTouch Communications, Inc. 3.2 3.2

WorldCom, Inc. 3.0 2.6

Sprint Corp. 2.3 2.2

Niagara Mohawk Power Corp. 2.1 0.6

Bell Atlantic Corp. 2.1 3.1

TOP UTILITY INDUSTRIES AS OF JULY 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE UTILITY
INDUSTRIES
6 MONTHS AGO

Telephone Services 36.5 42.8

Electric Utility 30.1 18.1

Gas 21.6 26.6

ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1997 * AS OF JANUARY 31, 1997 **
Row: 1, Col: 1, Value: 2.5
Row: 1, Col: 2, Value: 49.0
Row: 1, Col: 3, Value: 48.5
Stocks 99.0%
Short-term
investments 1.0%
FOREIGN
INVESTMENTS 1.5%
Stocks 98.5%
Short-term
investments 1.5%
FOREIGN
INVESTMENTS 3.1%
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 49.0
Row: 1, Col: 3, Value: 49.0
*
**
INVESTMENTS JULY 31, 1997 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 98.0%
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - 0.0%
METALS & MINING - 0.0%
Harsco Corp. 12,700 $ 564
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE - 0.0%
Echelon International Corp. (a) 1,179 25
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Developers Diversified Realty Corp. 12,100 478
TOTAL CONSTRUCTION & REAL ESTATE 503
DURABLES - 0.7%
AUTOS, TIRES, & ACCESSORIES - 0.7%
AutoZone, Inc. (a) 900 26
NGC Corp. 589,250 9,538
9,564
ENERGY - 2.1%
COAL - 0.1%
MAPCO, Inc. 55,700 1,723
INDEPENDENT POWER - 0.0%
Trigen Energy Corp. 20,200 452
OIL & GAS - 2.0%
Burlington Resources, Inc. 42,200 1,994
Coastal Corp. (The) 346,900 18,863
Nuevo Energy Corp. (a) 10,400 445
Occidental Petroleum Corp. 32,300 810
Pennzoil Co. 6,200 484
Petroleum Heat & Power, Inc. Class A 118,700 356
Royal Dutch Petroleum Co. 20,400 1,141
Texaco, Inc. 6,200 720
Total SA Class B 4,100 411
25,224
TOTAL ENERGY 27,399
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
ATS Medical, Inc. (a) 4,700 $ 28
Cardima, Inc. 100 1
Endocardial Solutions, Inc. 9,500 122
Endosonics Corp. (a) 1,000 13
Endovascular Technologies, Inc. (a) 3,000 32
Heartstream, Inc. (a) 2,900 25
Micro Therapeutics, Inc. 9,500 45
Nitinol Medical Technologies, Inc. 20,000 325
OEC Medical Systems, Inc. (a) 900 15
St. Jude Medical, Inc. (a) 3,750 153
Vista Medical Technologies, Inc. 1,300 12
World Heart Corp. (a) 900 3
774
MEDICAL FACILITIES MANAGEMENT - 0.0%
Cambridge Heart, Inc. 12,000 91
TOTAL HEALTH 865
HOLDING COMPANIES - 1.3%
CEI Citicorp Holdings SA Class B 144,104 1,078
CINergy Corp. 384,779 12,938
Iven SA 3,200,000 2,187
16,203
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
American Superconductor Corp. (a) 27,400 281
Roper Industries, Inc. 900 50
Westinghouse Electric Corp. 56,700 1,364
1,695
MEDIA & LEISURE - 0.7%
BROADCASTING - 0.7%
Smartalk Teleservices, Inc. (a) 7,700 137
TCI Group Class A 499,000 8,545
TCI Satellite Entertainment, Inc. Class A (a) 49,900 340
9,022
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
PRECIOUS METALS - 0.2%
Barrick Gold Corp. 69,400 $ 1,586
Newmont Mining Corp. 32,500 1,341
2,927
SERVICES - 0.1%
Chemed Corp. 33,300 1,240
Hagler Bailly, Inc. 800 16
1,256
TECHNOLOGY - 0.8%
COMMUNICATIONS EQUIPMENT - 0.4%
Alcatel Alsthom Compagnie Generale d'Electricite SA 33,200 4,333
Alcatel Alsthom Compagnie Generale d'Electricite SA
sponsored ADR 50,000 1,350
Lucent Technologies, Inc. 200 17
5,700
COMPUTER SERVICES & SOFTWARE - 0.1%
NCR Corp. (a) 29,650 951
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Itron, Inc. (a) 140,100 3,345
TOTAL TECHNOLOGY 9,996
UTILITIES - 91.9%
CELLULAR - 3.6%
AirTouch Communications, Inc. (a) 1,255,500 41,353
Cellnet Data Systems, Inc. (a) 45,100 558
Mobile Telecommunications Technologies, Inc. (a) 13,300 178
Nextel Communications, Inc. Class A 100,000 2,413
360 Degrees Communications Co. (a) 87,600 1,615
46,117
ELECTRIC UTILITY - 29.6%
AES Corp. (a) 247,454 19,549
Allegheny Power System, Inc. 634,400 18,596
American Electric Power Co., Inc. 418,300 18,719
Baltimore Gas & Electric Co. 39,000 1,085
Boston Edison Co. 116,800 3,285
CILCORP, Inc. 183,900 7,712
CIPSCO, Inc. 114,700 4,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
CMS Energy Corp. 100,000 $ 3,700
CMS Energy Corp. Class G 35,100 700
Calenergy, Inc. (a) 22,300 899
Carolina Power & Light Co. 28,500 1,015
Centerior Energy Corp. 119,000 1,346
Central & South West Corp. 246,400 4,943
Central Hudson Gas & Electric Corp. 47,100 1,563
Central Louisiana Electric Co., Inc. 90,300 2,427
Central Maine Power Co. 185,100 2,499
Citizens Utilities Co. Class B 2,856 24
Consolidated Edison Co. of New York, Inc. 520,000 16,445
DQE, Inc. 218,850 6,907
DPL, Inc. 410,100 10,099
DTE Energy Co. 120,000 3,593
Dominion Resources, Inc. 36,800 1,352
Duke Power Co. 525,593 26,641
Eastern Utilities Associates 9,500 183
Edison International 345,200 8,716
Electricity Generating PCL (For. Reg.) 26,800 79
Energy Group PLC 50,000 534
Energy Group PLC sponsored ADR 300,000 12,788
Enova Corp. 75,900 1,841
Entergy Corp. 345,961 9,449
FPL Group, Inc. 100,000 4,788
Florida Progress Corp. 10,000 322
GPU, Inc. 60,000 2,081
Hawaiian Electric Industries, Inc. 35,000 1,304
Houston Industries, Inc. 299,500 6,271
IES Industries, Inc. 50,700 1,553
Idaho Power Co. 116,100 3,766
Interstate Power Co. 6,500 195
KU Energy Corp. 66,300 2,267
Kansas City Power & Light Co. 28,400 838
Korea Electric Power Corp. sponsored ADR 91,800 1,698
LG&E Energy Corp. 62,700 1,368
Midamerican Energy Holdings Co. 9,500 164
Montana Power Co. 46,500 1,101
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
NIPSCO Industries, Inc. 145,100 $ 6,112
National Grid Co. PLC 308,500 1,306
Nevada Power Co. 50,000 1,087
New England Electric System 39,300 1,466
New York State Electric & Gas Corp. 164,800 4,141
Niagara Mohawk Power Corp. (a) 2,921,500 27,206
Northeast Utilities 550,700 5,369
Northern States Power Co. 6,300 324
OGE Energy Corp. 16,600 759
Ohio Edison Co. 164,200 3,653
PECO Energy Co. 688,400 16,177
PG&E Corp. 526,800 13,071
PP&L Resources, Inc. 29,200 597
PacifiCorp. 643,900 14,367
Pinnacle West Capital Corp. 128,300 4,049
Potomac Electric Power Co. 259,100 5,781
Public Service Co. of Colorado 228,775 9,523
Public Service Co. of New Mexico 434,800 8,044
Public Service Enterprise Group, Inc. 29,000 718
Puget Sound Power & Light Co. 98,700 2,634
Rochester Gas & Electric Corp. 28,500 691
SCANA Corp. 6,300 157
Sierra Pacific Resources 7,900 252
Southern Co. 244,300 5,359
Southern Electric PLC 79,300 582
TECO Energy, Inc. 6,300 160
TNP Enterprises, Inc. 17,700 434
Texas Utilities Co. 137,400 4,869
Tucson Electric Power Co. (a) 431,120 7,221
Unicom Corp. 400,300 9,082
Union Electric Co. 51,500 1,983
United Illuminating Co. 39,400 1,362
Utilicorp United, Inc. 110,453 3,293
WPL Holdings, Inc. 38,700 1,069
WPS Resources Corp. 25,000 702
Wisconsin Energy Corp. 42,400 1,084
383,433
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - 21.6%
AGL Resources, Inc. 30,800 $ 645
Aquila Gas Pipeline Corp. 37,200 488
Bay State Gas Co. 4,500 122
Brooklyn Union Gas Co. (The) 309,800 9,313
Colonial Gas Co. 8,400 178
Columbia Gas System, Inc. (The) 247,200 16,995
Connecticut Energy Corp. 400 9
Consolidated Natural Gas Co. 323,200 18,705
Eastern Enterprises Co. 397,800 14,246
El Paso Natural Gas Co. 336,600 19,460
Energen Corp. 275,100 9,972
Enron Corp. 370,371 14,051
Enron Global Power & Pipelines 68,400 2,270
ENSERCH Corp. 303,500 6,753
Equitable Resources, Inc. 38,000 1,133
K N Energy, Inc. 323,500 13,587
MCN Corp. 618,100 19,586
MDU Resources Group, Inc. 48,050 1,141
National Fuel Gas Co. 69,400 2,949
New Jersey Resources Corp. 500 16
NICOR, Inc. 224,100 8,208
Noram Energy Corp. 1,205,237 19,284
Northwest Natural Gas Co. 15,800 411
ONEOK, Inc. 338,705 11,855
Pacific Enterprises 416,300 13,920
Peoples Energy Corp. 83,300 3,197
Public Service Co. of North Carolina, Inc. 1,400 28
Questar Corp. 328,200 13,436
Sonat, Inc. 400,700 19,985
Southern Union Co. 34,069 788
Tejas Gas Corp. (a) 151,595 6,736
UGI Corp. 155,483 3,829
USX-Delhi Group 194,800 2,447
WICOR, Inc. 81,200 3,258
Washington Gas Light Co. 117,500 3,055
Western Resources, Inc. 8,500 294
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - CONTINUED
Williams Companies, Inc. 349,350 $ 15,983
Yankee Energy System, Inc. 47,900 1,150
279,483
TELEPHONE SERVICES - 36.5%
AT&T Corp. 610,000 22,456
ALLTEL Corp. 186,000 6,115
Ameritech Corp. 651,600 43,942
BCE, Inc. 41,000 1,248
Bell Atlantic Corp. 369,100 26,783
BellSouth Corp. 902,500 42,756
Brooks Fiber Properties, Inc. (a) 135,200 5,087
Cincinnati Bell, Inc. 70,200 2,106
Frontier Corp. 194,100 4,003
GTE Corp. 1,225,100 56,967
Indosat (Indonesia Satellite) sponsored ADR 10,900 339
LCI International, Inc. (a) 131,200 2,616
MCI Communications Corp. 511,100 18,048
McLeodUSA, Inc. Class A (a) 37,000 1,272
NYNEX Corp. 477,900 26,493
Qwest Communications International, Inc. 1,900 59
SBC Communications, Inc. 993,571 58,807
Sprint Corp. 600,700 29,735
Tel-Save Holdings, Inc. (a) 397,100 6,751
Telecom Italia Mobile Spa 282,100 957
Telefonica de Espana SA sponsored ADR 82,800 6,520
Telekomunikasiindo (Persero) PT, Series B sponsored ADR 10,100 309
Teleport Communications Group, Inc. Class A (a) 255,000 10,041
U S WEST Communications Group 1,186,924 43,397
U S WEST Media Group (a) 677,124 14,939
Winstar Communications, Inc. (a) 73,100 1,229
WorldCom, Inc. (a) 1,127,380 39,388
472,363
WATER - 0.6%
American Water Works, Inc. 270,157 5,859
E Town Corp. 15,200 488
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
WATER - CONTINUED
Severn Trent PLC Ord. 59,900 $ 850
Yorkshire Water PLC 100,800 739
7,936
TOTAL UTILITIES 1,189,332
TOTAL COMMON STOCKS
(Cost $902,790) 1,269,326
CONVERTIBLE PREFERRED STOCKS - 0.5%
UTILITIES - 0.5%
ELECTRIC UTILITY - 0.5%
Citizens Utilities Trust $2.50 141,300 6,137
Kenetech Corp. 8 1/4% (a) 41,700 68
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $7,909) 6,205
CASH EQUIVALENTS - 1.5%
Taxable Central Cash Fund (b)
(Cost $19,152) 19,151,565 19,152
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $929,851) $ 1,294,683
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund was
5.66%. The yield refers to the income earned by investing in the fund over
the seven-day period, expressed as an annual percentage.
INCOME TAX INFORMATION
At July 31, 1997, the aggregate cost of investment securities for income
tax purposes was $931,677,000. Net unrealized appreciation aggregated
$363,006,000, of which $372,579,000 related to appreciated investment
securities and $9,573,000 related to depreciated investment securities.
On December 31, 1991, the fund acquired substantially all of the assets of
Fidelity Corporate Trust: Adjustable Rate Preferred Portfolio. At the time
of the merger, Fidelity Corporate Trust: Adjustable Rate Preferred
Portfolio had a capital loss carryforward, of which approximately
$6,518,000 is still available to offset future gains of the fund, to the
extent provided by regulations.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1997 (UNAUDITED)

ASSETS

Investment in securities, at value (cost $929,851) - $ 1,294,683
See accompanying schedule

Receivable for investments sold 1,029

Receivable for fund shares sold 5,420

Dividends receivable 4,803

Interest receivable 84

Other receivables 2

TOTAL ASSETS 1,306,021

LIABILITIES

Payable for investments purchased $ 4,579

Payable for fund shares redeemed 10,069

Accrued management fee 690

Other payables and accrued expenses 306

Collateral on securities loaned, at value 2,824

TOTAL LIABILITIES 18,468

NET ASSETS $ 1,287,553

Net Assets consist of:

Paid in capital $ 855,626

Undistributed net investment income 3,210

Accumulated undistributed net realized gain (loss) on 63,887
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 364,830
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 69,227 shares outstanding $ 1,287,553

NET ASSET VALUE, offering price and redemption price per $18.60
share ($1,287,553 (divided by) 69,227 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1997 (UNAUDITED)

INVESTMENT INCOME $ 20,201
Dividends

Interest (including income on securities loaned of $20) 756

TOTAL INCOME 20,957

EXPENSES

Management fee $ 3,115
Basic fee

Performance adjustment 514

Transfer agent fees 1,345

Accounting and security lending fees 265

Non-interested trustees' compensation 3

Custodian fees and expenses 26

Registration fees 34

Audit 25

Legal 4

Miscellaneous 2

Total expenses before reductions 5,333

Expense reductions (154) 5,179

NET INVESTMENT INCOME 15,778

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

Investment securities 67,542

Foreign currency transactions (58) 67,484

Change in net unrealized appreciation (depreciation) on:

Investment securities 30,199

Assets and liabilities in foreign currencies 4 30,203

NET GAIN (LOSS) 97,687

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 113,465
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED JANUARY 31,
JULY 31, 1997 1997
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 15,778 $ 38,852
Net investment income

Net realized gain (loss) 67,484 61,625

Change in net unrealized appreciation (depreciation) 30,203 44,036

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 113,465 144,513
FROM OPERATIONS

Distributions to shareholders (15,777) (38,660)
From net investment income

From net realized gain (13,102) (41,320)

TOTAL DISTRIBUTIONS (28,879) (79,980)

Share transactions 159,410 542,924
Net proceeds from sales of shares

Reinvestment of distributions 25,694 71,648

Cost of shares redeemed (262,043) (945,410)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (76,939) (330,838)
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 7,647 (266,305)

NET ASSETS

Beginning of period 1,279,906 1,546,211

End of period (including undistributed net investment $ 1,287,553 $ 1,279,906
income of $3,210 and $3,209, respectively)

OTHER INFORMATION
Shares

Sold 9,159 33,232

Issued in reinvestment of distributions 1,478 4,482

Redeemed (15,086) (58,288)

Net increase (decrease) (4,449) (20,574)

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED JANUARY 31,
ENDED
JULY 31, 1997

(UNAUDITED) 1997 1996 1995 1994 E 1993

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

Net asset value, $ 17.37 $ 16.41 $ 13.47 $ 15.84 $ 13.94 $ 12.94
beginning of period

Income from
Investment
Operations

Net investment .22 D .48 D .54 .55 .50 .61
income

Net realized 1.41 1.50 3.22 (1.58) 2.14 1.37
and unrealized
gain (loss)

Total from 1.63 1.98 3.76 (1.03) 2.64 1.98
investment
operations

Less Distributions

From net investment (.22) (.48) (.54) (.54) (.52) (.60)
income

From net realized (.18) (.54) (.28) (.68) (.22) (.38)
gain

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

Total distributions (.40) (1.02) (.82) (1.34) (.74) (.98)

Net asset value, $ 18.60 $ 17.37 $ 16.41 $ 13.47 $ 15.84 $ 13.94
end of period

TOTAL RETURN B, C 9.55% 12.73% 28.61% (6.38)% 19.34% 15.92%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 1,288 $ 1,280 $ 1,546 $ 1,171 $ 1,456 $ 1,002
period (in millions)

Ratio of expenses to .86% A .84% .80% .88% .87% .87%
average net assets

Ratio of expenses to .84% A, .81% .77% .87% .86% .87%
average net assets F F F F F
after expense
reductions

Ratio of net investment 2.55% A 2.96% 3.69% 3.87% 3.39% 4.57%
income to average
net assets

Portfolio turnover rate 39% A 56% 98% 98% 47% 73%

Average commission $ .0059 $ .0048
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 6 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 6 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, 1997 (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 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 with remaining maturities of sixty days or less for which
quotations are not readily available 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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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. Non-cash dividends included in
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income is accrued as earned. Investment
income is recorded net of foreign taxes withheld where recovery of such
taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, market discount, partnerships, non-taxable dividends
and losses deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part of
the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income 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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund may invest in the Taxable
Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of
Fidelity Management & Research Company (FMR). The Cash Fund is an open-end
money market fund available only to investment companies and other accounts
managed by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income by investing in U.S. Treasury
securities and repurchase agreements for these securities. Income
2. OPERATING POLICIES -
CONTINUED
TAXABLE CENTRAL CASH FUND - CONTINUED
distributions from the Cash Fund are declared daily and paid monthly from
net interest income. Income distributions received by the fund are recorded
as interest income in the accompanying financial statements.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $239,590,000 and $327,271,000, 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. The annual individual
fund fee rate is .20%. 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 basic fee is subject to a performance adjustment (up to a maximum of
".15% of the fund's average net assets over the performance period) 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 annual rate of .59% of average net assets after the
performance adjustment.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (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 annual rate of .22%
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 $345,000 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
5. SECURITY LENDING -
CONTINUED
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 $2,643,000 and
$2,824,000, 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
$147,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During the
period, the fund's custodian and transfer agent fees were reduced by $1,000
and $6,000, respectively, under these arrangements.

MANAGING YOUR INVESTMENTS

Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a day.
BY PHONE
Fidelity TouchTone Xpressprovides a single toll-free number to access
account balances, positions, quotes and trading. It's easy to navigate the
service, and on your first call, the system will help you create a personal
identification number (PIN) for security.
SM
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
1
For quotes.*
2
For account balances and holdings.
3
To review orders and mutual
fund activity.
4
To change your PIN.
5
To speak to a Fidelity representative.
*
0
BY PC
Fidelity's Web site on the Internet provides a wide range of information,
including daily financial news, fund performance, interactive planning
tools and news about Fidelity products and services.
(PHONE_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at 1-800-544-7272
for significant savings on Web access from internetMCI.
SM
(PHONE_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity at
1-800-544-7272 or visit our Web site for more information on how to manage
your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO WRITE FIDELITY

If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
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)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
TO VISIT FIDELITY

For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
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
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
1907 West State Road 434
Longwood, FL
4001 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, 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 Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
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
155 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
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 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
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, 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
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI

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
Robert C. Pozen, Senior Vice President
William J. Hayes, Vice President
Robert A. Lawrence, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
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
Puritan Fund
Real Estate Investment Portfolio
Spartan(registered trademark) Market Index Fund
Utilities Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE

FIDELITY

(REGISTERED TRADEMARK)
REAL ESTATE INVESTMENT
PORTFOLIO
SEMIANNUAL REPORT
JULY 31, 1997
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 16 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 20 Notes to the financial statements.

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. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS

Fidelity Real Estate Investment 9.37% 41.90% 112.42% 219.79%

S&P 500(registered trademark) 22.55% 52.14% 155.75% 303.48%

Real Estate Funds Average 9.96% 38.66% 97.47% 163.65%

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 10
years. For example, if you had 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 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past six months average represents a peer group of 67
mutual funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Fidelity Real Estate Investment 41.90% 16.26% 12.33%

S&P 500 52.14% 20.66% 14.96%

Real Estate Funds Average 38.66% 14.34% 9.95%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking an arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19970731 19970808 094654 S00000000000001
Real Estate S&P 500
00303 SP001
1987/07/31 10000.00 10000.00
1987/08/31 9805.83 10373.00
1987/09/30 9570.31 10145.83
1987/10/31 8279.16 7960.42
1987/11/30 8505.85 7304.48
1987/12/31 8732.26 7860.35
1988/01/31 9299.56 8191.27
1988/02/29 9603.46 8572.99
1988/03/31 9521.12 8308.08
1988/04/30 9531.41 8400.30
1988/05/31 9304.96 8473.38
1988/06/30 9615.63 8862.31
1988/07/31 9657.48 8828.63
1988/08/31 9563.31 8528.46
1988/09/30 9710.49 8891.77
1988/10/31 9625.40 9138.96
1988/11/30 9487.13 9008.28
1988/12/31 9637.21 9165.92
1989/01/31 9734.45 9836.87
1989/02/28 9766.86 9591.93
1989/03/31 9841.99 9815.42
1989/04/30 10105.32 10324.84
1989/05/31 10291.84 10743.00
1989/06/30 10644.74 10681.76
1989/07/31 11179.20 11646.33
1989/08/31 11335.09 11874.59
1989/09/30 11201.32 11825.91
1989/10/31 10783.52 11551.55
1989/11/30 10919.02 11787.20
1989/12/31 10964.62 12070.09
1990/01/31 10724.51 11260.19
1990/02/28 10655.91 11405.44
1990/03/31 10713.08 11707.69
1990/04/30 10574.10 11415.00
1990/05/31 10527.77 12527.96
1990/06/30 10690.38 12442.77
1990/07/31 10760.79 12402.95
1990/08/31 9998.03 11281.73
1990/09/30 9498.44 10732.31
1990/10/31 9224.68 10686.16
1990/11/30 9807.92 11376.48
1990/12/31 10011.13 11693.89
1991/01/31 10944.37 12203.74
1991/02/28 11283.74 13076.31
1991/03/31 12030.06 13392.75
1991/04/30 12361.50 13424.90
1991/05/31 12656.11 14004.85
1991/06/30 12248.81 13363.43
1991/07/31 12509.69 13986.17
1991/08/31 12571.80 14317.64
1991/09/30 12936.54 14078.53
1991/10/31 12722.81 14267.18
1991/11/30 12597.09 13692.22
1991/12/31 13934.32 15258.61
1992/01/31 14774.96 14974.80
1992/02/29 14456.53 15169.47
1992/03/31 14367.93 14873.66
1992/04/30 14161.93 15310.95
1992/05/31 14586.79 15385.97
1992/06/30 14418.96 15156.72
1992/07/31 15054.33 15776.63
1992/08/31 15093.23 15453.21
1992/09/30 15510.03 15635.56
1992/10/31 15679.75 15690.28
1992/11/30 15966.98 16225.32
1992/12/31 16652.79 16424.89
1993/01/31 17472.21 16562.86
1993/02/28 17895.14 16788.12
1993/03/31 19183.88 17142.35
1993/04/30 18318.55 16727.50
1993/05/31 18092.23 17175.80
1993/06/30 18563.19 17225.61
1993/07/31 18684.07 17156.71
1993/08/31 18979.58 17806.95
1993/09/30 19856.04 17669.83
1993/10/31 19530.97 18035.60
1993/11/30 18393.25 17864.26
1993/12/31 18736.32 18080.42
1994/01/31 18888.20 18695.15
1994/02/28 19813.28 18188.51
1994/03/31 19104.65 17395.49
1994/04/30 19369.22 17618.16
1994/05/31 19786.96 17907.09
1994/06/30 19195.73 17468.37
1994/07/31 19153.57 18041.33
1994/08/31 19069.26 18781.03
1994/09/30 18842.51 18320.89
1994/10/31 18090.51 18733.11
1994/11/30 17452.03 18050.85
1994/12/31 19118.22 18318.55
1995/01/31 18278.17 18793.55
1995/02/28 18567.84 19525.93
1995/03/31 18641.36 20102.14
1995/04/30 18348.03 20694.15
1995/05/31 19022.70 21521.30
1995/06/30 19420.14 22021.23
1995/07/31 19761.63 22751.46
1995/08/31 20162.50 22808.57
1995/09/30 20520.94 23771.09
1995/10/31 19950.08 23686.22
1995/11/30 20055.24 24726.05
1995/12/31 21205.11 25202.27
1996/01/31 21587.05 26060.16
1996/02/29 21663.44 26301.74
1996/03/31 21679.94 26555.02
1996/04/30 21649.03 26946.44
1996/05/31 22097.16 27641.39
1996/06/30 22457.50 27746.70
1996/07/31 22535.75 26520.86
1996/08/31 23521.69 27080.18
1996/09/30 24276.98 28604.25
1996/10/31 25021.28 29393.16
1996/11/30 26193.17 31614.99
1996/12/31 28886.68 30988.69
1997/01/31 29239.15 32924.87
1997/02/28 29335.28 33183.00
1997/03/31 29342.44 31819.51
1997/04/30 28420.94 33719.13
1997/05/31 29229.27 35771.95
1997/06/30 30803.74 37374.54
1997/07/31 31979.08 40348.43
IMATRL PRASUN SHR__CHT 19970731 19970808 094657 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Real Estate Investment Portfolio on July 31, 1987. As the chart
shows, by July 31, 1997, the value of the investment would have grown to
$31,979 - a 219.79% 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 $40,348 - a 303.48% 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
long-term growth and
short-term volatility. 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-month period that ended July 31, 1997, the fund returned
9.37%. This slightly trailed the real estate funds average, as tracked by
Lipper Analytical Services, which returned 9.96% during the same time span.
For the 12 months that concluded July 31, 1997, the fund generated a return
of 41.90% versus 38.66% for the Lipper peer group.
Q. THE SIX- AND 12-MONTH RETURNS FOR THE FUND IMPLY THAT REAL ESTATE
INVESTMENT TRUSTS (REITS) HAD A GREAT YEAR, BUT SLOWED DOWN SOME IN THE
SECOND HALF. WHAT HAPPENED?
A. The REIT market has been a little more volatile this year, but what
we're seeing so far in 1997 is actually more of a normal year in terms of
overall performance. REITs were due for a price correction or slower
advance, as the majority of stocks in the universe soared too quickly -
rising approximately 30% in just a six-month span in 1996. To put that in
perspective, the average yearly return for REITs is around 13%, so slightly
more than TWO YEARS of growth was crammed into a very short period. From
mid-March to mid-April of this year, the average REIT fell by around 9%,
while the more aggressive, "new-era" REITs - which I'll talk more about
later - tumbled by approximately 20%. Because this correction was due to
the rapid rise in valuations rather than deteriorating business prospects,
I held onto many of the fund's positions and got rewarded when REITs
rebounded in June and July.
Q. WE TALKED SIX MONTHS AGO ABOUT THE ENORMOUS DEMAND FOR REITS. DID THIS
THIRST CONTINUE DESPITE THE VOLATILITY YOU JUST DESCRIBED?
A. It did. New money continued to pour into the real estate market,
particularly from America's diversified stock and pension fund managers. At
the same time, existing REITs issued a record amount of new shares through
the first seven months of 1997, surpassing the peak of the previous mark
established in all of 1993. The supply and demand forces seem to be in
equilibrium, but it remains to be seen whether this record amount of paper
will overwhelm the demand. Basically, the word has spread that REITs can be
a very attractive investment alternative.
Q. WITH THE REIT MARKET BECOMING MORE "DISCOVERED" BY THE DAY, HOW DID YOU
TRY TO GAIN A PERFORMANCE EDGE?
A. When you have as many market participants as we've had lately, everyone
knows which geographic regions or property sectors are hot or cold. This is
where the new-era REITs I mentioned earlier came into play. New-era REITs
are more aggressive than traditional REITs because of their proactive,
not-afraid-to-change mentality. Most new-era REITs are either expanding
their geographic focus, getting involved in new property types or are
acquiring "paired shares," which are common stocks of two different
entities under the same management that trade as one unit. In addition,
some companies are creating "paper-clipped" pairs, combining an operating
company with a real estate company which can then be separated and sold
separately by the shareholder. New-era REITs - which comprised nine of the
fund's current top 10 positions - prosper when the market's going well, but
can decline sharply when the market staggers. Overall, these positions made
positive contributions to the fund's performance. (For a more expanded
discussion on "new-era" REITs, please see the callout box on page 8.)
Q. HOW DID THE HOTEL AND OFFICE BUILDING SECTORS PERFORM?
A. Both were positive contributors to performance due to favorable supply
and demand conditions. Speaking from personal experience, finding a hotel
room in a busy metropolis these days is difficult. While there hasn't been
a lot of new hotel construction, occupancies and rates have been growing at
a double-digit pace. Because of this demand, hotels today enjoy an enormous
pricing advantage. The office building scenario is similar. In real
estate-speak, there are three classes of office building space: Class A,
Class B and Class C. Class A office space consists of buildings in the
central business district of major cities, while Class B and Class C space
is often located in the surrounding environs. There has been virtually no
building activity in the past five years, partially due to the time and
paperwork involved in getting a project approved. As a result, Class A
office space is in very high demand, and while only 7%-10% of leases roll
over each year, the ones that do are at substantially higher rents. With a
dearth of competition, this backdrop has resulted in a nice mix of rising
earnings and flat expenses.
Q. WHAT INDIVIDUAL HOLDINGS CONTRIBUTED POSITIVELY TO PERFORMANCE? WHICH
PROVED DISAPPOINTING?
A. My new-era strategy seems to be working, because most of the fund's
top-performing stocks fell into that category. Catellus Development Corp.,
for instance, owns more land than any company in America, including a huge
parcel stretching from the Bay Bridge to Candlestick Park in San Francisco.
The company used to sell land to other companies, but it recently has begun
building properties itself. Crescent Real Estate Equities was another
strong stock, as the company benefited from adopting the "paired shares"
mentality I mentioned earlier. Most of the fund's weaker contributors were
smaller positions, including Walden Residential Properties, Capstead
Mortgage Corp. - which the fund no longer owns - and Rouse.
Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
A. We've recovered from the real estate doldrums of the early 1990s, and I
think there is still some more juice left. Properties are being sold closer
to their fair value, occupancies are rising nicely in several property
classes, and hotel and office rents are going up sharply in many major
cities. What typically kills the real estate market is overbuilding, and we
haven't seen much of that. My concern in the short run is that the record
supply of REIT paper may overwhelm the market. I also think we'll see a
very substantial increase in merger and acquisition activity. The
newly-formed companies will be larger, more dominant and more liquid, thus
becoming more attractive to pension funds.
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
FUND NUMBER: 303
TRADING SYMBOL: FRESX
START DATE: November 17,
1986
SIZE: as of July 31, 1997,
more than $2.1 billion
MANAGER: Barry Greenfield,
since 1986; manager,
Fidelity Fund, 1982-1993;
joined Fidelity in 1968
(checkmark)
BARRY GREENFIELD ON
"NEW-ERA" REITS:
"The REIT Act of 1960
stipulated that real estate
companies could only derive
their income from real
estate-related activity, mainly
the collection of rent. But four
companies were
grandfathered as 'paired
shares,' meaning one stock
comprises the real estate part
of the business while another
stock, managed by the same
company, operates
peripheral, non-real-estate
businesses. The paired
shares then trade together as
one unit of common stock.
Many of the new-era REITs I've
been attracted to either have
acquired one of these four
paired-share companies or
have changed their corporate
mentality to imitate them in
many ways. For instance,
Crescent, one of the fund's
larger positions, recently
acquired a health care
company. The health care
company owned real estate,
but was also a health care
provider/manager. Crescent
couldn't keep the operating
company portion of its new
acquisition, because that
portion treats patients and
isn't real estate-related. So
Crescent created a separate
entity for that portion of the
health care company and
spun it off to its shareholders.
The key difference between
this situation and paired
shares, though, is that these
two stocks trade separately."

NOTE TO SHAREHOLDERS:
Robert McConnaughey has
been named associate
portfolio manager, effective
September 15, 1997. He will
assist Barry Greenfield, who
continues to serve as the
fund's portfolio manager.
INVESTMENT CHANGES

TOP TEN STOCKS AS OF JULY 31, 1997
% OF % OF FUND'S
FUND'S INVESTMENTS
INVESTMEN IN THESE STOCKS
TS 6 MONTHS AGO

Equity Residential Properties Trust (SBI) 4.8 2.9

Starwood Lodging Trust combined certificate 4.1 3.1
(SBI)

Public Storage, Inc. 4.1 3.1

Cali Realty Corp. 3.8 2.6

Duke Realty Investors, Inc. 3.6 3.1

Crescent Real Estate Equities, Inc. 3.5 2.5

Patriot American Hospitality, Inc. 3.2 2.2

Bay Apartment Communities, Inc. 2.9 2.6

Felcor Suite Hotels, Inc. 2.8 1.7

Catellus Development Corp. 2.7 1.2

TOP FIVE REIT SECTORS AS OF JULY 31, 1997
% OF % OF FUND'S
FUND'S INVESTMENTS
INVESTMEN IN THESE MARKET
TS SECTORS
6 MONTHS AGO

Industrial Buildings 16.4 14.8

Apartments 15.6 16.2

Office Buildings 14.6 14.3

Hotels 13.1 10.4

Shopping Centers 9.6 9.8

ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1997 * AS OF JANUARY 31, 1997 **
4
Row: 1, Col: 1, Value: 4.8
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 43.7
Row: 1, Col: 4, Value: 50.0
Stocks 90.7%
Convertible
securities 0.1%
Short-term
investments 9.2%
FOREIGN
INVESTMENTS 1.7%
Stocks 94.7%
Convertible
securities 0.5%
Short-term
investments 4.8%
FOREIGN
INVESTMENTS 1.9%
Row: 1, Col: 1, Value: 9.199999999999999
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 39.3
Row: 1, Col: 4, Value: 50.0
*
**
INVESTMENTS JULY 31, 1997 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 94.3%
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITs) - 85.6%
REITS - APARTMENTS - 15.2%
Apartment Investment & Management Co. Class A (b) 1,647,900 $ 52,733
Avalon Properties, Inc. 451,800 12,481
BRE Properties, Inc. Class A 1,107,200 28,234
Bay Apartment Communities, Inc. (b) 1,619,620 62,254
Colonial Properties Trust (SBI) 417,600 12,476
Equity Residential Properties Trust (SBI) 2,052,662 103,531
Essex Property Trust, Inc. 376,600 12,357
Home Properties of NY, Inc. 57,700 1,309
Irvine Apartment Communities, Inc. 299,300 8,979
Oasis Residential, Inc. 558,700 13,409
Post Properties, Inc. 355,200 14,186
Smith (Charles E.) Residential Realty, Inc. 91,800 2,668
Town & Country Trust 365,900 6,266
330,883
REITS - FACTORY OUTLETS - 0.7%
Chelsea GCA Realty, Inc. 138,600 5,466
Tanger Factory Outlet Centers, Inc. (b) 358,100 10,206
15,672
REITS - HEALTHCARE FACILITIES - 3.1%
American Health Properties, Inc. 201,200 5,068
LTC Properties, Inc. 700,700 13,226
Meditrust (SBI) 904,800 36,192
Omega Healthcare Investors, Inc. 94,100 3,082
Sunrise Assisted Living, Inc. (a) 240,500 8,688
66,256
REITS - HOTELS - 13.1%
Equity Inns, Inc. 320,500 4,487
Felcor Suite Hotels, Inc. 1,555,870 60,679
Hospitality Properties Trust (SBI) 121,700 3,887
Innkeepers USA Trust (b) 1,991,524 28,006
Patriot American Hospitality, Inc. 2,805,507 69,962
RFS Hotel Investors, Inc. 423,000 7,720
Starwood Lodging Trust combined certificate (SBI) 1,933,183 90,135
Sunstone Hotel Investors, Inc. (b) 1,422,100 19,909
284,785
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITs) - CONTINUED
REITS - INDUSTRIAL BUILDINGS - 16.4%
Bedford Property Investors, Inc. 547,800 $ 10,922
CenterPoint Properties Corp. 734,500 24,239
Duke Realty Investors, Inc. (b) 1,781,884 79,182
Eastgroup Properties, Inc. (b) 718,750 14,330
First Industrial Realty Trust, Inc. 731,600 22,634
Liberty Property Trust (SBI) 1,072,000 28,274
Meridian Industrial Trust, Inc. 443,600 9,870
Public Storage, Inc. 2,981,900 88,525
Sovran Self Storage, Inc. 363,400 10,788
Spieker Properties, Inc. 1,030,100 38,307
Storage USA, Inc. 307,078 12,667
Storage Trust Realty (SBI) 321,000 8,527
Weeks Corp. 261,600 8,273
356,538
REITS - LEISURE - 1.1%
Franchise Finance Corp. of America 220,900 5,840
National Golf Properties, Inc. 411,700 13,071
Santa Anita Realty Enterprises, Inc. combined certificate 174,200 5,574
24,485
REITS - MALLS - 6.0%
CBL & Associates Properties, Inc. 525,300 13,395
Crown American Realty Trust (SBI) 375,800 3,641
General Growth Properties, Inc. 262,600 9,240
Macerich Co. 527,800 15,174
Mills Corp. (b) 1,130,822 30,037
Simon Debartolo Group, Inc. 981,300 31,402
Taubman Centers, Inc. 1,022,400 13,355
Urban Shopping Centers, Inc. 443,800 13,730
129,974
REITS - MANAGEMENT/INVESTMENT - 1.2%
Glenborough Realty Trust, Inc. 961,700 22,900
Riocan Real Estate Investment Trust unit 195,000 2,886
25,786
REITS - MOBILE HOME PARKS - 2.2%
Chateau Communities, Inc. 141,482 4,094
Manufactured Home Communities, Inc. 809,100 19,368
Sun Communities, Inc. 687,300 24,872
48,334
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITs) - CONTINUED
REITS - MORTGAGE - 1.6%
Dynex Capital, Inc. 359,600 $ 5,169
Ocwen Asset Investment Corp. 210,000 5,171
Realty Income Corp. 601,400 15,486
Thornburg Mortgage Asset Corp. 439,500 9,779
35,605
REITS - OFFICE BUILDINGS - 14.6%
Alexandria Real Estate Equities, Inc. 185,900 4,589
Arden Realty Group, Inc. 821,100 22,324
Beacon Properties Corp. 295,600 10,826
Boston Properties, Inc. 124,400 3,468
Cali Realty Corp. (b) 2,256,100 82,489
Carr Realty Corp. 989,000 29,670
Cornerstone Properties, Inc. 68,800 1,140
Crescent Real Estate Equities, Inc. 2,465,900 77,059
Equity Office Properties Trust 446,000 12,934
Kilroy Realty Corp. 197,100 4,952
Reckson Associates Realty Corp. (b) 2,238,800 55,690
Trinet Corporate Realty Trust, Inc. 347,600 12,362
317,503
REITS - PRISON - 0.8%
CCA Prison Realty Trust 535,900 16,613
REITS - SHOPPING CENTERS - 9.6%
Bradley Real Estate Trust (SBI) 653,600 12,255
Burnham Pacific Properties, Inc. 578,000 8,237
Commercial Net Lease Realty, Inc. 59,900 932
Developers Diversified Realty Corp. 1,249,200 49,343
Excel Realty Trust, Inc. (b) 1,480,600 44,048
Federal Realty Investment Trust (SBI) 136,800 3,625
First Washington Realty Trust, Inc. 109,400 2,639
HRE Properties 38,900 695
IRT Property Co. 1,199,441 15,368
JDN Realty Corp. 349,500 10,900
JP Realty, Inc. 451,600 11,431
Kimco Realty Corp. 424,200 14,423
Malan Realty Investors, Inc. (b) 183,400 3,198
Mid Atlantic Realty Trust 352,200 4,226
Regency Realty Group 179,000 4,799
Weingarten Realty Investors (SBI) 535,400 23,357
209,476
TOTAL REAL ESTATE INVESTMENT TRUSTS 1,861,910
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION - 0.2%
OPERATIVE BUILDERS - 0.2%
Fairfield Communities, Inc. (a) 149,700 $ 4,154
LODGING & GAMING - 1.2%
HOTELS, MOTELS, & TOURIST COURTS - 1.2%
Four Seasons Hotels, Inc. 111,100 3,708
Host Marriott Corp. (a) 644,300 12,846
Red Lion Inns LP (b) 408,400 9,521
26,075
REAL ESTATE OPERATORS, NON-RESIDENTIAL - 6.4%
TRUSTS - 3.3%
Forest City Enterprises, Inc. Class A 200,000 10,513
Parkway Properties, Inc. (b) 387,500 11,165
Ramco-Gershenson Properties Trust (SBI) 313,300 5,953
Rouse Co. (The) 369,900 10,981
Security Capital US Realty (a) :
Class A (Reg.) 700,000 10,290
Class A 510,000 7,497
Trizec Hahn Corp. (sub-vtg.) 426,300 9,897
Wellsford Real Properties, Inc. (b) 377,225 4,432
70,728
REAL ESTATE, GENERAL - 0.1%
Boardwalk Equities, Inc. (a) 135,500 2,517
SUBDIVIDED REAL ESTATE DEVELOPMENT - 3.0%
Catellus Development Corp. (a) 2,830,000 58,015
Concord Land Development Co. Ltd. (c) 3,394,000 4,538
Newhall Land & Farming Co. 140,200 3,155
65,708
TOTAL REAL ESTATE operators, NON-RESIDENTIAL 138,953
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SAVINGS & LOANS - 0.9%
SAVINGS BANKS, FEDERAL CHARTER - 0.9%
Golden State Bancorp 676,800 $ 19,204
TOTAL COMMON STOCKS
(Cost $1,602,288) 2,050,296
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
REAL ESTATE INVESTMENT TRUSTS (REITS) - 0.4%
REITS - APARTMENTS - 0.4%
Walden Residential Properties, Inc. 9.20%
(Cost $8,298) 341,700 8,883
CONVERTIBLE BONDS - 0.5%
MOODY'S PRINCIPAL
RATINGS AMOUNT (000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - 0.5%
REITS - HEALTH CARE FACILITIES - 0.3%
Sunrise Assisted Living, Inc.
5 1/2%, 6/15/02 (c) B2 $ 5,000 5,850
REITS - MALLS - 0.2%
Macerich Co. 7 1/4%, 12/15/02 (c) - 5,000 5,038
TOTAL CONVERTIBLE BONDS
(Cost $10,000) 10,888
CASH EQUIVALENTS - 4.8%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.77%, dated
7/31/97 due 8/1/97 $ 104,593 104,576
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,725,162) $ 2,174,643
LEGEND
1. Non-income producing
2. Affiliated company (see Note 6 of Notes to Financial Statements).
3. 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 $15,426,000 or 0.7% of net
assets.
INCOME TAX INFORMATION
At July 31, 1997, the aggregate cost of investment securities for income
tax purposes was $1,725,835,000. Net unrealized appreciation (depreciation)
aggregated $448,808,000, of which $451,256,000 related to appreciated
investment securities and $2,448,000 related to depreciated investment
securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1997 (UNAUDITED)

ASSETS

Investment in securities, at value (including repurchase $ 2,174,643
agreements of $104,576) (cost $1,725,162) - See
accompanying schedule

Cash 621

Receivable for investments sold 35,893

Receivable for fund shares sold 4,752

Dividends receivable 4,686

Interest receivable 74

Redemption fees receivable 1

Other receivables 76

TOTAL ASSETS 2,220,746

LIABILITIES

Payable for investments purchased $ 17,186

Payable for fund shares redeemed 5,939

Accrued management fee 1,068

Other payables and accrued expenses 491

TOTAL LIABILITIES 24,684

NET ASSETS $ 2,196,062

Net Assets consist of:

Paid in capital $ 1,683,176

Undistributed net investment income 22,148

Accumulated undistributed net realized gain (loss) on 41,259
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 449,479
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 112,094 shares outstanding $ 2,196,062

NET ASSET VALUE, offering price and redemption price $19.59
per share ($2,196,062 (divided by) 112,094 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1997 (UNAUDITED)

INVESTMENT INCOME $ 58,344
Dividends (including $10,468 received from
affiliated issuers)

Interest 5,218

TOTAL INCOME 63,562

EXPENSES

Management fee $ 6,574

Transfer agent fees 2,438

Accounting fees and expenses 400

Non-interested trustees' compensation 5

Custodian fees and expenses 51

Registration fees 78

Audit 22

Legal 4

Miscellaneous 4

Total expenses before reductions 9,576

Expense reductions (305) 9,271

NET INVESTMENT INCOME 54,291

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

Investment securities (including realized gain (loss) of 43,409
$(238) on sales of investments in affiliated issuers)

Foreign currency transactions 1 43,410

Change in net unrealized appreciation (depreciation) on:

Investment securities 84,649

Assets and liabilities in foreign currencies (2) 84,647

NET GAIN (LOSS) 128,057

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 182,348
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED JULY 31, JANUARY 31,
1997 (UNAUDITED) 1997

INCREASE (DECREASE) IN NET ASSETS

Operations $ 54,291 $ 57,482
Net investment income

Net realized gain (loss) 43,410 13,773

Change in net unrealized appreciation (depreciation) 84,647 297,293

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 182,348 368,548
FROM OPERATIONS

Distributions to shareholders (40,116) (46,819)
From net investment income

From net realized gain (1,227) -

TOTAL DISTRIBUTIONS (41,343) (46,819)

Share transactions 569,817 1,406,864
Net proceeds from sales of shares

Reinvestment of distributions 39,049 43,072

Cost of shares redeemed (750,512) (307,589)

Redemption fees 860 460

NET INCREASE (DECREASE) IN NET ASSETS RESULTING (140,786) 1,142,807
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 219 1,464,536

NET ASSETS

Beginning of period 2,195,843 731,307

End of period (including undistributed net investment $ 2,196,062 $ 2,195,843
income of $22,148 and $7,973, respectively)

OTHER INFORMATION
Shares

Sold 31,012 85,737

Issued in reinvestment of distributions 2,098 2,808

Redeemed (41,305) (20,000)

Net increase (decrease) (8,195) 68,545

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED JANUARY 31,
ENDED JULY 31,
1997

(UNAUDITED) 1997 1996 1995 1994 E 1993

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

Net asset value, beginning $ 18.25 $ 14.13 $ 12.62 $ 13.68 $ 13.22 $ 11.60
of period

Income from Investment
Operations

Net investment income .45 D .86 D .72 .67 .54 .68 D

Net realized and 1.23 3.97 1.50 (1.10) .52 1.37
unrealized gain (loss)

Total from investment 1.68 4.83 2.22 (.43) 1.06 2.05
operations

Less Distributions (.34) (.72) (.71) (.63) (.60) (.43)
From net investment
income

From net realized gain (.01) - - - - -

Total distributions (.35) (.72) (.71) (.63) (.60) (.43)

Redemption fees added to .01 .01 - - - -
paid in capital

Net asset value, $ 19.59 $ 18.25 $ 14.13 $ 12.62 $ 13.68 $ 13.22
end of period

TOTAL RETURN B, C 9.37% 35.45% 18.10% (3.23) 8.10% 18.26%
%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period $ 2,196 $ 2,196 $ 731 $ 490 $ 431 $ 247
(in millions)

Ratio of expenses to .88% A .94% .99% 1.06% 1.17% 1.16%
average net assets

Ratio of expenses to .85% A, .90% .95% 1.03% 1.13% 1.16%
average net assets after F F F F F
expense reductions

Ratio of net investment 5.00% A 5.63% 6.28% 5.67% 4.34% 5.81%
income to average net
assets

Portfolio turnover rate 84% A 55% 85% 75% 110% 82%

Average commission rate G $ .0410 $ .0420

</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, 1997 (Unaudited)

7. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Real Estate Investment Portfolio (the fund) is a fund of Fidelity
Devonshire Trust (the trust) and is authorized to issue an unlimited number
of shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The 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 with remaining maturities
of sixty days or less for which quotations are not readily available 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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. Interest
income
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
is accrued as earned. Investment income is recorded net of foreign taxes
withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for
partnerships, non-taxable dividends, capital loss carryforwards and losses
deferred due to wash sales and excise tax regulations. The fund also
utilized earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
REDEMPTION FEES. Shares held in the fund less than 90 days are subject to a
redemption fee equal to .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.
8. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
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 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
2. OPERATING POLICIES -
CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
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.
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 the period, the
fund had no investments in restricted securities (excluding 144A issues).
9. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $832,707,000 and $892,275,000, respectively.
10. 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. The annual individual
fund fee rate is .30%. 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.
For the period, the management fee was equivalent to an annualized rate of
.60% of average net assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (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
.22% 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 $1,054,000 for the period.
11. 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
$283,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the
fund's expenses. During the period, the fund's custodian and transfer agent
fees were reduced by $5,000 and $17,000, respectively, under these
arrangements.
12. 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
Ambassador Apartments, Inc. $ 2,042 $ 5,466 $ - $ -
Apartment Investment &
Management Co. Class A 14,219 - 1,143 52,733
Arden Realty Group, Inc. 259 1,012 - -
Bay Apartment Communities, Inc. 2,618 1,574 1,327 62,254
Bay Meadows Operating Co. - - - -
Cali Realty Corp. 13,958 - 870 82,489
CenterPoint Properties Corp. 474 2,663 372 -
Duke Realty Investors, Inc. 6,056 3,571 1,709 79,182
Eastgroup Properties, Inc. - - - 14,330
Excel Realty Trust, Inc. 10,299 - 1,216 44,048
Glenborough Realty Trust, Inc. - - - -
Haagen Alexander Properties, Inc. - 4,538 226 -
Innkeepers USA Trust 296 471 1,012 28,006
Malan Realty Investors, Inc. 178 - - 3,198
Mid Atlantic Realty Trust 617 1,151 218 -
Mills Corp. - - - 30,037
Pacific Gulf Properties, Inc. 676 741 502 -
Parkway Properties, Inc. 1,634 - 176 11,165
Reckson Associates Realty Corp. 10,468 391 700 55,690
Red Lion Inns LP 229 - 444 9,521
Sunstone Hotel Investors, Inc. 2,406 - 356 19,909
Tanger Factory Outlet Centers, Inc. 336 - 197 10,206
Wellsford Real Properties, Inc. 1,328 - - 4,432
TOTALS $ 68,093 $ 21,578 $ 10,468 $ 507,200
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
Robert C. Pozen, Senior Vice President
William J. Hayes, Vice President
Richard A. Spillane Jr., Vice President
Barry Greenfield, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
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
Puritan Fund
Real Estate Investment Portfolio
Spartan Market Index Fund
Utilities Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE

FIDELITY

(REGISTERED TRADEMARK)
EQUITY-INCOME
FUND
SEMIANNUAL REPORT
JULY 31, 1997
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 31 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.

NOTES 35 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

Fidelity Equity-Income 21.21% 44.70% 157.87% 273.11%

S&P 500(registered trademark) 22.55% 52.14% 155.75% 303.48%

Equity Income Funds Average 17.80% 39.93% 118.42% 224.63%

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 10
years. For example, if you had 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 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past six months average represents a peer
group of 191 mutual funds. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS

Fidelity Equity-Income 44.70% 20.86% 14.07%

S&P 500 52.14% 20.66% 14.96%

Equity Income Funds Average 39.93% 16.77% 12.24%

AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate each
year. (Note: Lipper calculates average annual total returns by annualizing
each fund's total return, then taking an arithmetic average. This may
produce a slightly different figure than that obtained by averaging the
cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19970731 19970811 104743 S00000000000001
Equity Income S&P 500
00023 SP001
1987/07/31 10000.00 10000.00
1987/08/31 10283.24 10373.00
1987/09/30 10054.69 10145.83
1987/10/31 8289.65 7960.42
1987/11/30 7922.49 7304.48
1987/12/31 8240.50 7860.35
1988/01/31 8791.13 8191.27
1988/02/29 9202.21 8572.99
1988/03/31 9091.20 8308.08
1988/04/30 9217.20 8400.30
1988/05/31 9324.11 8473.38
1988/06/30 9852.53 8862.31
1988/07/31 9833.21 8828.63
1988/08/31 9636.16 8528.46
1988/09/30 9920.02 8891.77
1988/10/31 10095.98 9138.96
1988/11/30 9998.23 9008.28
1988/12/31 10093.88 9165.92
1989/01/31 10738.77 9836.87
1989/02/28 10642.64 9591.93
1989/03/31 10849.13 9815.42
1989/04/30 11253.70 10324.84
1989/05/31 11522.04 10743.00
1989/06/30 11557.43 10681.76
1989/07/31 12308.45 11646.33
1989/08/31 12458.66 11874.59
1989/09/30 12307.14 11825.91
1989/10/31 11653.85 11551.55
1989/11/30 11809.79 11787.20
1989/12/31 11978.46 12070.09
1990/01/31 11243.72 11260.19
1990/02/28 11261.53 11405.44
1990/03/31 11269.22 11707.69
1990/04/30 10845.67 11415.00
1990/05/31 11544.08 12527.96
1990/06/30 11497.33 12442.77
1990/07/31 11333.21 12402.95
1990/08/31 10453.36 11281.73
1990/09/30 9696.99 10732.31
1990/10/31 9502.96 10686.16
1990/11/30 10098.91 11376.48
1990/12/31 10299.01 11693.89
1991/01/31 10800.93 12203.74
1991/02/28 11558.64 13076.31
1991/03/31 11726.83 13392.75
1991/04/30 11785.47 13424.90
1991/05/31 12401.12 14004.85
1991/06/30 11858.80 13363.43
1991/07/31 12491.79 13986.17
1991/08/31 12773.68 14317.64
1991/09/30 12711.22 14078.53
1991/10/31 12906.39 14267.18
1991/11/30 12395.94 13692.22
1991/12/31 13327.26 15258.61
1992/01/31 13458.96 14974.80
1992/02/29 13869.26 15169.47
1992/03/31 13682.29 14873.66
1992/04/30 14143.32 15310.95
1992/05/31 14281.63 15385.97
1992/06/30 14117.08 15156.72
1992/07/31 14468.71 15776.63
1992/08/31 14179.13 15453.21
1992/09/30 14293.34 15635.56
1992/10/31 14439.51 15690.28
1992/11/30 14914.56 16225.32
1992/12/31 15283.10 16424.89
1993/01/31 15736.17 16562.86
1993/02/28 16115.48 16788.12
1993/03/31 16645.52 17142.35
1993/04/30 16613.64 16727.50
1993/05/31 16911.17 17175.80
1993/06/30 17115.53 17225.61
1993/07/31 17378.02 17156.71
1993/08/31 17961.93 17806.95
1993/09/30 17936.16 17669.83
1993/10/31 18243.91 18035.60
1993/11/30 17952.35 17864.26
1993/12/31 18539.84 18080.42
1994/01/31 19279.46 18695.15
1994/02/28 18753.51 18188.51
1994/03/31 17938.02 17395.49
1994/04/30 18330.95 17618.16
1994/05/31 18564.42 17907.09
1994/06/30 18316.74 17468.37
1994/07/31 18832.38 18041.33
1994/08/31 19491.26 18781.03
1994/09/30 19036.93 18320.89
1994/10/31 19215.60 18733.11
1994/11/30 18426.00 18050.85
1994/12/31 18584.93 18318.55
1995/01/31 18699.95 18793.55
1995/02/28 19396.13 19525.93
1995/03/31 19884.06 20102.14
1995/04/30 20536.81 20694.15
1995/05/31 21208.03 21521.30
1995/06/30 21526.30 22021.23
1995/07/31 22289.55 22751.46
1995/08/31 22457.10 22808.57
1995/09/30 23153.72 23771.09
1995/10/31 22754.41 23686.22
1995/11/30 23840.03 24726.05
1995/12/31 24496.80 25202.27
1996/01/31 25284.73 26060.16
1996/02/29 25530.15 26301.74
1996/03/31 26008.17 26555.02
1996/04/30 26330.89 26946.44
1996/05/31 26660.19 27641.39
1996/06/30 26693.12 27746.70
1996/07/31 25785.01 26520.86
1996/08/31 26394.83 27080.18
1996/09/30 27356.99 28604.25
1996/10/31 28197.51 29393.16
1996/11/30 29951.93 31614.99
1996/12/31 29647.17 30988.69
1997/01/31 30782.39 32924.87
1997/02/28 31273.86 33183.00
1997/03/31 30312.20 31819.51
1997/04/30 31240.98 33719.13
1997/05/31 33323.72 35771.95
1997/06/30 34799.57 37374.54
1997/07/31 37311.03 40348.43
IMATRL PRASUN SHR__CHT 19970731 19970811 104746 R00000000000123

$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Equity-Income Fund on July 31, 1987. As the chart shows, by
July 31, 1997, the value of the investment would have grown to $37,311 - a
273.11% 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 $40,348 - a
303.48% 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
long-term growth and
short-term volatility. 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- and 12-month periods ending July 31, 1997, the fund
returned 21.21% and 44.70%, outperforming the equity income funds average,
as tracked by Lipper Analytical Services, which returned 17.80% and 39.93%,
respectively. However, over the past six and 12 months, the fund lagged the
Standard and Poor's 500 Index, which returned 22.55% and 52.14%,
respectively.
Q. WHY DID THE FUND UNDERPERFORM THE S&P 500 INDEX?
A. When you compare the performance of most actively managed diversified
funds, like this one, against the S&P 500's performance over the period,
very few beat the index. That's because the index was heavily weighted in a
small number of very-large-capitalization stocks, and those stocks were the
top performers over the period. In most cases, diversified funds own stocks
of several different capitalization sizes, not just large-cap stocks.
Q. WERE THERE ANY OTHER REASONS?
A. Yes. Many of the top stocks that contributed to the S&P 500's
performance, such as technology giants Intel and Microsoft, don't pay
dividends and therefore are not the kind of stocks this fund tends to own.
In short, the fund didn't underperform because of poor investment
decisions. In fact, most of its heaviest-weighted stocks performed
relatively well. It's just that some of the very-large-cap stocks it didn't
own did better.
Q. STILL, THE FUND QUITE COMFORTABLY OUTPERFORMED ITS PEER GROUP . . .
A. That's true. The fund outperformed other equity-income funds largely
because it is run somewhat more aggressively than similar funds. That is to
say, the fund is more heavily weighted toward common stocks - as opposed to
convertible securities, fixed-income securities and short-term investments
- - than most of its peers. In addition, the fund held more
large-capitalization companies than the average equity-income fund. I
should add that strong individual stock selection also played a key role in
the fund's solid returns.
Q. HOW WOULD YOU DESCRIBE THE TYPES OF EQUITY-INCOME STOCKS YOU LOOK FOR?
A. In general, they're fairly large-market-capitalization companies that
pay higher dividend yields than the market. I also look for companies that
have been out of favor or relatively weak performers and where there's
potential for turnaround in one form or another. By using this combination
of established companies and up-and-coming companies, I try to maximize the
fund's total returns.
Q. WHAT WERE SOME OF THE FUND'S BEST-PERFORMING STOCKS OVER THE PERIOD?
A. General Electric, the fund's largest holding, showed consistently strong
earnings growth and performed better than initial expectations. It also
benefited from solid cash flow and a sound management team. The
second-largest holding, Philip Morris, continued to look very strong. Over
the period, most of its earnings came from its food business and its
international tobacco business. So, Philip Morris' major growth was outside
areas of the company that were affected by U.S. litigation against the
tobacco industry. Besides these two stocks, much of the fund's growth came
from energy stocks, such as British Petroleum, which benefited from
cost-cutting measures as well as strong production growth.
Q. CLEARLY, THESE ARE ALL STOCKS OF ESTABLISHED COMPANIES. WERE THERE ANY
UP-AND-COMING COMPANIES THAT PERFORMED WELL OVER THE PERIOD?
A. Sure. Fremont General, an insurance company that specializes in workers'
compensation, has been growing through acquisitions, and its outlook seemed
good. Another company, Modine, which manufactures radiators for trucks and
cars, appears to have found a niche in the repair market.
Q. TURNING TO SECTOR HOLDINGS, IT CERTAINLY LOOKS LIKE FINANCIAL STOCKS
PLAYED A KEY ROLE, MAKING UP ABOUT 24% OF THE FUND AT THE END OF THE
PERIOD. WHY DID THE FINANCIAL SECTOR LOOK GOOD?
A. Financial stocks, which tend to do well when interest rates are low,
benefited from the favorable interest-rate environment over the period.
Over the past six months, many banks generated more capital than they
needed to run their businesses, and they invested it by buying back their
own stock. In addition, both acquiring and acquired financial companies
benefited from recent mergers. Financial services company, Fannie Mae - the
Federal National Mortgage Association - which buys mortgages, packages
them, creates securities, and then sells them back to the marketplace,
turned in a strong performance over the period. American Express, another
financial services company, also looked attractive. It traded at a discount
to the overall market and showed signs of good earnings growth.
Q. DID YOU EXPERIENCE DISAPPOINTMENTS OVER THE PERIOD?
A. Yes. I expected to see a significant lift in the performance of cyclical
stocks - those whose performance is closely associated with the strength of
the economy - and I positioned the fund accordingly. Unfortunately,
cyclicals did not perform well relative to growth-oriented stocks over the
period.
Q. STEVE, HOW DOES THE FUND LOOK GOING FORWARD?
A. In general, I will be sticking with what I call the portfolio winners -
large-cap, steady earnings-growth companies with attractive fundamentals
and valuations. In addition, I will continue to look for attractive,
overlooked, oversold or misunderstood types of companies that I think show
some interesting possibilities going forward.
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: to increase the value
of the fund's shares over the
long-term by investing mainly
in income-producing equities
FUND NUMBER: 023
TRADING SYMBOL: FEQIX
START DATE: May 16, 1966
SIZE: as of July 31, 1997,
more than $19.7 billion
MANAGER: Stephen
Petersen, since 1993;
manager, Fidelity Balanced
Fund, 1996 to July 1997;
manager, various institutional
accounts, since 1987; joined
Fidelity in 1980
(checkmark)
STEPHEN PETERSEN ON THE
FUND'S FOREIGN HOLDINGS:
"At the end of the period,
about 14% of the portfolio
was invested in foreign
holdings. I considered these
holdings to be pretty much of
a wash over the period; that
is, they neither substantively
helped nor hurt the fund. For
the first six months of 1997,
the fund's domestic common
stocks were up a little less
than 15%, while the fund's
foreign stocks were up about
13%.
"Many of the fund's foreign
holdings were large,
energy-related companies,
such as British Petroleum,
Royal Dutch Petroleum and
Schlumberger. The fund also
had a fairly good-sized
exposure in Canada, mostly in
the banking industry. Over the
period, Canadian banks
experienced improved
fundamentals, as did many
U.S. banks. However, many
Canadian banks also
benefited from somewhat
lower valuations than their
U.S. counterparts.
"The biggest disappointment
with the fund's foreign holdings
came when their returns were
adjusted back into dollars. A
good example is the London
stock market, which was up
20% in local currency over the
period, but up only 13% in U.S.
dollars. The fund also owned
stock in a number of large
foreign automakers, such as
Volvo. These stocks
performed well in their local
markets, but suffered when
their returns were converted
to dollars."
INVESTMENT CHANGES

TOP TEN STOCKS AS OF JULY 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO

General Electric Co. 3.2 2.7

Philip Morris Companies, Inc. 2.7 2.7

American Express Co. 2.1 2.0

Federal National Mortgage Association 1.9 1.9

British Petroleum PLC ADR 1.9 2.4

Allstate Corp. 1.5 1.5

BankAmerica Corp. 1.3 0.8

Bank of New York Co., Inc. 1.2 1.2

NationsBank Corp. 1.2 1.0

Wal-Mart Stores, Inc. 1.2 0.9

TOP FIVE MARKET SECTORS AS OF JULY 31, 1997
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO

Finance 24.2 21.8

Energy 10.8 12.4

Utilities 8.2 8.8

Basic Industries 7.9 7.7

Industrial Machinery & Equipment 7.8 6.9

ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1997 * AS OF JANUARY 31, 1997 **
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 4.9
Row: 1, Col: 3, Value: 6.0
Row: 1, Col: 4, Value: 1.6
Row: 1, Col: 5, Value: 43.0
Row: 1, Col: 6, Value: 44.5
Stocks 85.2%
Bonds 0.3%
Convertible
securities 8.3%
Short-term
investments 6.1%
Other investments 0.1%
FOREIGN
INVESTMENTS 15.5%
Stocks 89.0%
Bonds 0.1%
Convertible
securities 6.0%
Short-term
investments 4.9%
Other investments 0.0%
FOREIGN
INVESTMENTS 13.9%
Row: 1, Col: 1, Value: 1.5
Row: 1, Col: 2, Value: 6.1
Row: 1, Col: 3, Value: 8.300000000000001
Row: 1, Col: 4, Value: 2.0
Row: 1, Col: 5, Value: 41.2
Row: 1, Col: 6, Value: 40.9
*
**
INVESTMENTS JULY 31, 1997 (UNAUDITED)

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 89.0%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 5.2%
AEROSPACE & DEFENSE - 3.9%
AlliedSignal, Inc. 1,827,300 $ 168,568
Boeing Co. 1,889,178 111,107
GenCorp, Inc. 1,035,273 30,152
Gulfstream Aerospace Corp. (a) 525,900 14,002
Lockheed Martin Corp. 1,943,000 206,930
Rockwell International Corp. 139,500 9,155
Textron, Inc. 1,058,200 74,140
Thiokol Corp. 230,900 17,159
United Technologies Corp. 1,701,500 143,883
775,096
DEFENSE ELECTRONICS - 1.2%
Northrop Grumman Corp. 619,300 71,297
Raytheon Co. 2,779,200 155,288
226,585
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 170,800 15,116
Newport News Shipbuilding, Inc. 690,880 14,206
29,322
TOTAL AEROSPACE & DEFENSE 1,031,003
BASIC INDUSTRIES - 7.6%
CHEMICALS & PLASTICS - 2.9%
Air Products & Chemicals, Inc. 390,000 34,394
du Pont (E.I.) de Nemours & Co. 1,782,300 119,303
Goodrich (B.F.) Co. 430,100 19,435
Great Lakes Chemical Corp. 624,900 31,284
Hercules, Inc. 483,000 25,659
Hoechst AG Ord. 578,400 26,934
Lyondell Petrochemical Co. 397,300 10,454
Millenium Chemicals, Inc. 1,097,257 23,111
Nalco Chemical Co. 954,200 38,943
Olin Corp. 1,118,500 47,396
Union Carbide Corp. 2,194,800 121,537
Witco Corp. 1,676,500 76,490
574,940
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - 0.6%
Aeroquip Vickers, Inc. 247,200 $ 13,550
Allegheny Teledyne, Inc. 465,300 14,481
Dofasco Inc. 1,075,200 22,817
Inland Steel Industries, Inc. 1,342,300 30,789
Lukens, Inc. 520,100 9,947
Quanex Corp. 128,900 4,012
USX-U.S. Steel Group 810,300 29,627
125,223
METALS & MINING - 2.2%
Alcan Aluminium Ltd. 1,269,700 49,743
Alumax, Inc. (a) 1,814,884 76,906
Aluminum Co. of America 1,585,048 140,277
Harsco Corp. 1,167,700 51,817
Inco Ltd. 1,170,600 36,094
Kaiser Aluminum Corp. (a) 980,200 14,703
Noranda, Inc. 621,200 13,385
Pechiney SA Class A 682,322 29,601
Phelps Dodge Corp. 169,100 14,384
426,910
PACKAGING & CONTAINERS - 0.1%
Owens-Illinois, Inc. (a) 229,100 7,904
Tupperware Corp. 85,000 2,954
10,858
PAPER & FOREST PRODUCTS - 1.8%
Boise Cascade Corp. 813,600 30,154
Champion International Corp. 1,055,400 65,435
Domtar, Inc. 2,098,000 18,874
Georgia-Pacific Corp. 405,500 38,294
Kimberly-Clark Corp. 1,698,200 86,078
Weyerhaeuser Co. 2,008,500 125,029
363,864
TOTAL BASIC INDUSTRIES 1,501,795
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - 1.2%
BUILDING MATERIALS - 0.4%
American Standard Companies, Inc. (a) 998,300 $ 49,603
Masco Corp. 751,800 35,241
84,844
ENGINEERING - 0.2%
EG&G, Inc. 823,400 16,880
Fluor Corp. 254,700 15,664
32,544
REAL ESTATE - 0.0%
Fastighets AB Tornet 528,030 6,340
REAL ESTATE INVESTMENT TRUSTS - 0.6%
Boston Properties, Inc. 165,700 4,619
Equity Residential Properties Trust (SBI) 1,073,500 54,145
First Industrial Realty Trust, Inc. 239,400 7,406
Liberty Property Trust (SBI) 135,500 3,574
Macerich Co. 469,400 13,495
Patriot American Hospitality, Inc. 437,806 10,918
Public Storage, Inc. 328,700 9,758
Weeks Corp. 360,700 11,407
115,322
TOTAL CONSTRUCTION & REAL ESTATE 239,050
DURABLES - 5.1%
AUTOS, TIRES, & ACCESSORIES - 3.3%
Bayerische Motoren Werke (BMW) AG 39,700 31,963
Chrysler Corp. 4,237,000 157,299
Cummins Engine Co., Inc. 291,800 22,906
Eaton Corp. 831,300 75,077
General Motors Corp. 1,848,235 114,360
Johnson Controls, Inc. 941,600 42,195
Michelin SA (Compagnie Generale des Etablissements) Class B 1,151 72
Modine Manufacturing Co. 779,600 24,363
Snap-On Tools Corp. 944,800 38,973
Standard Products Co. 209,800 5,415
Toyota Motor Corp. 1,612,000 49,307
Volvo AB:
Class B 2,595,100 69,304
Class B ADR 396,900 10,716
641,950
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER DURABLES - 0.7%
Minnesota Mining & Manufacturing Co. 1,372,200 $ 130,016
CONSUMER ELECTRONICS - 0.5%
Maytag Co. 1,863,600 54,394
Sunbeam-Oster, Inc. 643,600 25,181
Whirlpool Corp. 535,600 26,780
106,355
TEXTILES & APPAREL - 0.6%
Burlington Industries, Inc. (a) 729,300 9,435
Dexter Corp. 748,200 29,788
Kellwood Co. (f) 1,223,300 37,999
Stride Rite Corp. 403,200 5,468
Unifi, Inc. 1,142,000 43,610
126,300
TOTAL DURABLES 1,004,621
ENERGY - 9.8%
ENERGY SERVICES - 1.9%
Baker Hughes, Inc. 326,900 14,404
Dresser Industries, Inc. 1,974,700 82,444
Halliburton Co. 1,784,800 82,101
Schlumberger Ltd. 2,430,400 185,622
364,571
OIL & GAS - 7.9%
Amerada Hess Corp. 695,800 40,922
Amoco Corp. 995,400 93,568
Atlantic Richfield Co. 1,807,400 135,216
British Petroleum PLC:
ADR 4,454,044 367,180
Ord. 7,281,509 99,615
Burlington Resources, Inc. 620,000 29,295
Eni Spa 108,600 639
Exxon Corp. 636,200 40,876
Mobil Corp. 1,138,400 87,088
Monterey Resources, Inc. 376,357 5,739
Occidental Petroleum Corp. 1,583,600 39,689
Phillips Petroleum Co. 871,000 40,120
Royal Dutch Petroleum Co. 3,918,400 219,186
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Santa Fe Energy Resources, Inc. (a) 853,275 $ 7,359
Total SA:
Class B 1,195,943 120,012
sponsored ADR 1,539,192 77,633
USX-Marathon Group 2,538,500 81,708
Unocal Corp. 1,751,729 70,069
Valero Energy Corp. 150,900 6,489
1,562,403
TOTAL ENERGY 1,926,974
FINANCE - 23.3%
BANKS - 9.7%
Banc One Corp. 696,300 39,080
Bank of New York Co., Inc. 5,074,917 246,451
Bank of Nova Scotia 700,200 33,528
BankAmerica Corp. 3,374,400 254,767
BankBoston Corp. 990,372 84,120
Canadian Imperial Bank of Commerce 1,524,000 43,840
Chase Manhattan Corp. 757,400 86,012
Citicorp 532,500 72,287
Comerica, Inc. 1,153,826 87,258
Credit Suisse Group (Reg.) 317,900 42,905
Den Danske Bank Group AS 268,000 28,314
Den Norske Bank AS (h) 6,455,200 27,152
Den Norske Bank AS Class A Free shares 508,100 2,137
First Bank System, Inc. 1,199,500 106,756
Fleet Financial Group, Inc. 1,203,998 81,721
Fuji International Trust unit sponsored ADR (h) 332 8,554
HSBC Holdings PLC 793,785 27,773
National Bank of Canada 4,431,800 57,875
NationsBank Corp. 3,455,259 245,972
Norwest Corp. 1,339,734 84,487
Nordbanken AB (h) 234,000 7,713
Royal Bank of Canada 1,754,100 84,183
Societe Generale Class A 185,055 24,422
Sparbanken Sverige AB Class A (h) 1,156,300 25,384
Sparebanken Norway primary shares certificates 385,100 11,505
Wells Fargo & Co. 341,100 93,781
1,907,977
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 4.4%
American Express Co. 4,859,800 $ 407,008
Beneficial Corp. 647,800 46,966
Edper Group Ltd. (The) Class A (ltd. vtg.) 1,961,600 34,013
First Chicago NBD Corp. 3,082,453 233,881
Household International, Inc. 748,278 96,902
Sakura Finance Bermuda Trust sponsored ADR (h) 362 18,426
Transamerica Corp. 414,400 41,803
878,999
FEDERAL SPONSORED CREDIT - 1.9%
Federal National Mortgage Association 7,780,000 368,091
INSURANCE - 5.6%
Aetna, Inc. 595,700 67,873
Allstate Corp. 3,622,485 286,176
American Bankers Insurance Group, Inc. 936,220 63,370
American Financial Group, Inc. 1,074,600 51,312
Brascan Ltd. Class A 2,750,700 71,444
CIGNA Corp. 334,100 66,653
Fremont General Corp. (f) 1,811,228 77,430
General Re Corp. 355,100 74,172
Hartford Financial Services Group, Inc. 1,601,700 139,548
Highlands Insurance Group, Inc. (a)(f) 747,690 16,776
MBIA, Inc. 133,100 15,706
Marsh & McLennan Companies, Inc. 317,200 24,563
Provident Companies, Inc. 492,700 31,225
Providian Financial Corp. (a) 345,000 13,520
Reliastar Financial Corp. 1,267,577 97,207
1,096,975
SAVINGS & LOANS - 1.2%
Ahmanson (H.F.) & Co. 233,300 12,409
TCF Financial Corp. 54,200 2,903
Washington Mutual, Inc. 3,307,740 228,648
243,960
SECURITIES INDUSTRY - 0.5%
Bear Stearns Companies, Inc. 620,140 25,309
First Marathon Inc. Class A (non-vtg.) 1,105,900 16,609
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - CONTINUED
Lehman Brothers Holdings, Inc. 899,860 $ 44,824
Nomura Securities Co. Ltd. 898,000 12,712
99,454
TOTAL FINANCE 4,595,456
HEALTH - 3.4%
DRUGS & PHARMACEUTICALS - 2.7%
American Home Products Corp. 575,600 47,451
Amgen, Inc. 376,700 22,153
Bristol-Myers Squibb Co. 1,926,800 151,133
Merck & Co., Inc. 78,100 8,118
Novartis AG (Reg.) 53,317 85,611
Pharmacia & Upjohn, Inc. 1,001,000 37,788
Pfizer, Inc. 340,400 20,296
Schering-Plough Corp. 2,214,800 120,845
Takeda Chemical Industries Ltd. 1,199,000 36,271
529,666
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Allegiance Corp. 981,620 30,676
Bausch & Lomb, Inc. 516,600 21,988
Baxter International, Inc. 237,900 13,754
Johnson & Johnson 714,800 44,541
110,959
MEDICAL FACILITIES MANAGEMENT - 0.1%
Columbia/HCA Healthcare Corp. 356,000 11,481
Foundation Health Systems, Inc. Class A (a) 363,300 11,762
23,243
TOTAL HEALTH 663,868
HOLDING COMPANIES - 0.6%
CINergy Corp. 1,139,198 38,305
Norfolk Southern Corp. 608,900 67,436
U.S. Industries, Inc. (a) 214,480 8,646
114,387
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 7.7%
ELECTRICAL EQUIPMENT - 4.0%
Emerson Electric Co. 372,300 $ 21,966
General Electric Co. 9,061,400 635,997
Omron Corp. 1,018,000 23,933
Westinghouse Electric Corp. 4,240,514 102,037
783,933
INDUSTRIAL MACHINERY & EQUIPMENT - 2.4%
Caterpillar, Inc. 1,132,800 63,437
Cooper Industries, Inc. 1,027,772 57,106
Harnischfeger Industries, Inc. 591,400 25,504
Ingersoll-Rand Co. 904,400 61,556
Keystone International, Inc. 1,457,200 52,732
Parker-Hannifin Corp. 939,600 60,487
Regal-Beloit Corp. 268,800 7,610
Stewart & Stevenson Services, Inc. 599,400 16,371
Tyco International Ltd. 1,558,000 126,198
471,001
POLLUTION CONTROL - 1.3%
Browning-Ferris Industries, Inc. 2,742,400 101,469
Safety Kleen Corp. 1,070,300 18,797
Waste Management, Inc. 3,731,600 119,411
Zurn Industries, Inc. (f) 760,800 22,491
262,168
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,517,102
MEDIA & LEISURE - 2.2%
BROADCASTING - 0.1%
Ascent Entertainment Group, Inc. (a) 254,176 3,082
Evergreen Media Corp. Class A (a) 204,825 9,422
12,504
ENTERTAINMENT - 0.5%
MGM Grand, Inc. (a) 782,500 26,996
Viacom, Inc. (a):
Class A 19,900 608
Class B (non-vtg.) 2,690,500 83,069
110,673
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 793,300 $ 25,584
Hasbro, Inc. 861,150 26,427
Outboard Marine Corp. 643,300 10,253
62,264
LODGING & GAMING - 0.4%
ITT Corp. (a) 1,084,400 69,334
Mirage Resorts, Inc. (a) 488,800 13,075
82,409
PUBLISHING - 0.9%
ACNielsen Corp. (a) 1,384,433 29,765
Cognizant Corp. 741,300 31,598
Harcourt General, Inc. 1,084,300 51,233
Hollinger International, Inc. Class A 536,900 6,577
Houghton Mifflin Co. 218,400 7,890
McGraw-Hill, Inc. 687,500 46,621
173,684
TOTAL MEDIA & LEISURE 441,534
NONDURABLES - 6.5%
BEVERAGES - 0.1%
PepsiCo, Inc. 448,500 17,183
FOODS - 1.2%
CPC International, Inc. 434,600 41,694
General Mills, Inc. 1,029,658 71,175
Goodman Fielder Ltd. Ord. 24,006,380 37,055
Heinz (H.J.) Co. 374,500 17,297
Kellogg Co. 202,700 18,623
Ralcorp Holdings, Inc. (a) 400,000 7,250
Ralston Purina Co. 559,200 50,468
243,562
HOUSEHOLD PRODUCTS - 1.1%
Avon Products, Inc. 182,000 13,206
Dial Corp. 1,082,800 18,611
Premark International, Inc. 952,200 30,054
Rubbermaid, Inc. 2,184,000 56,921
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - CONTINUED
Unilever:
PLC Ord. 2,577,900 $ 74,805
NV Ord. 6,600 1,450
NV ADR 144,700 31,545
226,592
TOBACCO - 4.1%
BAT Industries PLC:
Ord. 2,828,924 23,899
sponsored ADR 163,900 2,848
Dimon, Inc. 458,450 11,203
Gallaher Group PLC sponsored ADR (a) 1,913,600 34,325
Philip Morris Companies, Inc. 11,705,500 528,211
RJR Nabisco Holdings Corp. 5,204,520 170,773
Universal Corp. 799,400 27,529
798,788
TOTAL NONDURABLES 1,286,125
PRECIOUS METALS - 0.3%
Newmont Mining Corp. 1,445,500 59,627
RETAIL & WHOLESALE - 4.7%
APPAREL STORES - 1.0%
Charming Shoppes, Inc. (a) 882,700 5,186
Footstar, Inc. (a) 776,654 20,775
Limited, Inc. (The) 1,723,739 38,461
Payless ShoeSource, Inc. (a) 881,328 54,202
TJX Companies, Inc. 2,621,464 78,316
196,940
DRUG STORES - 0.2%
CVS Corp. 819,900 46,632
GENERAL MERCHANDISE STORES - 2.7%
Coles Myer Ltd. 2,657,541 13,760
Dayton Hudson Corp. 854,900 55,248
Federated Department Stores, Inc. (a) 1,882,267 82,467
May Department Stores Co. (The) 583,100 32,581
Sears, Roebuck & Co. 1,473,300 93,278
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - CONTINUED
Wal-Mart Stores, Inc. 6,435,500 $ 241,732
Woolworth Corp. (a) 315,500 8,933
527,999
GROCERY STORES - 0.1%
American Stores Co. 623,200 15,736
RETAIL & WHOLESALE, MISCELLANEOUS - 0.7%
Fingerhut Companies, Inc. 776,400 15,722
Tandy Corp. 803,300 47,746
Toys "R" Us, Inc. (a) 1,964,700 66,923
130,391
TOTAL RETAIL & WHOLESALE 917,698
SERVICES - 1.0%
LEASING & RENTAL - 0.1%
Ryder Systems, Inc. 487,500 17,458
PRINTING - 0.6%
Deluxe Corp. 1,266,100 42,177
Donnelley (R.R.) & Sons Co. 1,202,600 48,329
Ennis Business Forms, Inc. 417,200 3,703
Harland (John H.) Co. 27,700 544
New England Business Service, Inc. 577,800 17,045
111,798
SERVICES - 0.3%
Block (H&R), Inc. 717,040 27,472
Dun & Bradstreet Corp. 777,300 20,987
Jostens, Inc. 473,000 12,209
60,668
TOTAL SERVICES 189,924
TECHNOLOGY - 2.5%
COMMUNICATIONS EQUIPMENT - 0.3%
Alcatel Alsthom Compagnie Generale d'Electricite SA 557,565 72,773
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - 0.2%
Electronic Data Systems Corp. 553,600 $ 23,943
Sabre Group Holdings, Inc. Class A (a) 371,400 10,956
34,899
COMPUTERS & OFFICE EQUIPMENT - 0.8%
Digital Equipment Corp. (a) 415,700 17,122
International Business Machines Corp. 1,061,400 112,243
Xerox Corp. 253,043 20,813
150,178
ELECTRONICS - 0.5%
AMP, Inc. 1,051,100 54,920
Nitto Denko Corp. 860,000 17,682
Thomas & Betts Corp. 457,600 26,140
98,742
PHOTOGRAPHIC EQUIPMENT - 0.7%
Eastman Kodak Co. 950,000 63,650
Fuji Photo Film Co. Ltd. 1,112,000 46,663
Polaroid Corp. 413,700 24,615
134,928
TOTAL TECHNOLOGY 491,520
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.2%
Viad Corp. 1,946,500 36,862
RAILROADS - 0.5%
CSX Corp. 1,554,800 96,009
TOTAL TRANSPORTATION 132,871
UTILITIES - 7.2%
ELECTRIC UTILITY - 2.7%
Allegheny Power System, Inc. 2,226,600 65,268
American Electric Power Co., Inc. 2,090,400 93,545
Central Maine Power Co. 1,269,800 17,142
CILCORP, Inc. 161,700 6,781
Consolidated Edison Co. of New York, Inc. 826,550 26,140
DQE, Inc. 235,700 7,439
DPL, Inc. 1,345,650 33,137
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Duke Power Co. 819,227 $ 41,525
Entergy Corp. 3,160,200 86,313
Illinova Corp. 979,700 23,084
National Grid Co. PLC 3,989,600 16,884
Niagara Mohawk Power Corp. (a) 2,119,000 19,733
PECO Energy Co. 462,400 10,866
PG&E Corp. 1,371,000 34,018
PacifiCorp. 663,300 14,800
Pinnacle West Capital Corp. 994,800 31,398
Unicom Corp. 247,600 5,617
533,690
GAS - 0.9%
MCN Corp. 993,000 31,466
Nova Corp. 2,749,200 23,935
Pacific Enterprises 1,916,700 64,090
Questar Corp. 1,658,900 67,911
187,402
TELEPHONE SERVICES - 3.6%
AT&T Corp. 177,400 6,532
ALLTEL Corp. 1,073,200 35,281
Ameritech Corp. 1,648,900 111,198
BCE, Inc. 1,768,800 53,833
Bell Atlantic Corp. 1,075,700 78,055
BellSouth Corp. 1,925,200 91,206
Cam-Net Communications Network, Inc. (a)(g) 1,626,737 -
Comsat Corp., Series 1 520,000 12,123
Frontier Corp. 748,600 15,440
MCI Communications Corp. 570,400 20,142
NYNEX Corp. 2,262,300 125,416
SBC Communications, Inc. 1,345,500 79,637
Sprint Corp. 663,900 32,863
Telus Corp. 999,700 19,401
WorldCom, Inc. (a) 790,627 27,623
708,750
TOTAL UTILITIES 1,429,842
TOTAL COMMON STOCKS
(Cost $10,905,874) 17,543,397
CONVERTIBLE PREFERRED STOCKS - 3.3%
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - 0.2%
IRON & STEEL - 0.1%
Armco, Inc. Class A $3.625 276,200 $ 13,448
METALS & MINING - 0.0%
Kaiser Aluminum Corp. $0.97 954,400 12,407
PAPER & FOREST PRODUCTS - 0.1%
International Paper $2.625 (h) 228,900 13,448
TOTAL BASIC INDUSTRIES 39,303
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Vornado Realty Trust $3.25 Series A 270,900 14,188
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Republic Industries, Inc. $1.55 465,300 11,342
ENERGY - 0.3%
OIL & GAS - 0.3%
Atlantic Richfield Co. $2.23 579,200 14,263
Occidental Petroleum Corp. $3.00 329,200 31,603
Tosco Financing Trust $2.875 (h) 76,600 4,481
Unocal Capital Trust $3.125 238,600 13,839
64,186
FINANCE - 0.6%
INSURANCE - 0.4%
Aetna, Inc. Class C 6.25% 335,700 33,822
American Bankers Insurance Group, Inc., Series B, $3.125 37,900 2,861
Conseco, Inc. $4.27875 268,200 38,353
St. Paul Capital LLC $3.00 162,900 11,505
86,541
SECURITIES INDUSTRY - 0.2%
Merrill Lynch & Co, Inc. $2.3906 329,100 11,560
Salomon, Inc. $2.03 490,100 17,643
Salomon, Inc. $3.484 63,800 3,788
32,991
TOTAL FINANCE 119,532
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Loral Space & Communications Ltd. $3.00 Series C (h) 388,600 $ 19,721
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.1%
Evergreen Media Corp. $3.00 (h) 395,800 22,214
ENTERTAINMENT - 0.2%
Time Warner Financing Trust $1.24 801,500 36,368
LODGING & GAMING - 0.1%
Hilton Hotels Corp. $0.89 602,400 17,470
Host Marriott Financial Trust $3.375 (h) 94,300 5,976
23,446
PUBLISHING - 0.1%
Hollinger International, Inc. $0.95 1,329,800 15,459
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 956,400 -
15,459
TOTAL MEDIA & LEISURE 97,487
NONDURABLES - 0.2%
FOODS - 0.2%
Chiquita Brands International, Inc.:
Series A, $2.875 474,500 23,013
Series B, $3.75 200,100 11,706
Dole Food Automatic Common Exchange Security
Trust $2.7475 283,900 11,498
46,217
RETAIL & WHOLESALE - 0.2%
APPAREL STORES - 0.1%
TJX Companies, Inc., Series E, $7.00 47,800 14,579
GENERAL MERCHANDISE STORES - 0.1%
K mart Financing I $3.875 597,400 32,558
TOTAL RETAIL & WHOLESALE 47,137
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Wang Labs, Inc. $3.25 276,100 $ 13,805
Wang Labs, Inc. $3.25 (h) 228,300 11,358
25,163
UTILITIES - 0.9%
CELLULAR - 0.2%
AirTouch Communications, Inc. Class B $1.74 1,270,500 40,338
ELECTRIC UTILITY - 0.2%
Houston Industries, Inc. $3.215 602,600 32,164
GAS - 0.2%
Enron Corp. Series J, $10.50 31,800 16,385
MCN Corp. $4.00 52,900 2,900
Williams Companies, Inc. $3.50 166,600 17,993
37,278
TELEPHONE SERVICES - 0.3%
Enhance Financial Services Group, Inc. $7.625 378,300 16,645
Worldcom, Inc. 8% depositary shares 350,500 42,980
59,625
TOTAL UTILITIES 169,405
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $508,552) 653,681
CORPORATE BONDS - 2.8%
MOODY'S PRINCIPAL
RATINGS (E) AMOUNT (D) (000S)
CONVERTIBLE BONDS - 2.7%
BASIC INDUSTRIES - 0.1%
METALS & MINING - 0.1%
Inco Ltd. 5 3/4%, 7/1/04 Baa2 $ 20,000 24,175
CONSTRUCTION & REAL ESTATE - 0.1%
BUILDING MATERIALS - 0.1%
Hexcel Corp. 7%, 8/1/03 B2 6,758 11,759
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (E) AMOUNT (D) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Liberty Property 8%, 7/1/01 Ba2 $ 1,358 $ 1,787
TOTAL CONSTRUCTION & REAL ESTATE 13,546
DURABLES - 0.1%
CONSUMER ELECTRONICS - 0.1%
Matsushita Electric Industrial Co. Ltd.:
1.30%, 3/29/02 Aa2 JPY 870,000 11,226
1.40%, 3/31/04 Aa2 JPY 401,000 5,174
16,400
ENERGY - 0.7%
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 0%, 5/5/08 A2 18,959 16,518
OIL & GAS - 0.6%
Pennzoil Co.:
6 1/2%, 1/15/03 Baa3 46,142 87,151
4 3/4%, 10/1/03 Baa3 22,210 29,928
117,079
TOTAL ENERGY 133,597
FINANCE - 0.3%
CREDIT & OTHER FINANCE - 0.3%
Edper Group Ltd. 7%, 5/31/06 (h) - CAD 14,000 16,556
MBL International Finance of Bermuda
3%, 11/30/02 Aa2 22,990 24,829
Volkswagen AG 3%, 1/24/02 (h) A1 18,750 26,813
68,198
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
POLLUTION CONTROL - 0.0%
WMX Technologies, Inc. 2%, 1/24/05 Baa1 5,700 5,258
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (E) AMOUNT (D) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Jacor Communications, Inc. liquid yield
option notes 0%, 6/12/11 B3 $ 18,322 $ 11,520
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5%, 5/15/06 Baa2 7,760 9,020
PUBLISHING - 0.0%
News America Holdings, Inc. liquid yield
option notes 0%, 3/11/13 Baa3 15,330 6,784
TOTAL MEDIA & LEISURE 27,324
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.1%
Baker (J.), Inc. 7%, 6/1/02 B3 13,170 11,688
Charming Shoppes, Inc. 7 1/2%, 7/15/06 B2 5,338 5,632
17,320
GENERAL MERCHANDISE STORES - 0.1%
Federated Department Stores, Inc. 5%, 10/1/03 Baa3 20,753 28,561
RETAIL & WHOLESALE, MISCELLANEOUS - 0.2%
Home Depot, Inc. 3 1/4%, 10/1/01 A1 24,060 28,752
TOTAL RETAIL & WHOLESALE 74,633
SERVICES - 0.1%
ADT Operations, Inc. liquid yield
option notes 0%, 7/6/10 Ba3 19,295 21,285
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE - 0.1%
Softkey International, Inc.
5 1/2%, 11/1/00 (h) - 28,760 24,446
COMPUTERS & OFFICE EQUIPMENT - 0.4%
Apple Computer, Inc. 6%, 6/1/01 (h) CCC 17,780 15,602
Quantum Corp. 7%, 8/1/04 14,980 15,317
Unisys Corp. 8 1/4%, 3/15/06 B3 25,009 38,514
69,433
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (E) AMOUNT (D) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.1%
Cirrus Logic, Inc. 6%, 12/15/03 (h) B3 $ 11,090 $ 9,329
National Semiconductor Corp.
6 1/2%, 10/1/02 (h) Ba2 10,450 11,051
20,380
TOTAL TECHNOLOGY 114,259
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Continental Airlines, Inc.
6 3/4%, 4/15/06 (h) B2 9,150 12,673
UTILITIES - 0.1%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
0%, 8/15/10 Baa3 3,690 4,701
TELEPHONE SERVICES - 0.1%
Cam-Net Communications Network, Inc.
11 1/2%, 4/4/98 (c)(g) - 4,225 -
MIDCOM Communications, Inc.
8 1/4%, 8/15/03 (h) - 12,810 10,824
10,824
TOTAL UTILITIES 15,525
TOTAL CONVERTIBLE BONDS 526,873
NONCONVERTIBLE BONDS - 0.1%
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Daimler-Benz Capital AG 4 1/8%, 7/5/03 unit A1 DEM 19,000 16,589
TOTAL CORPORATE BONDS
(Cost $447,334) 543,462
COMMERCIAL MORTGAGE SECURITIES - 0.0%
MOODY'S PRINCIPAL VALUE (NOTE 1)
RATINGS (E) AMOUNT (D) (000S) (000S)
Bardell Associates Note Trust
12 1/2%, 11/1/08 (g)
(Cost $2,756) - $ 2,704 $ 2,874
INDEXED SECURITIES - 0.0%
Merrill Lynch & Co. Inc. Japan Index equity
participation securities 0%, 1/31/00
(Cost $4,187) Aa3 5,000 5,175
PURCHASED BANK DEBT - 0.0%
GPA Group PLC term loan 6.40%, 11/19/98
(Cost $341) - 450 434
CASH EQUIVALENTS - 4.9%
SHARES
Taxable Central Cash Fund (b)
(Cost $969,059) 969,059,002 969,059
PURCHASED OPTIONS - 0.0%
EXPIRATION DATE UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE (000S)
Bank of America OTC Put Option on
12,614,900,000 Japanese Yen Sept. 97/124.90 $ 106,410 131
Swiss Bank Corp. OTC Put Option on
3,630,000,000 Japanese Yen Jan. 98/121 30,620 474
TOTAL PURCHASED OPTIONS
(Cost $1,564) 605
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $12,839,667) $ 19,718,687
CURRENCY ABBREVIATIONS
CAD - Canadian dollar
DEM - German deutsche mark
JPY - Japanese yen
LEGEND
1. Non-income producing
2. At period end, the seven-day yield on the Taxable Central Cash Fund was
5.66%. The yield refers to the income earned by investing in the fund over
the seven-day period, expressed as an annual percentage.
3. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
4. Principal amount is stated in United States dollars unless otherwise
noted.
5. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
6. Affiliated company (see Note 7 of Notes to Financial Statements).
7. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)

Bardell Associates Note
Trust 12 1/2%,
11/1/08 4/19/94 $ 2,756
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
8. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $291,721,000 or 1.5% of net
assets.
OTHER INFORMATION
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 86.1%
United Kingdom 3.3
Canada 3.1
France 1.6
Netherlands 1.4
Japan 1.0
Others (individually less than 1%) 3.5
TOTAL 100.0%
INCOME TAX INFORMATION
At July 31, 1997, the aggregate cost of investment securities for income
tax purposes was $12,842,718,000. Net unrealized appreciation aggregated
$6,875,969,000, of which $6,963,332,000 related to appreciated investment
securities and $87,363,000 related to depreciated investment securities.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1997 (UNAUDITED)

ASSETS

Investment in securities, at value (cost $12,839,667) - $ 19,718,687
See accompanying schedule

Cash 406

Receivable for investments sold 63,433

Receivable for fund shares sold 41,776

Dividends receivable 32,792

Interest receivable 8,690

Other receivables 2,105

TOTAL ASSETS 19,867,889

LIABILITIES

Payable for investments purchased $ 86,959

Payable for fund shares redeemed 23,202

Accrued management fee 7,187

Other payables and accrued expenses 3,999

Collateral on securities loaned, at value 30,256

TOTAL LIABILITIES 151,603

NET ASSETS $ 19,716,286

Net Assets consist of:

Paid in capital $ 12,343,494

Undistributed net investment income 17,453

Accumulated undistributed net realized gain (loss) on 476,570
investments and foreign currency transactions

Net unrealized appreciation (depreciation) on 6,878,769
investments and assets and liabilities in foreign
currencies

NET ASSETS, for 373,818 shares outstanding $ 19,716,286

NET ASSET VALUE, offering price and redemption price $52.74
per share ($19,716,286 (divided by) 373,818 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1997 (UNAUDITED)

INVESTMENT INCOME $ 196,496
Dividends (including $804 received from affiliated
issuers)

Interest (including income on securities loaned of $391) 37,574

TOTAL INCOME 234,070

EXPENSES

Management fee $ 38,162

Transfer agent fees 16,361

Accounting and security lending fees 448

Non-interested trustees' compensation 35

Custodian fees and expenses 355

Registration fees 619

Audit 64

Legal 55

Miscellaneous 4

Total expenses before reductions 56,103

Expense reductions (1,323) 54,780

NET INVESTMENT INCOME 179,290

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

Investment securities (including realized gain of $109 480,362
on sales of investments in affiliated issuers)

Foreign currency transactions (141) 480,221

Change in net unrealized appreciation (depreciation) on:

Investment securities 2,715,502

Assets and liabilities in foreign currencies (7,101) 2,708,401

NET GAIN (LOSS) 3,188,622

NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 3,367,912
FROM OPERATIONS

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED JULY 31, JANUARY 31,
1997 1997
(UNAUDITED)

INCREASE (DECREASE) IN NET ASSETS

Operations $ 179,290 $ 311,265
Net investment income

Net realized gain (loss) 480,221 658,250

Change in net unrealized appreciation (depreciation) 2,708,401 1,597,637

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,367,912 2,567,152
FROM OPERATIONS

Distributions to shareholders (183,926) (311,393)
From net investment income

From net realized gain (168,740) (571,846)

TOTAL DISTRIBUTIONS (352,666) (883,239)

Share transactions 3,451,832 4,405,850
Net proceeds from sales of shares

Reinvestment of distributions 343,378 858,753

Cost of shares redeemed (2,118,065) (2,934,221)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,677,145 2,330,382
FROM SHARE TRANSACTIONS

TOTAL INCREASE (DECREASE) IN NET ASSETS 4,692,391 4,014,295

NET ASSETS

Beginning of period 15,023,895 11,009,600

End of period (including undistributed net investment $ 19,716,286 $ 15,023,895
income of $17,453 and $22,089, respectively)

OTHER INFORMATION
Shares

Sold 74,128 107,111

Issued in reinvestment of distributions 7,454 21,056

Redeemed (45,616) (71,564)

Net increase (decrease) 35,966 56,603

</TABLE>

FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED JANUARY 31,
ENDED
JULY 31, 1997

(UNAUDITED) 1997 1996 1995 1994 E 1993

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

Net asset value, $ 44.47 $ 39.15 $ 30.89 $ 35.19 $ 29.87 $ 26.57
beginning of period

Income from Investment
Operations

Net investment income .50 D 1.01 D .93 1.02 1.11 1.11 D

Net realized and 8.78 7.17 9.65 (2.12) 5.48 3.27
unrealized gain
(loss)

Total from investment 9.28 8.18 10.58 (1.10) 6.59 4.38
operations

Less Distributions (.52) (1.02) (.96) (.98) (1.15) (1.08)
From net investment
income

From net (.49) (1.84) (1.36) (2.22) (.12) -
realized gain

Total distributions (1.01) (2.86) (2.32) (3.20) (1.27) (1.08)

Net asset value, end $ 52.74 $ 44.47 $ 39.15 $ 30.89 $ 35.19 $ 29.87
of period

TOTAL RETURN B, C 21.21% 21.74% 35.21% (3.01) 22.52% 16.92%
% H H

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of $ 19,716 $ 15,024 $ 11,010 $ 7,439 $ 6,943 $ 5,123
period (in millions)

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

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

Ratio of net investment 2.17% A 2.46% 2.86% 3.37% 3.55% 4.02%
income to average
net assets

Portfolio turnover rate 27% A 30% 39% 50% 70% 84%

Average commission $ .0350 $ .0331
rate G

</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 FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
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 6 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.
H TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1997 (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 with remaining maturities
of sixty days or less for which quotations are not readily available 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. Income receipts and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions. Purchases and sales of securities are translated into
U.S. dollars at the contractual currency exchange rates established at the
time of each trade.
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,
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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
date. Non-cash dividends included in dividend income, if any, are recorded
at the fair market value of the securities received. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTION 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), market discount, non-taxable dividends and losses
deferred due to wash sales. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income 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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
more joint trading accounts. These balances are invested in one or more
repurchase agreements 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.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the
SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund)
managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end
money market fund available only to investment companies and other accounts
managed by FMR and its affiliates. The Cash Fund seeks preservation of
capital, liquidity, and current income by investing in U.S. Treasury
securities and repurchase agreements for these securities. Income
distributions from the Cash Fund are declared daily and paid monthly from
net interest income. Income distributions received by the fund are recorded
as interest income in the accompanying financial statements.
OPTIONS. The fund may use options to manage its exposure to the stock and
bond market and to fluctuations in interest rates and currency values.
Writing puts and buying calls tend to increase the fund's exposure to the
underlying instrument. 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 of any open options at
period end 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. Gains and losses are realized upon the expiration or
closing of the options. Realized gains (losses) on purchased options are
included in realized gains (losses) on investment securities, except
purchased options on foreign currency which are included in realized gains
(losses) on foreign currency transactions.
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
2. OPERATING POLICIES - CONTINUED
INDEXED SECURITIES - CONTINUED
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. Gains
(losses) realized upon the sale of indexed securities are included in
realized gains (losses) on investment securities.
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 the period,
restricted securities (excluding 144A issues) amounted to $2,874,000 or
0.01% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $3,560,530,000 and $2,092,891,000, 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. The annual individual
fund fee rate is .16% (.14% prior to December 1, 1996). 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. For the period, the management fee was
equivalent to an annualized rate of .46% of average net assets.
In accordance with the management contract currently in effect, the annual
individual fund fee rate is scheduled to increase to .18% and .20% on
December 1, 1997 and December 1, 1998, respectively.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (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 a portion of the typesetting,
printing and mailing of shareholder reports, except
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
proxy statements. For the period, the transfer agent fees were equivalent
to an annualized rate of .20% 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 $2,111,000 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 $29,225,000 and
$30,256,000, 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
$641,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During the
period, the fund's custodian and transfer agent fees were reduced by $5,000
and $677,000, 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
Fremont General Corp. $ - $ - $ 272 $ 77,430
Highlands Insurance Group, Inc. - - - 16,776
Kellwood Co. - 660 380 37,999
Zurn Industries, Inc. - - 152 22,491
TOTALS $ - $ 660 $ 804 $ 154,696
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
William J. Hayes, Vice President
Stephen R. Petersen, Vice President
Richard A. Spillane, Jr., Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
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
Puritan Fund
Real Estate Investment Portfolio
Spartan(registered trademark) Market Index Fund
Utilities Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
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)
TouchTone Xpress 1-800-544-5555
SM
AUTOMATED LINE FOR QUICKEST SERVICE