FIDELITY
(REGISTERED TRADEMARK)
EQUITY-INCOME
FUND
SEMIANNUAL REPORT
JULY 31, 1998
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 32 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 36 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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
So far, 1998 has been a year of considerable volatility in the U.S.
stock and bond markets. In the first quarter, the U.S. stock market
soared as inflation and interest rates remained stable, while the
economy maintained strong growth. By summer, however, investors began
to exercise caution relative to the troublesome Asian economic climate
and reports of concerns about corporate earnings domestically. Market
volatility and low interest rates were also the main stories in the
bond market, with many investors moving assets to highly rated U.S.
Treasuries.
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, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Equity-Income 9.13% 12.26% 141.02% 325.95%
S&P 500 (registered trademark) 15.18% 19.29% 180.53% 445.15%
Equity Income Funds Average 5.95% 10.48% 117.99% 284.94%
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 returns 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 223 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, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Equity-Income 12.26% 19.24% 15.59%
S&P 500 19.29% 22.91% 18.48%
Equity Income Funds Average 10.48% 16.75% 14.27%
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
Equity-Income S&P 500
00023 SP001
1988/07/31 10000.00 10000.00
1988/08/31 9799.61 9660.00
1988/09/30 10088.28 10071.52
1988/10/31 10267.23 10351.50
1988/11/30 10167.81 10203.48
1988/12/31 10265.09 10382.04
1989/01/31 10920.92 11142.00
1989/02/28 10823.15 10864.57
1989/03/31 11033.15 11117.71
1989/04/30 11444.58 11694.72
1989/05/31 11717.47 12168.36
1989/06/30 11753.46 12099.00
1989/07/31 12517.23 13191.54
1989/08/31 12669.98 13450.09
1989/09/30 12515.89 13394.95
1989/10/31 11851.52 13084.18
1989/11/30 12010.11 13351.10
1989/12/31 12181.63 13671.53
1990/01/31 11434.43 12754.17
1990/02/28 11452.55 12918.70
1990/03/31 11460.37 13261.04
1990/04/30 11029.63 12929.52
1990/05/31 11739.89 14190.14
1990/06/30 11692.34 14093.65
1990/07/31 11525.44 14048.55
1990/08/31 10630.67 12778.56
1990/09/30 9861.47 12156.25
1990/10/31 9664.14 12103.97
1990/11/30 10270.21 12885.89
1990/12/31 10473.70 13245.41
1991/01/31 10984.13 13822.91
1991/02/28 11754.69 14811.25
1991/03/31 11925.74 15169.68
1991/04/30 11985.37 15206.08
1991/05/31 12611.47 15862.99
1991/06/30 12059.94 15136.46
1991/07/31 12703.68 15841.82
1991/08/31 12990.34 16217.27
1991/09/30 12926.82 15946.44
1991/10/31 13125.31 16160.13
1991/11/30 12606.20 15508.87
1991/12/31 13553.31 17283.09
1992/01/31 13687.25 16961.62
1992/02/29 14104.51 17182.12
1992/03/31 13914.37 16847.07
1992/04/30 14383.22 17342.38
1992/05/31 14523.87 17427.35
1992/06/30 14356.53 17167.69
1992/07/31 14714.13 17869.85
1992/08/31 14419.64 17503.51
1992/09/30 14535.78 17710.06
1992/10/31 14684.43 17772.04
1992/11/30 15167.54 18378.07
1992/12/31 15542.33 18604.12
1993/01/31 16003.08 18760.39
1993/02/28 16388.82 19015.53
1993/03/31 16927.86 19416.76
1993/04/30 16895.44 18946.88
1993/05/31 17198.01 19454.65
1993/06/30 17405.84 19511.07
1993/07/31 17672.78 19433.03
1993/08/31 18266.59 20169.54
1993/09/30 18240.39 20014.23
1993/10/31 18553.36 20428.53
1993/11/30 18256.86 20234.46
1993/12/31 18854.31 20479.29
1994/01/31 19606.47 21175.59
1994/02/28 19071.60 20601.73
1994/03/31 18242.28 19703.49
1994/04/30 18641.87 19955.70
1994/05/31 18879.31 20282.97
1994/06/30 18627.43 19786.04
1994/07/31 19151.82 20435.02
1994/08/31 19821.87 21272.86
1994/09/30 19359.83 20751.67
1994/10/31 19541.53 21218.59
1994/11/30 18738.54 20445.80
1994/12/31 18900.16 20749.02
1995/01/31 19017.13 21287.04
1995/02/28 19725.12 22116.59
1995/03/31 20221.33 22769.25
1995/04/30 20885.15 23439.81
1995/05/31 21567.75 24376.70
1995/06/30 21891.42 24942.97
1995/07/31 22667.62 25770.08
1995/08/31 22838.01 25834.76
1995/09/30 23546.45 26924.99
1995/10/31 23140.37 26828.87
1995/11/30 24244.40 28006.65
1995/12/31 24912.31 28546.06
1996/01/31 25713.61 29517.77
1996/02/29 25963.19 29791.40
1996/03/31 26449.32 30078.29
1996/04/30 26777.51 30521.64
1996/05/31 27112.39 31308.80
1996/06/30 27145.88 31428.08
1996/07/31 26222.37 30039.59
1996/08/31 26842.54 30673.13
1996/09/30 27821.01 32399.41
1996/10/31 28675.79 33292.98
1996/11/30 30459.97 35809.60
1996/12/31 30150.04 35100.21
1997/01/31 31304.51 37293.27
1997/02/28 31804.32 37585.65
1997/03/31 30826.35 36041.26
1997/04/30 31770.89 38192.92
1997/05/31 33888.95 40518.11
1997/06/30 35389.84 42333.32
1997/07/31 37943.89 45701.78
1997/08/31 36339.51 43141.57
1997/09/30 38337.32 45504.43
1997/10/31 36992.91 43984.58
1997/11/30 38236.13 46020.63
1997/12/31 39190.03 46810.80
1998/01/31 39033.00 47328.53
1998/02/28 41560.43 50741.86
1998/03/31 43654.94 53340.35
1998/04/30 43639.75 53876.96
1998/05/31 43085.62 52950.81
1998/06/30 43601.55 55101.68
1998/07/31 42595.36 54514.84
IMATRL PRASUN SHR__CHT 19980731 19980818 100723 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Equity-Income Fund on July 31, 1988. As the chart
shows, by July 31, 1998, the value of the investment would have grown
to $42,595 - a 325.95% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $54,515 - a 445.15% 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 MANAGER'S OVERVIEW
MARKET RECAP
Low interest rates. A strong
domestic economy. Tame inflation.
Not the environment where one
expects to encounter anxious
investors and a tumbling S&P. Yet
that was the scenario in the latter
stages of the six-month period
ending July 31, 1998. At the end of
those six months, the Standard &
Poor's 500 Index - a measure of
the U.S. stock market - produced
a return of 15.18%. That's down
from 17.71% for the six-month
period ending June 30, 1998.
After a strong first quarter of the
year, investor uncertainty over
corporate earnings reports, the
Asian economy and stock market
volatility began to have a tangible
effect on the domestic equity
market. In mid-June the major U.S.
indexes, along with Asian markets,
continued to sell off. During the
week of July 20th, the Dow Jones
Industrial Average racked up losses
of over 400 points. Contributing to
the decline were concerns that Asia's
crisis will inhibit the earnings
growth of American companies.
Throughout the period, small-cap
stocks were weak, while large-cap
stocks continued to pace the
market, due in large part to strong
consumer spending. Despite the
descending performance in the later
stages of the six-month period, the
15.18% return over those six
months was still approximately
50% higher than the stock
market's historical annual return.
An interview with Steve Petersen, Portfolio Manager of Fidelity
Equity-Income Fund
Q. HOW DID THE FUND PERFORM, STEVE?
A. It did well against its peers, but underperformed the Standard &
Poor's 500 Index. For the six- and 12-month periods that ended July
31, 1998, the fund returned 9.13% and 12.26%, respectively,
outperforming the equity-income funds average, as tracked by Lipper
Analytical Services, which returned 5.95% and 10.48%, respectively.
However, over the past six and 12 months, the fund lagged the S&P 500
index, which returned 15.18% and 19.29%, respectively.
Q. AS WE'VE DISCUSSED IN THE PAST SEVERAL REPORTS, THE FUND HAS TENDED
TO UNDERPERFORM THE S&P 500 INDEX RECENTLY BECAUSE THE INDEX IS MUCH
MORE HEAVILY WEIGHTED IN STRONG-PERFORMING, LARGE-CAPITALIZATION
STOCKS THAN THE FUND. DOES THIS STILL EXPLAIN WHY THE FUND
UNDERPERFORMED THE INDEX OVER THIS PERIOD?
A. In part, yes. Over the period, large-capitalization stocks
continued to notably outperform the rest of the market. So, given the
fund's investment style of looking for value stocks and
income-producing stocks - which can range from large-caps to
small-caps - the fund was at a disadvantage compared to the S&P 500
over the past six and 12 months. That said, the fund performed well
against its peer group over the same periods because it owned
significantly more large-cap holdings than did other equity-income
funds. In addition, the fund benefited from its focus on earning
income from common stocks rather than bonds, whereas many
equity-income funds focused on earning income from bonds. Over the
period, bonds woefully underperformed stocks.
Q. SO, IF LARGE-CAP STOCKS HAVE DONE SO WELL RECENTLY, WHY DIDN'T THE
FUND HOLD ONLY THEM?
A. If I held just large-cap stocks, the fund's performance probably
would have been stronger over the short run. However, as I just
mentioned, that would be inconsistent with the fund's long-term
strategy, which encourages me to own stocks of several different
capitalization sizes. In general, I feel that if I continue with the
fund's investment style, the fund will catch any short-term market
trends over the long run.
Q. GOING BACK TO THE FUND'S PERFORMANCE COMPARED TO THE S&P 500, YOU
IMPLIED THAT THERE WERE OTHER REASONS THE FUND UNDERPERFORMED . . .
A. Yes, there were. What probably hurt the fund the most was that the
energy sector - the fund's third-largest sector weighting - was
negatively affected by declining oil prices. This was largely due to
reduced demand in the worldwide oil market, mostly from Asian
countries still stinging from last fall's correction. On top of that,
weather patterns, including a relatively mild U.S. winter, had a
negative impact on oil demand. I failed to recognize how low energy
prices could go over the period. I thought it was a temporary issue,
but, in retrospect, I should have taken much more aggressive action.
Q. WHAT ABOUT FINANCE, THE FUND'S LARGEST SECTOR WEIGHTING?
A. The finance sector - which made up 26.60% of the fund at the end of
the period - somewhat underperformed the overall market. As a result,
the fund was slightly hurt by its large exposure to the sector. Many
banks were negatively affected by a flurry of acquisition and merger
activity in the early part of the year. Investors were concerned that
their ability to earn an adequate return on the acquisitions was
lessening as bank prices kept getting bid up. In addition, some larger
money-center banks like BankAmerica were somewhat hurt recently by
their exposure in Asia.
Q. DID ANY SPECIFIC HOLDINGS HELP THE FUND?
A. Three top-10 holdings were especially strong performers. General
Electric - the fund's number one holding - showed solid earnings
growth, and I consider it one of the best-managed companies around.
Another strong performer was American Express. I bought this stock as
a turnaround, and it not only did so, but in addition the American
Express card has been gaining market share relative to its
competitors. Fannie Mae, which buys loans from mortgage originators,
packages them and then sells them to investors, benefited from strong
refinancing activity at the beginning of the year.
Q. STEVE, WHAT'S YOUR OUTLOOK GOING FORWARD?
A. In general, the underlying economic conditions in the U.S. remain
very good. We have low inflation, low interest rates, low unemployment
and good consumer demand. In addition, the political environment is
still relatively benign, and the lack of major activity in Congress is
good for stock prices since change often creates uncertainty. I will
be paying close attention to what's happening in Asia and Russia,
however, since events in those regions could negatively affect the
U.S. economy 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.
STEPHEN PETERSEN ON THE
ADVANTAGES AND
DISADVANTAGES OF NOT OWNING
TECHNOLOGY STOCKS:
"AS WE'VE DISCUSSED IN PREVIOUS
REPORTS, THE FUND DOES NOT INVEST
- - OR INVESTS VERY INFREQUENTLY -
IN TECHNOLOGY STOCKS. THAT'S BECAUSE
THESE STOCKS DO NOT PAY DIVIDENDS,
AND, THEREFORE, DO NOT FIT INTO THE
FUND'S INVESTMENT STRATEGY.
"OVER THE PAST SIX TO 12 MONTHS,
THIS LIMITATION HURT THE FUND. AS A
GROUP, TECHNOLOGY STOCKS GENERALLY
DID WELL, WITH SOME OF ITS LARGER
COMPANIES - SUCH AS MICROSOFT
AND DELL COMPUTER - TURNING IN
VERY STRONG RESULTS. THE SECTOR ALSO
GOT A BOOST, ESPECIALLY OVER THE PAST
THREE MONTHS, FROM THE MARKET
CRAZE FOR INTERNET-ORIENTED STOCKS.
"THAT SAID, EVEN DURING THIS
HIGH-GROWTH PERIOD FOR SOME
TECHNOLOGY STOCKS, A NUMBER OF
PROMINENT TECHNOLOGY COMPANIES
PERFORMED POORLY. HOUSEHOLD
NAMES LIKE HEWLETT PACKARD WERE
DOWN NOTABLY.
"I POINT OUT THIS EXAMPLE TO STRESS
THAT EVEN IN THE BEST OF TIMES,
TECHNOLOGY STOCKS OVERALL ARE
CONSIDERED MORE VOLATILE THAN OTHER
PARTS OF THE MARKET. IN ADDITION,
WHILE MANY TECHNOLOGY STOCKS HAVE
DONE WELL OVER THE SHORT TERM, THEY
HAVE NOT PROVEN THEMSELVES TO
CONSISTENTLY PERFORM WELL OVER THE
LONG TERM.
"THE REALITY IS THAT IF THE FUND OWNED
TECHNOLOGY STOCKS, ITS VOLATILITY LEVEL
WOULD NOTABLY INCREASE, CHANGING
THE FACE OF THE FUND. SINCE THIS IS A
RELATIVELY CONSERVATIVE FUND, I BELIEVE
MOST SHAREHOLDERS WOULD BE
UNCOMFORTABLE WITH THIS LEVEL OF
VOLATILITY."
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, 1998,
MORE THAN $24 BILLION
MANAGER: STEPHEN PETERSEN,
SINCE 1993; MANAGER, FIDELITY
BALANCED FUND, 1996 TO
1997; MANAGER, VARIOUS
INSTITUTIONAL ACCOUNTS, SINCE
1987; JOINED FIDELITY IN 1980
(CHECKMARK)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 3.6 3.5
American Express Co. 2.3 2.0
Citicorp 2.3 0.5
Fannie Mae 1.9 2.2
Philip Morris Companies, Inc. 1.8 2.4
Wal-Mart Stores, Inc. 1.5 1.3
British Petroleum Co. PLC ADR 1.5 1.7
Bank of New York Co., Inc. 1.5 1.4
BankAmerica Corp. 1.4 1.2
AT&T Corp. 1.3 0.5
TOP FIVE MARKET SECTORS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
Finance 26.6 24.1
Utilities 10.2 9.3
Energy 9.8 10.2
Industrial Machinery & Equipment 7.9 7.2
Basic Industries 6.2 7.4
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1998 * AS OF JANUARY 31, 1998**
ROW: 1, COL: 1, VALUE: 1.5
ROW: 1, COL: 2, VALUE: 6.3
ROW: 1, COL: 3, VALUE: 1.1
ROW: 1, COL: 4, VALUE: 92.09999999999999
STOCKS 89.6%
BONDS 0.1%
CONVERTIBLE
SECURITIES 6.0%
SHORT-TERM
INVESTMENTS 4.3%
FOREIGN
INVESTMENTS 11.7%
STOCKS 93.1%
BONDS 0.1%
CONVERTIBLE
SECURITIES 6.3%
SHORT-TERM
INVESTMENTS 0.5%
FOREIGN
INVESTMENTS 11.2%
ROW: 1, COL: 1, VALUE: 4.3
ROW: 1, COL: 2, VALUE: 6.0
ROW: 1, COL: 3, VALUE: 1.1
ROW: 1, COL: 4, VALUE: 88.59999999999999
*
**
INVESTMENTS JULY 31, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
COMMON STOCKS - 93.1%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 4.1%
AEROSPACE & DEFENSE - 3.0%
AlliedSignal, Inc. 3,985,800 $ 173,382
Harsco Corp. 1,763,000 76,140
Lockheed Martin Corp. 1,369,300 136,502
Textron, Inc. 2,201,600 162,643
United Technologies Corp. 1,871,500 179,313
727,980
DEFENSE ELECTRONICS - 1.0%
Northrop Grumman Corp. 587,900 47,657
Raytheon Co.:
Class A 112,556 6,099
Class B 3,292,600 182,122
235,878
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 826,000 39,287
TOTAL AEROSPACE & DEFENSE 1,003,145
BASIC INDUSTRIES - 6.2%
CHEMICALS & PLASTICS - 3.2%
Air Products & Chemicals, Inc. 1,098,600 38,451
E. I. du Pont de Nemours and Co. 1,416,400 87,817
Great Lakes Chemical Corp. 1,899,300 74,904
Hanna (M.A.) Co. 1,459,900 21,625
Hercules, Inc. 1,611,700 55,906
Hoechst AG Ord. 1,039,600 46,631
IMC Global, Inc. 1,248,900 31,925
ICI (Imperial Chemical Industries) PLC ADR Class L 557,400 29,229
Lawter International, Inc. 706,600 6,536
Millennium Chemicals, Inc. 854,157 23,062
Monsanto Co. 2,061,600 116,738
Nalco Chemical Co. 964,200 33,084
Octel Corp. (a) 269,450 5,473
Olin Corp. 1,300,700 50,808
Solutia, Inc. 1,368,500 40,627
Union Carbide Corp. 1,638,000 78,624
Witco Corp. 2,087,200 50,354
791,794
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - 0.4%
Dofasco, Inc. 1,613,100 $ 23,153
Inland Steel Industries, Inc. 1,827,300 51,507
USX-U.S. Steel Group 574,900 15,487
90,147
METALS & MINING - 1.1%
Alcan Aluminium Ltd. 1,564,100 40,192
Alumax, Inc. 828,396 39,815
Aluminum Co. of America 1,745,048 120,953
Kaiser Aluminum Corp. (a) 961,201 8,711
Noranda, Inc. 631,200 9,707
Pechiney SA Class A 262,838 11,023
Phelps Dodge Corp. 721,400 40,083
270,484
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 210,500 6,460
Tupperware Corp. 318,000 8,029
14,489
PAPER & FOREST PRODUCTS - 1.4%
Boise Cascade Corp. 989,800 27,714
Champion International Corp. 1,364,300 57,898
Domtar, Inc. 2,284,800 13,450
Georgia-Pacific Corp. 1,187,000 60,982
Kimberly-Clark Corp. 2,275,500 102,255
Weyerhaeuser Co. 1,903,300 79,939
342,238
TOTAL BASIC INDUSTRIES 1,509,152
CONSTRUCTION & REAL ESTATE - 2.1%
BUILDING MATERIALS - 0.5%
American Standard Companies, Inc. (a) 1,233,600 58,750
Masco Corp. 1,703,600 48,659
107,409
ENGINEERING - 0.4%
EG & G, Inc. 823,400 21,254
Fluor Corp. 471,700 19,841
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
ENGINEERING - CONTINUED
Foster Wheeler Corp. 645,200 $ 10,122
IMS Health, Inc. 751,300 47,191
98,408
REAL ESTATE - 0.0%
Fastighets AB Tornet 528,030 8,409
Mandamus AB 57,815 346
8,755
REAL ESTATE INVESTMENT TRUSTS - 1.2%
Alexandria Real Estate Equities, Inc. 232,800 6,780
Crescent Real Estate Equities, Inc. 949,600 27,895
Duke Realty Investors, Inc. 212,900 4,564
Equity Office Properties Trust 886,000 22,039
Equity Residential Properties Trust (SBI) 1,113,500 46,767
First Industrial Realty Trust, Inc. 133,300 3,683
Macerich Co. 469,400 12,821
Patriot American Hospitality, Inc. 437,806 8,318
Public Storage, Inc. 545,600 14,458
Starwood Hotels & Resorts Trust 3,203,200 131,531
Weeks Corp. 360,700 10,415
289,271
TOTAL CONSTRUCTION & REAL ESTATE 503,843
DURABLES - 4.1%
AUTOS, TIRES, & ACCESSORIES - 2.7%
Bayerische Moteren Werke (BMW) AG 39,700 38,206
Bayerische Moteren Werke (BMW) AG (RFD) 7,940 7,552
Chrysler Corp. 3,527,000 208,754
Eaton Corp. 637,500 41,597
Ford Motor Co. 619,100 35,250
General Motors Corp. 983,935 71,151
Johnson Controls, Inc. 897,900 46,971
Meritor Automotive, Inc. 1,338,400 27,103
Navistar International Corp. (a) 602,100 16,069
Snap-On Tools Corp. 413,900 14,693
TRW, Inc. 1,529,800 82,896
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES - CONTINUED
Volvo AB Class B 1,685,000 $ 52,078
Volvo AB Class B ADR 142,200 4,364
646,684
CONSUMER DURABLES - 0.6%
Minnesota Mining & Manufacturing Co. 1,748,900 130,949
CONSUMER ELECTRONICS - 0.3%
General Motors Corp. Class H 481,200 20,511
Maytag Co. 1,128,400 49,649
Sunbeam-Oster, Inc. 1,179,600 10,469
80,629
TEXTILES & APPAREL - 0.5%
Dexter Corp. 946,000 25,897
Intimate Brands, Inc. Class A 366,100 8,375
Kellwood Co. 899,400 28,556
NIKE, Inc. Class B 1,032,300 45,937
Unifi, Inc. 798,900 21,620
130,385
TOTAL DURABLES 988,647
ENERGY - 9.6%
ENERGY SERVICES - 0.9%
Dresser Industries, Inc. 2,054,700 72,557
Halliburton Co. 1,864,800 67,716
Schlumberger Ltd. 1,111,900 67,339
207,612
OIL & GAS - 8.7%
Amerada Hess Corp. 1,536,700 77,891
Amoco Corp. 1,753,600 73,213
Anadarko Petroleum Corp. 829,400 28,459
Atlantic Richfield Co. 1,820,200 123,319
British Petroleum Co. PLC 8,218,279 109,088
British Petroleum Co. PLC ADR 4,554,056 365,463
Burlington Resources, Inc. 1,690,400 61,277
Chevron Corp. 2,161,400 178,586
Coastal Corp. (The) 1,133,800 37,132
Elf Aquitaine SA sponsored ADR 1,232,300 79,945
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Exxon Corp. 1,068,600 $ 74,936
Kerr-McGee Corp. 267,600 13,731
Mobil Corp. 1,090,900 76,090
Occidental Petroleum Corp. 4,954,100 110,229
Phillips Petroleum Co. 1,385,200 61,208
Royal Dutch Petroleum Co. 4,458,400 227,378
Santa Fe Energy Resources, Inc. 863,275 7,608
Texaco, Inc. 130,633 7,944
Tosco Corp. 200 6
Total SA:
Class B 1,315,943 150,450
sponsored ADR 1,645,892 94,124
USX-Marathon Group 2,638,500 90,039
Ultramar Diamond Shamrock Corp. 761,700 19,947
Unocal Corp. 968,245 31,710
Valero Energy Corp. 522,300 12,503
2,112,276
TOTAL ENERGY 2,319,888
FINANCE - 25.4%
BANKS - 12.0%
Chase Manhattan Corp. 1,612,600 121,953
Banc One Corp. 4,870,870 251,763
Bank of New York Co., Inc. 5,534,917 354,235
Bank of Nova Scotia 1,547,100 34,742
BankBoston Corp. 940,244 45,484
BankAmerica Corp. 3,762,100 337,648
Citicorp 3,252,700 552,959
Comerica, Inc. 1,895,739 127,725
Credit Suisse Group 454,300 114,812
Forenings Sparbanken AB Class A (g) 1,156,300 34,573
Fuji International Trust sponsored ADR unit (a)(g) 332 2,687
National Bank of Canada 4,722,100 84,644
NationsBank Corp. 3,799,559 303,015
Norwest Corp. 3,101,768 111,470
Royal Bank of Canada 1,681,300 91,191
Societe Generale Class A 120,655 29,088
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
U.S. Bancorp 3,928,500 $ 180,711
Wells Fargo & Co. 386,600 137,581
2,916,281
CREDIT & OTHER FINANCE - 5.5%
American Express Co. 5,069,800 559,579
AMP Ltd. (a) 1,961,800 25,929
Associates First Capital Corp. Class A 1,634,702 126,996
First Chicago NBD Corp. 2,497,753 209,343
Fleet Financial Group, Inc. 1,458,298 125,322
Household International, Inc. 4,646,978 231,187
Transamerica Corp. 487,100 57,539
1,335,895
FEDERAL SPONSORED CREDIT - 1.9%
Fannie Mae 7,605,400 471,535
INSURANCE - 4.5%
Aetna, Inc. 483,300 33,499
Allstate Corp. 7,271,370 308,579
CIGNA Corp. 1,032,300 68,196
Fremont General Corp. (f) 1,785,628 102,116
General Re Corp. 365,100 86,529
Hartford Financial Services Group, Inc. 3,407,200 177,387
Highlands Insurance Group, Inc. (a)(f) 787,590 11,420
MBIA, Inc. 266,200 17,935
Marsh & McLennan Companies, Inc. 475,800 29,054
PMI Group, Inc. 496,800 33,658
Reliastar Financial Corp. 2,365,145 117,370
Torchmark Corp. 1,584,100 69,403
Travelers Property Casualty Corp. Class A 632,000 27,334
1,082,480
SAVINGS & LOANS - 0.9%
Washington Mutual, Inc. 5,396,610 215,527
SECURITIES INDUSTRY - 0.6%
First Marathon Inc. Class A (non-vtg.) 1,115,900 18,084
Lehman Brothers Holdings, Inc. 882,060 63,508
Nomura Securities Co. Ltd. 652,000 7,601
Travelers Group, Inc. (The) 664,000 44,488
133,681
TOTAL FINANCE 6,155,399
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 5.9%
DRUGS & PHARMACEUTICALS - 4.1%
American Home Products Corp. 4,415,000 $ 227,373
Bristol-Myers Squibb Co. 2,105,800 239,930
Merck & Co., Inc. 745,600 91,942
Novartis AG (Reg.) 53,317 89,853
Sankyo Co. Ltd. 2,270,000 50,884
Schering-Plough Corp. 2,793,100 270,232
Takeda Chemical Industries Ltd. 702,000 18,019
988,233
MEDICAL EQUIPMENT & SUPPLIES - 0.9%
Bausch & Lomb, Inc. 516,600 26,411
Baxter International, Inc. 1,453,100 86,822
Johnson & Johnson 1,185,100 91,549
Pall Corp. 887,500 19,969
224,751
MEDICAL FACILITIES MANAGEMENT - 0.9%
Columbia/HCA Healthcare Corp. 4,837,700 137,874
Humana, Inc. (a) 1,246,700 33,895
United HealthCare Corp. 1,011,500 57,150
228,919
TOTAL HEALTH 1,441,903
HOLDING COMPANIES - 0.3%
CINergy Corp. 1,189,198 37,534
Cookson Group PLC 4,894,058 13,983
U.S. Industries, Inc. 1,564,860 30,124
81,641
INDUSTRIAL MACHINERY & EQUIPMENT - 7.6%
ELECTRICAL EQUIPMENT - 4.6%
Alcatel Alsthom Compagnie Generale d'Electricite SA 587,565 116,892
General Electric Co. 9,841,400 878,960
Loral Space & Communications Ltd. (a) 634,300 17,562
Omron Corp. 1,028,000 15,149
Siemens A.G. 1,087,000 80,752
1,109,315
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
Alstom SA 979,700 $ 29,030
Cooper Industries, Inc. 409,372 21,466
Harnischfeger Industries, Inc. 956,700 23,798
Ingersoll-Rand Co. 1,467,200 64,832
Parker-Hannifin Corp. 1,459,400 50,076
Stewart & Stevenson Services, Inc. 1,109,600 18,863
Tyco International Ltd. 4,716,070 292,101
500,166
POLLUTION CONTROL - 1.0%
Browning-Ferris Industries, Inc. 2,213,682 77,894
Ogden Corp. 1,080,800 28,033
Waste Management, Inc. 2,391,920 131,855
237,782
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,847,263
MEDIA & LEISURE - 3.5%
BROADCASTING - 1.1%
CBS Corp. 2,677,014 90,851
Time Warner, Inc. 2,074,496 186,834
277,685
ENTERTAINMENT - 1.1%
King World Productions, Inc. (a) 976,400 27,339
MGM Grand, Inc. (a) 1,444,900 47,953
Viacom, Inc. Class B (non-vtg.) (a) 2,770,800 189,800
265,092
LEISURE DURABLES & TOYS - 0.1%
Brunswick Corp. 1,073,300 20,862
LODGING & GAMING - 0.2%
Circus Circus Enterprises, Inc. (a) 785,500 10,752
Mirage Resorts, Inc. (a) 1,292,100 27,780
38,532
PUBLISHING - 0.6%
ACNielsen Corp. (a) 1,474,433 38,428
Harcourt General, Inc. 1,248,200 70,445
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - CONTINUED
R.H. Donnelley Corp. 787,300 $ 2,165
Reader's Digest Association, Inc. (The) Class A (non-vtg.) 909,100
25,682
136,720
RESTAURANTS - 0.4%
McDonald's Corp. 1,447,600 96,718
TOTAL MEDIA & LEISURE 835,609
NONDURABLES - 5.5%
AGRICULTURE - 0.4%
Edperbrascan Corp. Ltd., Class A 6,169,050 98,543
BEVERAGES - 0.2%
Anheuser-Busch Companies, Inc. 1,044,300 53,977
Seagram Co. Ltd. 313 11
53,988
FOODS - 0.9%
Bestfoods 1,358,200 75,550
Corn Products International, Inc. (a) 856,300 25,475
General Mills, Inc. 363,558 22,518
Goodman Fielder Ltd. Ord. 5,084,926 6,474
Heinz (H.J.) Co. 879,400 48,477
Ralston Purina Co. 1,067,500 34,360
212,854
HOUSEHOLD PRODUCTS - 1.4%
Avon Products, Inc. 357,100 30,889
Clorox Co. 545,500 55,914
Dial Corp. 1,050,100 25,071
Premark International, Inc. 649,100 20,122
Rubbermaid, Inc. 1,625,700 54,156
Unilever PLC Ord. 11,656,600 114,571
Unilever NV:
Ord. 26,400 1,891
ADR 588,800 40,922
343,536
TOBACCO - 2.6%
Dimon, Inc. 764,550 8,315
Gallaher Group PLC sponsored ADR 2,298,500 58,899
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
TOBACCO - CONTINUED
Philip Morris Companies, Inc. 10,091,600 $ 442,138
RJR Nabisco Holdings Corp. 4,998,920 122,161
631,513
TOTAL NONDURABLES 1,340,434
PRECIOUS METALS - 0.1%
Newmont Mining Corp. 1,280,700 24,173
RETAIL & WHOLESALE - 4.0%
APPAREL STORES - 0.9%
Charming Shoppes, Inc. (a) 1,334,600 6,173
Footstar, Inc. (a) 786,654 29,155
Limited, Inc. (The) 2,148,539 57,608
TJX Companies, Inc. 5,306,528 124,703
Venator Group, Inc. (a) 315,500 4,535
222,174
GENERAL MERCHANDISE STORES - 2.8%
Consolidated Stores Corp. (a) 500,000 16,812
Dayton Hudson Corp. 1,789,800 85,575
Federated Department Stores, Inc. (a) 1,962,267 103,878
Hudson's Bay Co. Ord. 1,289,500 26,014
Hudson's Bay Co. (g) 642,800 12,968
Penney (J.C.) Co., Inc. 623,400 36,586
Sears, Roebuck & Co. 297,000 15,073
Wal-Mart Stores, Inc. 5,942,200 375,101
672,007
RETAIL & WHOLESALE, MISCELLANEOUS - 0.3%
Tandy Corp. 944,900 53,682
Toys "R" Us, Inc. (a) 632,500 14,390
68,072
TOTAL RETAIL & WHOLESALE 962,253
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 1.0%
LEASING & RENTAL - 0.2%
Ryder Systems, Inc. 1,752,100 $ 50,811
PRINTING - 0.4%
Donnelley (R.R.) & Sons Co. 1,302,600 55,360
Harland (John H.) Co. 27,700 436
New England Business Service, Inc. 587,800 17,781
Wallace Computer Services, Inc. 1,038,600 20,253
93,830
SERVICES - 0.4%
AccuStaff, Inc. (a) 545,600 12,890
Block (H & R), Inc. 1,102,440 46,854
Dunn & Bradstreet Corp. 787,300 21,601
Manpower, Inc. 826,900 22,223
103,568
TOTAL SERVICES 248,209
TECHNOLOGY - 2.9%
COMPUTER SERVICES & SOFTWARE - 0.7%
Electronic Data Systems Corp. 2,919,900 102,744
First Data Corp. 1,172,000 33,914
NCR Corp. (a) 1,021,900 34,617
171,275
COMPUTERS & OFFICE EQUIPMENT - 1.3%
Compaq Computer Corp. 260,536 8,565
Diebold, Inc. 245,200 6,192
International Business Machines Corp. 1,131,300 149,897
Unisys Corp. (a) 4,529,771 124,852
Xerox Corp. 183,543 19,375
308,881
ELECTRONICS - 0.6%
AMP, Inc. 1,091,100 32,051
Motorola, Inc. 2,254,300 117,787
Nitto Denko Corp. 678,000 9,898
159,736
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.3%
Eastman Kodak Co. 481,700 $ 40,523
Polaroid Corp. 722,900 23,856
64,379
TOTAL TECHNOLOGY 704,271
TRANSPORTATION - 1.4%
AIR TRANSPORTATION - 0.2%
Viad Corp. 1,966,500 47,319
RAILROADS - 1.2%
Burlington Northern Santa Fe Corp. 731,900 75,340
CSX Corp. 3,475,100 140,524
Norfolk Southern Corp. 2,471,800 73,845
289,709
TOTAL TRANSPORTATION 337,028
UTILITIES - 9.4%
ELECTRIC UTILITY - 2.7%
Allegheny Energy, Inc. 2,456,600 66,942
American Electric Power Co., Inc. 2,432,300 104,741
Central & South West Corp. 596,900 15,184
Central Maine Power Co. 1,269,800 24,047
CILCORP, Inc. 325,000 15,214
Consolidated Edison, Inc. 1,007,350 42,624
DPL, Inc. 2,038,475 34,781
Duke Energy Corp. 859,227 49,083
Entergy Corp. 3,403,400 93,168
FPL Group, Inc. 484,300 29,451
Illinova Corp. 482,000 12,050
Niagara Mohawk Power Corp. (a) 3,055,600 46,407
PG&E Corp. 2,285,698 69,571
PacifiCorp. 673,300 14,434
Pinnacle West Capital Corp. 1,017,900 43,515
661,212
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - 0.8%
MCN Energy Group, Inc. 1,873,500 $ 46,486
Questar Corp. 3,357,700 62,537
Sempra Energy (a) 3,047,751 76,766
Sonat, Inc. 731,700 21,402
207,191
TELEPHONE SERVICES - 5.9%
AT&T Corp. 5,210,000 315,856
ALLTEL Corp. 1,143,200 47,943
Ameritech Corp. 3,687,800 181,394
Bell Atlantic Corp. 5,655,092 256,600
BellSouth Corp. 2,569,000 175,495
SUNCOM Telecommunications, Inc. (a)(c) 1,626,737 -
GTE Corp. 2,221,800 120,810
MCI Communications Corp. 580,400 37,581
SBC Communications, Inc. 3,167,400 129,467
Sprint Corp. 693,900 48,573
WorldCom, Inc. (a) 2,041,734 107,957
1,421,676
TOTAL UTILITIES 2,290,079
TOTAL COMMON STOCKS
(Cost $15,081,872) 22,592,937
CONVERTIBLE PREFERRED STOCKS - 3.9%
BASIC INDUSTRIES - 0.0%
PAPER & FOREST PRODUCTS - 0.0%
International Paper $2.625 (g) 228,900 11,331
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Vornado Realty Trust, Series A, $3.25 87,100 4,703
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Republic Industries, Inc. $1.55 465,300 9,946
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 0.1%
OIL & GAS - 0.1%
Occidental Petroleum Corp. $3.00 329,200 $ 22,015
Tosco Financing Trust $2.875 TOPRS (g) 76,600 4,031
26,046
FINANCE - 1.0%
CLOSED END INVESTMENT COMPANY - 0.1%
Readers Digest Association $1.93 TRACES 985,200 26,662
CREDIT & OTHER FINANCE - 0.3%
DECS Trust $2.01 DECS 93,000 1,140
Life Re Corp./ Life Re Capital Trust II $3.96 83,800 6,264
Union Pacific Capital Trust $3.13 TIDES (a)(g) 817,600 36,792
WBK Trust $3.135 STRYPES 605,200 18,648
62,844
INSURANCE - 0.3%
Aetna, Inc. Class C 6.25% PRIDES 335,700 23,079
Conseco, Inc.:
$4.2788 PRIDES 278,200 41,730
$3.50 PRIDES 363,200 17,661
82,470
SAVINGS & LOANS - 0.1%
Ahmanson (H.F.) & Co., Series D, $3.00 150,000 20,400
SECURITIES INDUSTRY - 0.2%
Merrill Lynch & Co, Inc. $2.3906 STRYPES 329,100 9,544
Salomon, Inc.:
$2.03 DECS 490,100 20,890
$3.484 DECS 198,400 11,706
42,140
TOTAL FINANCE 234,516
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.2%
Loral Space & Communications Ltd., Series C:
$3.00 (g) 388,600 28,853
$3.00 302,300 22,446
51,299
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Ingersoll Rand Co./ Ingersoll Rand Finance Co. $0.19
Growth PRIDES 1,126,900 $ 22,820
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 74,119
MEDIA & LEISURE - 1.0%
BROADCASTING - 0.7%
Evergreen Media Corp. $3.00 (g) 395,800 39,580
MediaOne Group, Inc.:
Class D $2.25 849,600 86,500
7 5/8% DECS (a) 393,300 20,943
$3.63 PIES (a) 528,700 30,731
177,754
ENTERTAINMENT - 0.2%
Premier Parks, Inc. $4.05 PIES 581,100 36,755
PUBLISHING - 0.1%
Hollinger Inernational, Inc. $0.95 PRIDES 1,147,500 16,710
Taylor, J.N. Holdings Ltd. 9 1/2% (a) 956,400 -
Tribune Co. $1.75 DECS (a) 216,300 6,043
22,753
TOTAL MEDIA & LEISURE 237,262
NONDURABLES - 0.2%
FOODS - 0.2%
Chiquita Brands International, Inc.:
Series A, $2.875 474,500 19,929
Series B, $3.75 178,500 9,126
Dole Food Automatic Common Exchange Security Trust
$2.7475 ACES 283,900 12,066
41,121
RETAIL & WHOLESALE - 0.3%
APPAREL STORES - 0.1%
TJX Companies, Inc., Series E, $7.00 47,800 24,258
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 0.2%
K mart Financing I $3.875 607,400 $ 37,659
TOTAL RETAIL & WHOLESALE 61,917
SERVICES - 0.1%
Cendant Corp. $2.91 Growth PRIDES 611,200 15,891
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Wang Laboratories, Inc.:
$3.25 (g) 228,300 11,643
$3.25 276,100 14,081
25,724
UTILITIES - 0.8%
CELLULAR - 0.2%
AirTouch Communications, Inc. Class B $1.74 DECS 1,030,400 49,974
ELECTRIC UTILITY - 0.4%
Houston Industries, Inc. $3.215 ACES 612,600 47,936
Texas Utilities Co. $3.90 PRIDES (a) 986,600 41,613
89,549
GAS - 0.2%
Enron Corp. Series J, $10.50 31,800 22,982
MCN Corp. $4.00 52,900 2,387
Williams Companies, Inc. $3.50 (a) 166,600 25,073
50,442
TOTAL UTILITIES 189,965
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $725,468) 932,541
CORPORATE BONDS - 2.5%
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (E) AMOUNT (000S) (D)
(000S)
CONVERTIBLE BONDS - 2.4%
CONSTRUCTION & REAL ESTATE - 0.0%
BUILDING MATERIALS - 0.0%
Hexcel Corp. 7%, 8/1/03 B1 $ 6,758 $ 7,957
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Liberty Property exchangeable 8%, 7/1/01 Ba2 1,358 1,702
TOTAL CONSTRUCTION & REAL ESTATE 9,659
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Magna International, Inc.
4 7/8%, 2/15/05 (g) Baa 12,500 13,742
CONSUMER ELECTRONICS - 0.2%
Matsushita Electric Industrial Co. Ltd.:
1.3%, 3/29/02 Aa2 JPY 959,000 9,574
1.4%, 3/31/04 Aa2 JPY 442,000 4,450
Sunbeam Corp. 0%, 3/25/18 (g) Caa 128,730 27,677
41,701
TOTAL DURABLES 55,443
ENERGY - 0.1%
OIL & GAS - 0.1%
Pennzoil Co. 4 3/4%,10/1/03 Ba1 22,210 31,205
FINANCE - 0.2%
CREDIT & OTHER FINANCE - 0.2%
Bell Atlantic Financial Services, Inc.
5 3/4%, 4/1/03 (g) A1 30,050 31,252
INSURANCE - 0.0%
Loews Corp. 3 1/8%, 9/15/07 A2 9,210 7,892
TOTAL FINANCE 39,144
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (E) AMOUNT (000S) (D)
(000S)
CONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - 0.4%
BROADCASTING - 0.1%
Jacor Communications, Inc.:
liquid yield option notes 0%, 6/12/11 B3 $ 18,492 $ 15,291
liquid yield option notes 0%, 2/9/18 B3 7,150 3,124
18,415
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5%, 5/15/06 Baa 5,634 5,634
PUBLISHING - 0.3%
News America Holdings, Inc. liquid yield option
notes 0%, 3/11/13 Baa 114,540 68,294
TOTAL MEDIA & LEISURE 92,343
NONDURABLES - 0.1%
AGRICULTURE - 0.1%
EdperBrascan Corp. 7%, 5/31/06 (g) - CAD 14,000 15,279
RETAIL & WHOLESALE - 0.5%
APPAREL STORES - 0.1%
Baker (J.), Inc. 7%, 6/1/02 B3 13,300 12,219
Charming Shoppes, Inc. 7 1/2%, 7/15/06 B2 5,338 5,045
17,264
DRUG STORES - 0.1%
Rite Aid Corp.:
5 1/4%, 9/15/02 - 230 294
5 1/4%, 9/15/05 (g) Baa 24,600 31,411
31,705
GENERAL MERCHANDISE STORES - 0.1%
Federated Department Stores, Inc.
5%, 10/1/03 Baa 20,953 32,582
RETAIL & WHOLESALE, MISCELLANEOUS - 0.2%
Home Depot, Inc. 3 1/4%, 10/1/01 A1 24,290 50,887
TOTAL RETAIL & WHOLESALE 132,438
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (E) AMOUNT (000S) (D)
(000S)
CONVERTIBLE BONDS - CONTINUED
SERVICES - 0.1%
ADT Operations, Inc. liquid yield option notes
0%, 7/6/10 Baa $ 19,295 $ 32,477
TECHNOLOGY - 0.7%
COMPUTER SERVICES & SOFTWARE - 0.1%
Softkey International, Inc.
5 1/2%, 11/1/00 (g) - 29,030 27,143
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Apple Computer, Inc.:
6%, 6/1/01 (g) Caa 12,780 16,694
6%, 6/1/01 Caa 23,710 30,971
Quantum Corp. 7%, 8/1/04 B2 16,080 14,794
62,459
ELECTRONICS - 0.3%
Cirrus Logic, Inc. 6%, 12/15/03 (g) B3 11,090 8,532
Micron Technology, Inc. 7%, 7/1/04 B2 36,417 36,144
Motorola, Inc. liquid yield option notes
0%, 9/27/13 A1 35,020 25,433
70,109
TOTAL TECHNOLOGY 159,711
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Continental Airlines, Inc.
6 3/4%, 4/15/06 (g) B2 9,150 16,584
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
Cam-Net Communications Network, Inc.
11 1/2%, 4/4/99 (c) - 4,225 -
TOTAL CONVERTIBLE BONDS 584,283
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (E) AMOUNT (000S) (D)
(000S)
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 $ 21,012
TOTAL CORPORATE BONDS
(Cost $508,251) 605,295
COMMERCIAL MORTGAGE SECURITIES - 0.0%
Bardell Associates Note Trust
12 1/2%, 11/1/08 (c)
(Cost $2,636) - $ 2,587 2,749
INDEXED SECURITIES - 0.0%
Merrill Lynch & Co. Inc. Japan Index equity
participation securities 0%, 1/31/00
(Cost $4,188) Aa3 5,000 5,238
PURCHASED BANK DEBT - 0.0%
GPA Group PLC term loan 6.40%, 11/19/98
(Cost $341) - 450 447
CASH EQUIVALENTS - 0.5%
SHARES
Taxable Central Cash Fund (b) 79,942,330 79,942
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
U.S. Treasury obligations), in a joint
trading account at 5.63%, dated
7/31/98 due 8/3/98 $ 48,989 48,966
TOTAL CASH EQUIVALENTS
(Cost $128,908) 128,908
PURCHASED OPTIONS - 0.0%
EXPIRATION DATE/ UNDERLYING FACE VALUE (NOTE 1) STRIKE PRICE
AMOUNT AT VALUE (000S) (000S)
J. Aron and Co. OTC Put Option
on 10,032,000,000 Japanese Yen Sept.1998/
(Cost $1,300) 132 $ 69,406 $ 6,329
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $16,452,964) $ 24,274,444
SECURITY TYPE ABBREVIATIONS
ACES - Automatic Common Exchange Securities
DECS - Dividend Enhanced Convertible
Stock/Debt Exchangeable for
Common Stock
PIES - Premium Income Equity
Securities
PRIDES - Preferred Redeemable
Increased Dividend Equity
Securities
STRYPES - Structured Yield Product
Exchangeable for Common
Stock
TIDES - Term Income Deferred Equity Securities
TOPRS - Trust Originated Preferred
Securities
TRACES - Trust Automatic Common
Exchange Securities
CURRENCY ABBREVIATIONS
CAD - Canadian dollar
DEM - German deutsche mark
JPY - Japanese yen
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield of the Taxable Central Cash
Fund was 5.62%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(c) 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 $ 2,636
SUNCOM Telecommunications,
Inc. 4/12/96 $ 1,271
Cam-Net Communications
Network, Inc. 11 1/2%,
4/4/99 4/12/96 $ 2,792
(d) Principal amount is stated in United States dollars unless
otherwise noted.
(e) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(f) Affiliated company (see Note 7 of Notes to Financial Statements).
(g) 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
$370,772,000 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 88.8%
United Kingdom 2.8
France 2.1
Canada 2.0
Netherlands 1.1
Others (individually less than 1%) 3.2
TOTAL 100.0%
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $16,456,065,000. Net unrealized appreciation
aggregated $7,818,379,000, of which $8,608,169,000 related to
appreciated investment securities and $789,790,000 related to
depreciated investment securities.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1998 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 24,274,444
agreements of $48,966) (cost $16,452,964) -
See accompanying schedule
Cash 1
Receivable for investments sold 153,456
Receivable for fund shares sold 24,166
Dividends receivable 40,086
Interest receivable 5,111
Other receivables 595
TOTAL ASSETS 24,497,859
LIABILITIES
Payable for investments purchased $ 82,763
Payable for fund shares redeemed 44,224
Accrued management fee 9,852
Other payables and accrued expenses 4,972
Collateral on securities loaned, at value 122,190
TOTAL LIABILITIES 264,001
NET ASSETS $ 24,233,858
Net Assets consist of:
Paid in capital $ 15,618,452
Undistributed net investment income 20,538
Accumulated undistributed net realized gain (loss) on 773,460
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on investments 7,821,408
and assets and liabilities in foreign currencies
NET ASSETS, for 433,664 shares outstanding $ 24,233,858
NET ASSET VALUE, offering price and redemption price $55.88
per share ($24,233,858 (divided by) 433,664 shares)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED)
INVESTMENT INCOME $ 250,816
Dividends (including $623 received from affiliated issuers)
Interest (including income on securities loaned of $913) 29,678
280,494
Less foreign taxes withheld (5,218)
TOTAL INCOME 275,276
EXPENSES
Management fee $ 57,214
Transfer agent fees 22,172
Accounting and security lending fees 485
Non-interested trustees' compensation 66
Custodian fees and expenses 464
Registration fees 601
Audit 33
Legal 90
Miscellaneous 4
Total expenses before reductions 81,129
Expense reductions (1,815) 79,314
NET INVESTMENT INCOME 195,962
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain 779,675
of $978 on sales of investments in affiliated issuers)
Foreign currency transactions (381) 779,294
Change in net unrealized appreciation (depreciation) on:
Investment securities 993,299
Assets and liabilities in foreign currencies (332) 992,967
NET GAIN (LOSS) 1,772,261
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,968,223
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED YEAR ENDED
JULY 31, 1998 JANUARY 31,
(UNAUDITED) 1998
INCREASE (DECREASE) IN NET ASSETS
Operations $ 195,962 $ 350,823
Net investment income
Net realized gain (loss) 779,294 947,882
Change in net unrealized appreciation (depreciation) 992,967 2,658,073
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,968,223 3,956,778
FROM OPERATIONS
Distributions to shareholders (196,787) (352,802)
From net investment income
From net realized gain (259,730) (774,993)
TOTAL DISTRIBUTIONS (456,517) (1,127,795)
Share transactions 4,295,117 6,976,733
Net proceeds from sales of shares
Reinvestment of distributions 445,729 1,101,392
Cost of shares redeemed (3,290,865) (4,658,832)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,449,981 3,419,293
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,961,687 6,248,276
NET ASSETS
Beginning of period 21,272,171 15,023,895
End of period (including undistributed net investment $ 24,233,858 $ 21,272,171
income of $20,538 and $21,363, respectively)
OTHER INFORMATION
Shares
Sold 76,163 141,602
Issued in reinvestment of distributions 7,979 22,381
Redeemed (57,974) (94,339)
Net increase (decrease) 26,168 69,644
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED JANUARY 31,
JULY 31, 1998
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, $ 52.20 $ 44.47 $ 39.15 $ 30.89 $ 35.19 $ 29.87
beginning of period
Income from Investment
Operations
Net investment income .46 E .94 E 1.01 E .93 1.02 1.11
Net realized and 4.30 9.79 7.17 9.65 (2.12) 5.48
unrealized gain
(loss)
Total from investment 4.76 10.73 8.18 10.58 (1.10) 6.59
operations
Less Distributions
From net investment (.46) (.96) (1.02) (.96) (.98) (1.15)
income
From net realized gain (.62) (2.04) (1.84) (1.36) (2.22) (.12)
Total distributions (1.08) (3.00) (2.86) (2.32) (3.20) (1.27)
Net asset value, $ 55.88 $ 52.20 $ 44.47 $ 39.15 $ 30.89 $ 35.19
end of period
TOTAL RETURN B, C 9.13% 24.69% 21.74% 35.21% (3.01)% 22.52% D
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 24,234 $ 21,272 $ 15,024 $ 11,010 $ 7,439 $ 6,943
period (in millions)
Ratio of expenses to .66% A .67% .68% .68% .70% .66%
average net assets
Ratio of expenses to .65% A, F .65% F .66% F .67% F .69% F .66%
average net assets
after expense
reductions
Ratio of net investment 1.60% A 1.90% 2.46% 2.86% 3.37% 3.55%
income to average
net assets
Portfolio turnover rate 24% A 23% 30% 39% 50% 70%
Average commission $ .0425 $ .0421 $ .0331
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 TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
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, 1998 (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, 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 require 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. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts and foreign currency options, disposition of
foreign currencies, the difference between the amount of net
investment income accrued and the U.S. dollar amount actually
received, and gains and losses between trade date and settlement on
purchases and sales of securities. 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
U.S. federal income taxes to the extent that it distributes
substantially all of its taxable income for its fiscal year. The fund
may be subject to foreign taxes on income and gains on investments
which are accrued based upon the fund's understanding of the tax rules
and regulations that exist in the markets in which it invests. The
fund accrues such taxes as applicable. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. 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
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Under the Plan, deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of a
cross-section of Fidelity funds, including shares of the fund.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, foreign currency transactions,
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.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of 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 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 Fidelity Investments Money Management, Inc., 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 earned 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
market and to fluctuations in 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.
2. OPERATING POLICIES - CONTINUED
INDEXED SECURITIES. The fund may invest in indexed securities whose
values are linked either directly or inversely to changes in foreign
currencies, interest rates, commodities, indices, or other underlying
instruments. The fund uses these securities to increase or decrease
its exposure to different underlying instruments and to gain exposure
to markets that might be difficult to invest in through conventional
securities. Indexed securities may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment. 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 $2,749,000 or 0.01% of net assets.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The fund is permitted to
invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments amounted to $447,000 or 0.0% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $4,685,765,000 and $2,822,960,000, 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 .18%. 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 .47% of average net
assets.
In accordance with the management contract currently in effect, the
annual individual fund fee rate is scheduled to increase to .20% on
December 1, 1998.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 .18% 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 $672,000 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 $115,534,000 and $122,190,000, 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 $958,000 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 $4,000 and $853,000, 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. $ 3,528 $ 4,766 $ 552 $ 102,116
Highlands Insurance Group, Inc. 780 - - 11,420
Zurn Industries, Inc. - 1,585 71 -
TOTALS $ 4,308 $ 6,351 $ 623 $ 113,536
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 Xpress(registered trademark) provides a single
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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.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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0
*
BY PC
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interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_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.
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INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Management & Research
(U.K.) Inc., London, England
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(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Stephen R. Petersen, Vice President
Richard A. Spillane, Jr., Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
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
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FIDELITY
(REGISTERED TRADEMARK)
REAL ESTATE INVESTMENT
PORTFOLIO
SEMIANNUAL REPORT
JULY 31, 1998
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.
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.
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.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
So far, 1998 has been a year of considerable volatility in the U.S.
stock and bond markets. In the first quarter, the U.S. stock market
soared as inflation and interest rates remained stable, while the
economy maintained strong growth. By summer, however, investors began
to exercise caution relative to the troublesome Asian economic climate
and reports of concerns about corporate earnings domestically. Market
volatility and low interest rates were also the main stories in the
bond market, with many investors moving assets to highly rated U.S.
Treasuries.
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, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Fidelity Real Estate -11.30% -4.36% 63.70% 216.70%
S&P 500 (registered trademark) 15.18% 19.29% 180.53% 445.15%
Wilshire Real Estate Securities -10.64% -1.65% 69.48% 79.26%
Real Estate Funds Average -9.11% -2.03% 48.71% 149.43%
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 returns to the performance
of the Wilshire Real Estate Securities Index - a market capitalization
weighted index of publicly traded real estate securities such as real
estate investment trusts (REITs) and real estate operating companies
(REOCs) - and the performance of the S&P 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
103 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, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Real Estate -4.36% 10.36% 12.22%
S&P 500 19.29% 22.91% 18.48%
Wilshire Real Estate Securities -1.65% 11.13% 6.01%
Real Estate Funds Average -2.03% 8.10% 9.38%
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
Real Estate Wilshire Real Estate
S&P 500
00303 WA005
SP001
1988/07/31 10000.00 10000.00
10000.00
1988/08/31 9902.49 9979.00
9660.00
1988/09/30 10054.89 10160.62
10071.52
1988/10/31 9966.78 10159.60
10351.50
1988/11/30 9823.61 10027.53
10203.48
1988/12/31 9979.01 10354.42
10382.04
1989/01/31 10079.70 10522.17
11142.00
1989/02/28 10113.26 10549.52
10864.57
1989/03/31 10191.05 10623.37
11117.71
1989/04/30 10463.72 10816.72
11694.72
1989/05/31 10656.86 11002.76
12168.36
1989/06/30 11022.27 11125.99
12099.00
1989/07/31 11575.69 11477.58
13191.54
1989/08/31 11737.11 11355.91
13450.09
1989/09/30 11598.59 11330.93
13394.95
1989/10/31 11165.98 10764.38
13084.18
1989/11/30 11306.29 10603.99
13351.10
1989/12/31 11353.50 10599.75
13671.53
1990/01/31 11104.88 10100.50
12754.17
1990/02/28 11033.85 10096.46
12918.70
1990/03/31 11093.04 10073.24
13261.04
1990/04/30 10949.13 9877.82
12929.52
1990/05/31 10901.16 9834.36
14190.14
1990/06/30 11069.53 9853.04
14093.65
1990/07/31 11142.44 9475.67
14048.55
1990/08/31 10352.62 8368.91
12778.56
1990/09/30 9835.32 7398.96
12156.25
1990/10/31 9551.85 6866.23
12103.97
1990/11/30 10155.77 7145.69
12885.89
1990/12/31 10366.20 7053.51
13245.41
1991/01/31 11332.54 7739.81
13822.91
1991/02/28 11683.93 8194.92
14811.25
1991/03/31 12456.72 8925.08
15169.68
1991/04/30 12799.92 8852.79
15206.08
1991/05/31 13104.98 8990.01
15862.99
1991/06/30 12683.23 8546.80
15136.46
1991/07/31 12953.36 8510.90
15841.82
1991/08/31 13017.68 8407.92
16217.27
1991/09/30 13395.35 8312.07
15946.44
1991/10/31 13174.05 8125.05
16160.13
1991/11/30 13043.87 7855.30
15508.87
1991/12/31 14428.52 8466.44
17283.09
1992/01/31 15298.98 8865.21
16961.62
1992/02/29 14969.26 8843.05
17182.12
1992/03/31 14877.51 8652.04
16847.07
1992/04/30 14664.21 8508.41
17342.38
1992/05/31 15104.14 8542.45
17427.35
1992/06/30 14930.36 8285.32
17167.69
1992/07/31 15588.26 8315.97
17869.85
1992/08/31 15628.54 8190.40
17503.51
1992/09/30 16060.12 8501.64
17710.06
1992/10/31 16235.86 8592.61
17772.04
1992/11/30 16533.27 8666.50
18378.07
1992/12/31 17243.41 9092.90
18604.12
1993/01/31 18091.89 9724.85
18760.39
1993/02/28 18529.82 10195.53
19015.53
1993/03/31 19864.28 10879.65
19416.76
1993/04/30 18968.25 10262.78
18946.88
1993/05/31 18733.90 10101.65
19454.65
1993/06/30 19221.56 10366.32
19511.07
1993/07/31 19346.74 10576.75
19433.03
1993/08/31 19652.73 10796.75
20169.54
1993/09/30 20560.27 11285.84
20014.23
1993/10/31 20223.67 10968.71
20428.53
1993/11/30 19045.59 10490.47
20234.46
1993/12/31 19400.84 10477.88
20479.29
1994/01/31 19558.10 10792.22
21175.59
1994/02/28 20515.99 11233.62
20601.73
1994/03/31 19782.23 10713.51
19703.49
1994/04/30 20056.18 10833.50
19955.70
1994/05/31 20488.74 11058.83
20282.97
1994/06/30 19876.54 10840.98
19786.04
1994/07/31 19832.89 10865.91
20435.02
1994/08/31 19745.58 10858.30
21272.86
1994/09/30 19510.80 10676.97
20751.67
1994/10/31 18732.13 10286.19
21218.59
1994/11/30 18070.99 9884.00
20445.80
1994/12/31 19796.28 10650.01
20749.02
1995/01/31 18926.44 10306.02
21287.04
1995/02/28 19226.39 10628.60
22116.59
1995/03/31 19302.51 10690.24
22769.25
1995/04/30 18998.77 10613.27
23439.81
1995/05/31 19697.37 10964.57
24376.70
1995/06/30 20108.91 11155.35
24942.97
1995/07/31 20462.51 11334.96
25770.08
1995/08/31 20877.60 11473.24
25834.76
1995/09/30 21248.75 11684.35
26924.99
1995/10/31 20657.64 11322.13
26828.87
1995/11/30 20766.53 11439.89
28006.65
1995/12/31 21957.19 12103.40
28546.06
1996/01/31 22352.67 12270.43
29517.77
1996/02/29 22431.77 12513.38
29791.40
1996/03/31 22448.86 12614.74
30078.29
1996/04/30 22416.85 12671.50
30521.64
1996/05/31 22880.87 12954.08
31308.80
1996/06/30 23253.99 13213.16
31428.08
1996/07/31 23335.02 13095.56
30039.59
1996/08/31 24355.92 13652.12
30673.13
1996/09/30 25138.00 13993.43
32399.41
1996/10/31 25908.71 14372.65
33292.98
1996/11/30 27122.15 14969.11
35809.60
1996/12/31 29911.19 16566.32
35100.21
1997/01/31 30276.17 16803.22
37293.27
1997/02/28 30375.70 16813.30
37585.65
1997/03/31 30383.12 16870.47
36041.26
1997/04/30 29428.94 16325.55
38192.92
1997/05/31 30265.94 16812.05
40518.11
1997/06/30 31896.25 17645.93
42333.32
1997/07/31 33113.28 18226.48
45701.78
1997/08/31 32910.44 18091.60
43141.57
1997/09/30 36224.29 20376.57
45504.43
1997/10/31 35166.90 19510.57
43984.58
1997/11/30 35405.66 19902.73
46020.63
1997/12/31 36309.79 20346.56
46810.80
1998/01/31 35706.10 20059.68
47328.53
1998/02/28 35049.15 19802.91
50741.86
1998/03/31 35978.10 20193.03
53340.35
1998/04/30 34707.43 19556.95
53876.96
1998/05/31 34253.62 19369.20
52950.81
1998/06/30 34072.47 19266.54
55101.68
1998/07/31 31670.16 17925.59
54514.84
IMATRL PRASUN SHR__CHT 19980731 19980813 162224 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Real Estate Investment Portfolio on July 31,
1988. As the chart shows, by July 31, 1998, the value of the
investment would have grown to $31,670 - a 216.70% increase on the
initial investment. For comparison, look at how both the Wilshire Real
Estate Securities Index and S&P 500 Index did over the same period.
With dividends and capital gains, if any, reinvested, the same $10,000
investment in the Wilshire Real Estate Securities Index would have
grown to $17,926 - a 79.26% increase. If $10,000 was invested in the
S&P 500 Index, it would have grown to $54,515 - a 445.15% 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
MARKET RECAP
Low interest rates. A strong
domestic economy. Tame inflation.
Not the environment where one
expects to encounter anxious
investors and a tumbling S&P. Yet
that was the scenario in the latter
stages of the six-month period
ending July 31, 1998. At the end of
those six months, the Standard &
Poor's 500 Index - a measure of
the U.S. stock market - produced
a return of 15.18%. That's down
from 17.71% for the six-month
period ending June 30, 1998.
After a strong first quarter of the
year, investor uncertainty over
corporate earnings reports, the
Asian economy and stock market
volatility began to have a tangible
effect on the domestic equity
market. In mid-June the major U.S.
indexes, along with Asian markets,
continued to sell off. During the
week of July 20th, the Dow Jones
Industrial Average racked up losses
of over 400 points. Contributing to
the decline were concerns that Asia's
crisis will inhibit the earnings
growth of American companies.
Throughout the period, small-cap
stocks were weak, while large-cap
stocks continued to pace the
market, due in large part to strong
consumer spending. And despite
the descending performance in the
later stages of the six month period,
the 15.18% return over those six
months was still approximately
50% higher than the stock
market's historical annual return.
NOTE TO SHAREHOLDERS: The following is an interview with Barry
Greenfield (top), who managed Fidelity Real Estate Investment
Portfolio during the period, and Steven Buller, who has been associate
portfolio manager of the fund and becomes manager effective October 1,
1998.
Q. HOW DID THE FUND PERFORM, BARRY?
B.G. It was a tough period. For the six months that ended July 31,
1998, the fund returned -11.30%. In comparison, the real estate funds
average returned -9.11% for the same period, according to Lipper
Analytical Services. The Wilshire Real Estate Securities Index,
meanwhile, returned -10.64% over the same time span, while the
Standard & Poor's 500 Index returned 15.18%. For the 12 months that
ended July 31, 1998, the fund returned -4.36%, while the Lipper
average and Wilshire index returned -2.03% and -1.65%, respectively.
The S&P 500 returned 19.29%
Q. CAN YOU OUTLINE SOME OF THE FACTORS BEHIND THIS DISAPPOINTING
PERFORMANCE?
B.G. There were a number of drivers responsible, all of which seemed
to occur simultaneously. First, the real estate investment trust
(REIT) market suffered from misperceptions concerning "paired share"
REITs, or two entities that trade under one symbol. Federal
legislation was introduced proposing certain restrictions on these
securities and I think investors became concerned. We also saw
decreased demand for REITs from diversified stock fund managers, as
many sought higher returns from other securities. An excess of REIT
equity issuance during the period also hurt, though much of that
oversupply came in response to demand. Lastly, REITs suffered from a
perception of overbuilding in certain sectors, particularly in the
office-building area.
Q. MOST OF THOSE PROBLEMS SEEM TECHNICAL IN NATURE, RATHER THAN AN
INDICATION OF SERIOUS STRUCTURAL CONCERNS WITHIN THE MARKET . . .
B.G. With the exception of the perceived overbuilding problem - which
also occurred in the lodging sector - that's an accurate statement.
There has been some development occurring in cities such as Dallas and
Atlanta, but much of this building has come in response to demand.
While investors seemed to overlook this during the period, investors
may come to realize that REIT business prospects are still healthy.
Q. DID YOU PURSUE ANY SPECIFIC STRATEGIES TO TRY TO OFFSET THE
PROBLEMS IN THE REIT MARKET?
B.G. One move I made was to slightly increase the fund's exposure to
Canadian and U.K.-based real-estate companies. The theory behind this,
particularly in Canada, was that the Canadian economic and real estate
cycles were behind that of the U.S., and I felt there was room to
grow. Unfortunately, currency problems in Canada prevented this
strategy from fulfilling its promise. The fund's Canadian investments
included Trizec Hahn Corp. and Boardwalk Equities. The fund's U.K.
holdings - namely Minerva and Pillar Property Investments - accounted
for a small portion of the portfolio but performed well.
Q. WHICH INDIVIDUAL POSITIONS CONTRIBUTED TO PERFORMANCE? WHICH WERE
DISAPPOINTMENTS?
B.G. A sound consumer atmosphere helped some shopping-mall REITs -
notably Simon Debartolo Group - post decent returns. Apartment
Investment & Management was also a good contributor. On the negative
side, the fund's single largest holding - Starwood Hotels & Resorts -
suffered from many of the problems I mentioned at the outset.
Mack-Cali Realty - an active acquisition company in the office REIT
area - also detracted from performance.
Q. BEGINNING WITH THIS PERIOD, STEVE, THE FUND IS COMPARING ITS
PERFORMANCE TO THAT OF THE WILSHIRE REAL ESTATE SECURITIES INDEX AS
WELL AS THE S&P 500. WHAT SORTS OF SECURITIES COMPRISE THIS INDEX?
S.B. The Wilshire index is a market-capitalization weighted index of
publicly traded real-estate securities, including REITs and real
estate operating companies. Companies that are included in the index
are involved in the equity ownership and operation of commercial real
estate and have a market capitalization of at least $100 million.
We've added this benchmark because we feel the Wilshire index reflects
the performance of the universe of stocks in which the fund invests.
Q. AND WHAT'S YOUR OUTLOOK?
S.B. It's been a frustrating period, mainly because the real estate
market has dipped despite good fundamental prospects. Despite this
backdrop, though, I'm hopeful that REITs will rebound and get back on
track to delivering better returns. In terms of the portfolio itself,
I don't anticipate any major sector allocation changes.
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.
BARRY GREENFIELD OFFERS A
SECTOR-BY-SECTOR LOOK AT
PERFORMANCE AND SUPPLY AND
DEMAND DYNAMICS:
SHOPPING MALLS: "This was
probably the strongest-performing
sector during the period, buoyed by
a good consumer environment and
steady retail sales. There wasn't a
lot of speculative building within
this sector, which was favorable.
Speculative building is when a
company receives the financing
for a site and puts up the building
without having a pre-lease
component or a lead tenant. For the
most part, new malls were being
built in areas where the
population was on the rise.
HOTELS: "Hotels had a tough
performance stretch. We've seen
quite a bit of new building occur on
the limited-service side of the hotel
industry, an area that would include
hotels such as Days Inn and
Hampton Inn. I avoided these hotels
for the most part, instead choosing
to concentrate on resort hotels or
upper-tier, urban hotels.
OFFICE: "While office REITs were
offering growth, they had a very
difficult period. There has been
talk of increased building -
primarily in response to demand
- - within this sector."
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, 1998,
more than $1.6 billion
MANAGER: Barry Greenfield,
since inception; manager,
Fidelity Fund, 1982-1993;
joined Fidelity in 1968; Steven
Buller, beginning October
1998; associate portfolio
manager, since 1997;
manager, Fidelity Select
Environmental Services
Portfolio, since 1997
(checkmark)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Starwood Hotels & Resorts 7.7 5.8
Public Storage, Inc. 5.7 4.6
Crescent Real Estate Equities, Inc. 5.6 4.2
Duke Realty Investments, Inc. 5.5 4.4
Mack-Cali Realty Corp. 4.8 4.8
Apartment Investment & Management Co. Class A 4.3 2.7
Reckson Associates Realty Corp. 3.4 2.9
Patriot American Hospitality, Inc. 3.0 3.0
Equity Office Properties Trust 2.8 3.1
Excel Realty Trust, Inc. 2.7 2.1
</TABLE>
TOP FIVE REIT SECTORS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE REIT SECTORS
6 MONTHS AGO
Office Buildings 24.2 24.8
Industrial Buildings 18.9 18.5
Apartments 12.9 14.4
Hotels 12.1 12.1
Shopping Centers 8.7 5.7
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1998* AS OF JANUARY 31, 1998**
ROW: 1, COL: 1, VALUE: 93.8
ROW: 1, COL: 2, VALUE: 1.4
ROW: 1, COL: 3, VALUE: 4.8
STOCKS 93.4%
CONVERTIBLE
SECURITIES 0.2%
SHORT-TERM
INVESTMENTS 6.4%
FOREIGN
INVESTMENTS 1.7%
STOCKS 94.8%
CONVERTIBLE
SECURITIES 0.4%
SHORT-TERM
INVESTMENTS 4.8%
FOREIGN
INVESTMENTS 4.1%
ROW: 1, COL: 1, VALUE: 92.40000000000001
ROW: 1, COL: 2, VALUE: 1.2
ROW: 1, COL: 3, VALUE: 6.4
*
**
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENTS JULY 31, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
COMMON STOCKS - 94.8%
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - 86.7%
REITS - APARTMENTS - 12.9%
Apartment Investment & Management Co. Class A 1,860,500 $ 70,699
Avalon Bay Communities, Inc. 890,404 31,943
BRE Properties, Inc. Class A 708,800 17,897
Camden Property Trust (SBI) 702,200 20,232
Colonial Properties Trust (SBI) 352,000 9,636
Equity Residential Properties Trust (SBI) 906,962 38,092
Gables Residential Trust 53,100 1,424
Home Properties of New York, Inc. 529,380 13,499
Pennsylvania Real Estate Investment Trust 146,000 3,203
Post Properties, Inc. 90,000 3,572
210,197
REITS - FACTORY OUTLETS - 1.2%
Chelsea GCA Realty, Inc. 19,000 689
FAC Realty, Inc. (a) 441,000 3,721
Tanger Factory Outlet Centers, Inc. (d) 550,900 15,804
20,214
REITS - HEALTH CARE FACILITIES - 1.1%
Nationwide Health Properties, Inc. 580,000 13,340
Omega Healthcare Investors, Inc. 169,600 4,982
18,322
REITS - HOTELS - 11.9%
Felcor Lodging Trust, Inc. 20,000 553
Innkeepers USA Trust 763,124 9,301
Legacy Hotels Real Estate Investment Trust 280,000 1,435
Patriot American Hospitality, Inc. 2,599,907 49,398
Starwood Hotels & Resorts 3,034,783 124,612
Sunstone Hotel Investors, Inc. 800,000 8,900
194,199
REITS - INDUSTRIAL BUILDINGS - 18.9%
AMB Property Corp. 238,400 5,692
Bedford Property Investors, Inc. 539,800 10,088
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - INDUSTRIAL BUILDINGS - CONTINUED
CenterPoint Properties Corp. (d) 1,059,800 $ 35,238
Duke Realty Investments, Inc. (d) 4,169,868 89,392
First Industrial Realty Trust, Inc. 383,500 10,594
Liberty Property Trust (SBI) 629,700 15,782
ProLogis Trust 367,000 8,762
Public Storage, Inc. 3,529,200 93,524
Spieker Properties, Inc. 612,900 22,026
Summit Real Estate Investment Trust 182,600 1,769
Weeks Corp. 479,500 13,846
306,713
REITS - LEISURE - 0.6%
Franchise Finance Corp. of America 265,100 6,594
Golf Trust of America, Inc. 112,300 3,439
10,033
REITS - MALLS - 5.8%
CBL & Associates Properties, Inc. 226,300 5,502
General Growth Properties, Inc. 664,500 24,171
Simon Debartolo Group, Inc. 1,321,500 41,132
Taubman Centers, Inc. 294,800 3,851
Urban Shopping Centers, Inc. 590,000 19,396
94,052
REITS - MOBILE HOME PARKS - 1.6%
Manufactured Home Communities, Inc. 350,500 8,653
Sun Communities, Inc. 495,000 16,613
25,266
REITS - OFFICE BUILDINGS - 24.0%
Alexandria Real Estate Equities, Inc. 314,600 9,163
Boston Properties, Inc. 947,100 30,603
Brandywine Realty Trust 455,100 9,074
Crescent Real Estate Equities, Inc. 2,980,600 87,555
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
REAL ESTATE INVESTMENT TRUSTS (REITS) - CONTINUED
REITS - OFFICE BUILDINGS - CONTINUED
Crocker Realty, Inc. (c):
Class A 1,497 $ 16
Class B (non-vtg.) 1,308,241 14,391
Equity Office Properties Trust 1,822,710 45,340
Glenborough Realty Trust, Inc. (d) 1,472,200 36,253
Mack-Cali Realty Corp. 2,521,900 78,337
Minerva PLC 558,300 1,937
PS Business Parks, Inc. 250,360 5,664
PS Business Parks, Inc. (a)(c) 516,134 11,678
Reckson Associates Realty Corp. (d) 2,425,700 55,033
SL Green Realty Corp. 219,400 4,827
389,871
REITS - SHOPPING CENTERS - 8.7%
Bradley Real Estate, Inc. (SBI) 741,895 15,812
Developers Diversified Realty Corp. 518,100 19,170
Excel Realty Trust, Inc. (d) 1,654,500 43,224
Kimco Realty Corp. 1,042,200 38,561
Malan Realty Investors, Inc. 251,900 4,408
Mid-Atlantic Realty Trust 370,000 4,810
Realfund Trust units 50,000 450
Realty Income Corp. 568,500 13,680
RioCan Real Estate Investment Trust 250,000 1,736
141,851
TOTAL REAL ESTATE INVESTMENT TRUSTS 1,410,718
COMPUTER SERVICES & SOFTWARE - 0.0%
DATA PROCESSING - 0.0%
Realty Information Group, Inc. (a) 58,000 624
CREDIT & OTHER FINANCE - 0.5%
TRUSTS, NEC - 0.5%
Security Capital US Realty Class A (Reg.) (a) 645,300 7,744
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
LODGING & GAMING - 0.2%
HOTELS, MOTELS, & TOURIST COURTS - 0.2%
Host Marriott Corp. (a) 188,200 $ 3,188
REAL ESTATE - 6.5%
OPERATORS, NON-RESIDENTIAL - 2.6%
Cadillac Fairvew Corp. 118,400 2,599
CR Leasing & Development, Inc. (c):
Class A 46 -
Class B (non-vtg.) 216 -
Forest City Enterprises, Inc. Class A 310,400 8,963
Ramco-Gershenson Properties Trust (SBI) 155,800 2,863
Trizec Hahn Corp. (sub-vtg.) 890,700 18,912
Unibail 64,040 8,246
41,583
REAL ESTATE AGENTS - 0.9%
Reckson Service Industries, Inc. (a) 1,190,736 2,530
Rouse Co. (The) 392,900 11,468
13,998
REAL ESTATE DEALERS - 0.5%
Excel Legacy Corp. (a)(d) 1,776,900 8,218
REAL ESTATE, GENERAL - 1.2%
Boardwalk Equities, Inc. (a) 1,482,400 16,669
Boardwalk Equities, Inc. (a)(b) 254,100 2,857
Pillar Property Investments PLC 100,000 467
19,993
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SUBDIVIDED REAL ESTATE DEVELOPMENT - 1.3%
Bluegreen Corp. (a) 17,800 165
Catellus Development Corp. (a) 1,164,500 18,996
Oxford Properties Group, Inc. (a) 200,000 2,064
21,225
TOTAL REAL ESTATE 105,017
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SECURITIES INDUSTRY - 0.9%
INVESTMENT MANAGERS - 0.9%
Security Capital Group, Inc. Class B (a) 615,800 $ 15,433
TOTAL COMMON STOCKS 1,542,724
(Cost $1,355,089)
</TABLE>
CONVERTIBLE PREFERRED STOCKS - 0.4%
REAL ESTATE INVESTMENT TRUSTS - 0.4%
REITS - OFFICE BUILDINGS - 0.2%
Crescent Real Estate Equities, Inc. $1.6875 180,000 3,600
REITS - HOTELS - 0.2%
Innkeepers USA Trust $2.16 (b) 160,000 3,540
TOTAL CONVERTIBLE PREFERRED STOCKS 7,140
(Cost $8,500)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 4.8%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements $ 77,501 77,465
(U.S. Treasury obligations), in a joint
trading account at 5.62%,
dated 7/31/98 due 8/3/98
TOTAL INVESTMENT IN SECURITIES - 100% $ 1,627,329
(Cost $1,441,054)
</TABLE>
LEGEND
(a) Non-income producing
(b) 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
$6,397,000 or 0.4% of net assets.
(c) 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)
CR Leasing &
Development, Inc.:
Class A 11/19/97 $ -
Class B (non-vtg.) 11/19/97 $ 2
Crocker Realty, Inc.:
Class A 11/19/97 $ 15
Class B (non-vtg.) 11/19/97 $ 13,082
PS Business Parks, Inc. 5/6/98 $ 11,810
(d) Affiliated company (see Note 6 of Notes to Financial Statements).
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $1,441,953,000. Net unrealized appreciation
aggregated $185,376,000, of which $249,886,000 related to appreciated
investment securities and $64,510,000 related to depreciated
investment securities.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1998 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 1,627,329
agreements of $77,465) (cost $1,441,054) -
See accompanying schedule
Cash 1
Receivable for investments sold 6,936
Receivable for fund shares sold 968
Dividends receivable 2,255
Redemption fees receivable 1
Other receivables 8
TOTAL ASSETS 1,637,498
LIABILITIES
Payable for investments purchased $ 903
Payable for fund shares redeemed 6,956
Accrued management fee 878
Other payables and accrued expenses 456
TOTAL LIABILITIES 9,193
NET ASSETS $ 1,628,305
Net Assets consist of:
Paid in capital $ 1,371,250
Undistributed net investment income 11,499
Accumulated undistributed net realized gain (loss) 59,281
on investments and foreign currency transactions
Net unrealized appreciation (depreciation) 186,275
on investments
NET ASSETS, for 94,297 shares outstanding $ 1,628,305
NET ASSET VALUE, offering price and redemption price $17.27
per share ($1,628,305 (divided by) 94,297 shares)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED)
INVESTMENT INCOME $ 49,549
Dividends (including $12,419 received from
affiliated issuers)
Interest 2,816
TOTAL INCOME 52,365
EXPENSES
Management fee $ 6,060
Transfer agent fees 2,234
Accounting fees and expenses 380
Non-interested trustees' compensation 3
Custodian fees and expenses 58
Registration fees 65
Audit 27
Legal 8
Miscellaneous 5
Total expenses before reductions 8,840
Expense reductions (286) 8,554
NET INVESTMENT INCOME 43,811
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of $2,582 61,802
on sales of investments in affiliated issuers)
Foreign currency transactions (78) 61,724
Change in net unrealized appreciation (depreciation) on:
Investment securities (332,976)
Assets and liabilities in foreign currencies 1 (332,975)
NET GAIN (LOSS) (271,251)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (227,440)
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED YEAR ENDED
JULY 31, 1998 JANUARY 31,
(UNAUDITED) 1998
INCREASE (DECREASE) IN NET ASSETS
Operations $ 43,811 $ 92,148
Net investment income
Net realized gain (loss) 61,724 102,218
Change in net unrealized appreciation (depreciation) (332,975) 154,418
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (227,440) 348,784
FROM OPERATIONS
Distributions to shareholders (39,962) (91,259)
From net investment income
From net realized gain (28,796) (65,254)
TOTAL DISTRIBUTIONS (68,758) (156,513)
Share transactions 214,798 1,046,591
Net proceeds from sales of shares
Reinvestment of distributions 65,253 148,396
Cost of shares redeemed (836,423) (1,103,764)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (556,372) 91,223
FROM SHARE TRANSACTIONS
Redemption fees 398 1,140
TOTAL INCREASE (DECREASE) IN NET ASSETS (852,172) 284,634
NET ASSETS
Beginning of period 2,480,477 2,195,843
End of period (including undistributed net investment $ 1,628,305 $ 2,480,477
income of $11,499 and $7,650, respectively)
OTHER INFORMATION
Shares
Sold 11,123 54,293
Issued in reinvestment of distributions 3,427 7,571
Redeemed (43,573) (58,833)
Net increase (decrease) (29,023) 3,031
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED JANUARY 31,
JULY 31, 1998
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, $ 20.11 $ 18.25 $ 14.13 $ 12.62 $ 13.68 $ 13.22
beginning of period
Income from Investment
Operations
Net investment income .41 D .79 D .86 D .72 .67 .54
Net realized and (2.63) 2.41 3.97 1.50 (1.10) .52
unrealized gain (loss)
Total from investment (2.22) 3.20 4.83 2.22 (.43) 1.06
operations
Less Distributions
From net investment (.37) (.79) (.72) (.71) (.63) (.60)
income
From net realized gain (.25) (.56) - - - -
Total distributions (.62) (1.35) (.72) (.71) (.63) (.60)
Redemption fees added - .01 .01 - - -
to paid in capital
Net asset value, $ 17.27 $ 20.11 $ 18.25 $ 14.13 $ 12.62 $ 13.68
end of period
TOTAL RETURN B, C (11.30)% 17.93% 35.45% 18.10% (3.23)% 8.10%
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of period $ 1,628 $ 2,480 $ 2,196 $ 731 $ 490 $ 431
(in millions)
Ratio of expenses to .86% A .86% .94% .99% 1.06% 1.17%
average net assets
Ratio of expenses to .83% A, E .84% E .90% E .95% E 1.03% E 1.13% E
average net assets
after expense
reductions
Ratio of net investment 4.26% A 4.06% 5.63% 6.28% 5.67% 4.34%
income to average
net assets
Portfolio turnover rate 39% A 76% 55% 85% 75% 110%
Average commission $ .0425 $ .0397 $ .0420
rate F
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Real Estate Investment Portfolio (the fund) is a fund of
Fidelity Devonshire Trust (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended, 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 require 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. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. 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 is accrued as earned. Investment
income is recorded
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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
among 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, 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.
SHORT-TERM TRADING (REDEMPTION) FEES. Shares held in the fund less
than 90 days are subject to a short-term trading 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.
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.
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 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, restricted securities (excluding 144A
issues) amounted to $26,085,000 or 1.6% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $375,576,000 and $892,136,000, 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 .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 .59% 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $274,000 for the
period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $270,000 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 $4,000 and $12,000, respectively, under these arrangements.
6. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of
at least 5% of the voting securities. Transactions during the period
with companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Apartment Investment &
Management Co. Class A $ - $ - $ - $ -
Bay Apartment Communities, Inc. - - - -
CenterPoint Properties Corp. 1,119 1,344 942 35,238
Duke Realty Investors, Inc. - 10,063 2,762 89,392
Excel Legacy Co.. 922 - - 8,218
Excel Realty Trust, Inc. 1,109 319 1,643 43,224
Glenborough Realty Trust, Inc. - 1,247 1,274 36,253
Home Properties of NY, Inc. - - - -
Mack-Cali Realty Corp. 3,772 10,949 3,069 -
Malan Realty Investors, Inc. - 39 110 -
Reckson Associates Realty Corp. - 10,107 1,701 55,033
Red Lions Inns LP - 5,004 248 -
Starwood Hotels & Resorts - - - -
Tanger Factory Outlet Centers, Inc. 1,042 466 670 15,804
TOTALS $ 7,964 $ 39,538 $ 12,419 $ 283,162
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
Richard A. Spillane Jr., Vice President
Barry Greenfield, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
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(registered trademark) Fund
Real Estate Investment Portfolio
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 (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
FIDELITY
(REGISTERED TRADEMARK)
UTILITIES
FUND
SEMIANNUAL REPORT
JULY 31, 1998
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the fund's
investments over the past six months.
INVESTMENTS 10 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS 17 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 21 Notes to the financial statements.
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.
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.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
So far, 1998 has been a year of considerable volatility in the U.S.
stock and bond markets. In the first quarter, the U.S. stock market
soared as inflation and interest rates remained stable, while the
economy maintained strong growth. By summer, however, investors began
to exercise caution relative to the troublesome Asian economic climate
and reports of concerns about corporate earnings domestically. Market
volatility and low interest rates were also the main stories in the
bond market, with many investors moving assets to highly rated U.S.
Treasuries.
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, 1998 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
FIDELITY UTILITIES 11.12% 31.01% 104.15% 326.86%
S&P 500 (registered trademark) 15.18% 19.29% 180.53% 445.15%
S&P Utilities 5.76% 20.74% 67.76% 261.72%
Utility Funds Average 7.56% 21.58% 71.78% 250.28%
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 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 105 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, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
FIDELITY UTILITIES 31.01% 15.34% 15.62%
S&P 500 19.29% 22.91% 18.48%
S&P Utilities 20.74% 10.90% 13.72%
Utility Funds Average 21.58% 11.32% 13.24%
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
Utilities S&P 500
S&P Utilities
00311 SP001
SP002
1988/07/31 10000.00 10000.00
10000.00
1988/08/31 9953.14 9660.00
9859.00
1988/09/30 10311.74 10071.52
10264.20
1988/10/31 10530.13 10351.50
10531.07
1988/11/30 10454.17 10203.48
10446.83
1988/12/31 10539.62 10382.04
10511.60
1989/01/31 10703.55 11142.00
11108.65
1989/02/28 10501.05 10864.57
10864.26
1989/03/31 10618.15 11117.71
11149.99
1989/04/30 10940.50 11694.72
11846.87
1989/05/31 11467.99 12168.36
12526.88
1989/06/30 11703.48 12099.00
12721.05
1989/07/31 12318.41 13191.54
13736.19
1989/08/31 12189.47 13450.09
13651.02
1989/09/30 12249.72 13394.95
13876.26
1989/10/31 12289.98 13084.18
13927.61
1989/11/30 12682.53 13351.10
14385.82
1989/12/31 13271.70 13671.53
15433.11
1990/01/31 12597.58 12754.17
14184.57
1990/02/28 12629.18 12918.70
14028.54
1990/03/31 12618.05 13261.04
14289.47
1990/04/30 12108.99 12929.52
13735.04
1990/05/31 12693.87 14190.14
14671.77
1990/06/30 12747.85 14093.65
14362.20
1990/07/31 12758.85 14048.55
14317.67
1990/08/31 12109.91 12778.56
13179.42
1990/09/30 12296.89 12156.25
13719.78
1990/10/31 13045.88 12103.97
14614.30
1990/11/30 13336.54 12885.89
14896.36
1990/12/31 13516.83 13245.41
15025.96
1991/01/31 13459.51 13822.91
14567.67
1991/02/28 13941.02 14811.25
15074.62
1991/03/31 14106.20 15169.68
15371.59
1991/04/30 14106.20 15206.08
15125.65
1991/05/31 14106.20 15862.99
14930.53
1991/06/30 14000.85 15136.46
14721.50
1991/07/31 14439.48 15841.82
15171.98
1991/08/31 14795.14 16217.27
15563.41
1991/09/30 15263.36 15946.44
15877.79
1991/10/31 15455.66 16160.13
16190.59
1991/11/30 15575.84 15508.87
16027.06
1991/12/31 16380.02 17283.09
17201.85
1992/01/31 15841.37 16961.62
16284.99
1992/02/29 15780.16 17182.12
15843.66
1992/03/31 15596.76 16847.07
15615.52
1992/04/30 16108.33 17342.38
16621.15
1992/05/31 16432.74 17427.35
16596.22
1992/06/30 16596.02 17167.69
16830.23
1992/07/31 17492.76 17869.85
18159.82
1992/08/31 17518.02 17503.51
18023.62
1992/09/30 17568.69 17710.06
18155.19
1992/10/31 17543.13 17772.04
17982.72
1992/11/30 17709.24 18378.07
17953.94
1992/12/31 18165.54 18604.12
18596.70
1993/01/31 18363.14 18760.39
18883.08
1993/02/28 19337.94 19015.53
20242.67
1993/03/31 19858.27 19416.76
20609.06
1993/04/30 19671.06 18946.88
20174.21
1993/05/31 19724.55 19454.65
20156.05
1993/06/30 20652.88 19511.07
21089.28
1993/07/31 20909.19 19433.03
21561.68
1993/08/31 21866.96 20169.54
22603.11
1993/09/30 21880.13 20014.23
22555.64
1993/10/31 21703.34 20428.53
22515.04
1993/11/30 20805.84 20234.46
21375.78
1993/12/31 21000.70 20479.29
21262.49
1994/01/31 21913.77 21175.59
21426.21
1994/02/28 21014.53 20601.73
20215.63
1994/03/31 20219.42 19703.49
19530.32
1994/04/30 20731.31 19955.70
20012.72
1994/05/31 20361.61 20282.97
19476.37
1994/06/30 20201.07 19786.04
19517.28
1994/07/31 20831.90 20435.02
20178.91
1994/08/31 20989.61 21272.86
20124.43
1994/09/30 20429.01 20751.67
19613.27
1994/10/31 20414.56 21218.59
19783.90
1994/11/30 19763.95 20445.80
19495.06
1994/12/31 19890.42 20749.02
19594.48
1995/01/31 20514.85 21287.04
21122.85
1995/02/28 20804.23 22116.59
21093.28
1995/03/31 20913.29 22769.25
20966.72
1995/04/30 21543.30 23439.81
21727.81
1995/05/31 22035.01 24376.70
22414.41
1995/06/30 22178.08 24942.97
22517.52
1995/07/31 22829.92 25770.08
23080.46
1995/08/31 23326.56 25834.76
23537.45
1995/09/30 24404.79 26924.99
25036.78
1995/10/31 24514.44 26828.87
25622.64
1995/11/30 25141.01 28006.65
25963.43
1995/12/31 25981.55 28546.06
27799.04
1996/01/31 26383.49 29517.77
28163.21
1996/02/29 25692.15 29791.40
27047.94
1996/03/31 25489.89 30078.29
26496.17
1996/04/30 26289.51 30521.64
26782.33
1996/05/31 26240.55 31308.80
26710.01
1996/06/30 26849.89 31428.08
27815.81
1996/07/31 25666.06 30039.59
26055.07
1996/08/31 26044.23 30673.13
26599.62
1996/09/30 26338.10 32399.41
26926.79
1996/10/31 27348.56 33292.98
28203.12
1996/11/30 28806.26 35809.60
28792.57
1996/12/31 28953.42 35100.21
28614.05
1997/01/31 29741.04 37293.27
28808.63
1997/02/28 29826.65 37585.65
28534.95
1997/03/31 28575.33 36041.26
27673.19
1997/04/30 29306.25 38192.92
27249.79
1997/05/31 30837.69 40518.11
28399.73
1997/06/30 31584.29 42333.32
29288.65
1997/07/31 32582.79 45701.78
29959.36
1997/08/31 31689.39 43141.57
29405.11
1997/09/30 33938.88 45504.43
30675.41
1997/10/31 34027.03 43984.58
30954.55
1997/11/30 36460.05 46020.63
33133.76
1997/12/31 38101.37 46810.80
35622.10
1998/01/31 38414.64 47328.53
34200.78
1998/02/28 39843.93 50741.86
35353.34
1998/03/31 42923.44 53340.35
37619.49
1998/04/30 42066.96 53876.96
36889.68
1998/05/31 41927.54 52950.81
36701.54
1998/06/30 42585.85 55101.68
38055.83
1998/07/31 42685.86 54514.84
36172.06
IMATRL PRASUN SHR__CHT 19980731 19980812 121050 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Utilities Fund on July 31, 1988. As the chart
shows, by July 31, 1998, the value of the investment would have grown
to $42,686 - a 326.86% increase on the initial investment. For
comparison, look at how both the Standard & Poor's 500 Index and the
Standard & Poor's Utilities Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000 in
the S&P 500 would have grown to $54,515 - a 445.15% increase. If
$10,000 was put in the S&P Utilities Index, it would have grown to
$36,172 - a 261.72% 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
MARKET RECAP
Low interest rates. A strong
domestic economy. Tame
inflation. Not the environment
where one expects to encounter
anxious investors and a tumbling
S&P. Yet that was the scenario in
the latter stages of the six-month
period ending July 31, 1998. At the
end of those six months, the
Standard & Poor's 500 Index - a
measure of the U.S. stock market
- - produced a return of 15.18%.
That's down from 17.71% for the
six-month period ending June 30,
1998. After a strong first quarter of
the year, investor uncertainty over
corporate earnings reports, the
Asian economy and stock market
volatility began to have a tangible
effect on the domestic equity
market. In mid-June, the major
U.S. indexes, along with Asian
markets, continued to sell off.
During the week of July 20th, the
Dow Jones Industrial Average
racked up losses of over 400
points. Contributing to the decline
were concerns that Asia's crisis
will inhibit the earnings growth of
American companies. Throughout
the period, small-cap stocks were
weak, while large-cap stocks
continued to pace the market, due
in large part to strong consumer
spending. Despite the descending
performance in the later stages of
the six-month period, the 15.18%
return over those six months was
still approximately 50% higher
than the stock market's historical
annual return.
An interview with Nick Thakore, Portfolio Manager of Fidelity
Utilities Fund
Q. HOW DID THE FUND PERFORM, NICK?
A. The fund did very well. For the six-month period that ended July
31, 1998, the fund had a total return of 11.12%, compared to 5.76% for
the Standard & Poor's Utilities Index and 7.56% for the utility funds
average tracked by Lipper Analytical Services. For the 12 months that
ended July 31, 1998, the fund posted a return of 31.01%, while the S&P
Utilities index returned 20.74%, and the utility funds average
returned 21.58%.
Q. WHAT CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE?
A. The fund's solid performance can be attributed to two factors.
First, relative to the index, the fund had more assets invested in
telephone stocks, which performed well, and less in electric utility
holdings, which did not perform as well. Second, the fund was in the
right stocks within the telecommunications industry. I overweighted
the fund's assets in the new market entrants, such as WorldCom and the
regional Bell operating companies (RBOCs) such as BellSouth, which
performed very well.
Q. WHY HAVE TELEPHONE STOCKS CONTINUED TO PERFORM THE BEST WITHIN THE
UTILITIES SECTOR?
A. The telecommunications industry has been viewed as the growth area
within the utilities sector. Telephone companies increased revenues
faster than other utilities, and they once again managed to meet or
beat analysts' earnings estimates, helped by continued demand for
additional telephone lines and data services. Also, consolidation has
continued in the telecommunications industry, with the announced
mergers of WorldCom and MCI, Bell Atlantic and GTE, SBC and Ameritech,
and AT&T and TCI over the past few months. To some degree, mergers had
a positive impact on the industry because the market anticipated that
this trend would drive the industry's longer-term performance and
growth prospects.
Q. SIX MONTHS AGO YOU TALKED ABOUT REGULATORY DEVELOPMENTS IN THE
UTILITIES SECTOR. WERE THERE ANY SIGNIFICANT DEVELOPMENTS DURING THE
PERIOD?
A. Progress is coming very slowly and the key issues are being held up
in the courts. This environment may have influenced some companies to
pursue the merger route in an effort to expand their market share.
While mergers in some ways have decreased competition, in other ways
they have increased competition by creating large multi-regional
organizations with the financial muscle to compete across the country
with companies that have near monopolies in certain regions.
Q. HOW WOULD YOU DESCRIBE THE ENVIRONMENT FOR ELECTRIC AND GAS
UTILITIES?
A. While the declining interest-rate environment and uncertainty in
Asia were good for electric and gas utilities in the fourth quarter of
1997, as investor confidence returned to the domestic markets in the
first half of 1998 electric and gas utilities were again viewed as
slow growth industries. As a result, the performance of electric and
gas utilities lagged telecommunications stocks, which exhibited
stronger growth prospects.
Q. WHAT STOCKS PERFORMED WELL FOR THE FUND?
A. WorldCom performed very well. It had the best assets in the
business in terms of the networks it owns, giving it superior
resources to enter markets where it had low market share. I believed
it had great growth potential in the U.S., internationally and with
the Internet. Selected RBOCs, such as BellSouth, showed accelerated
earnings growth in the first half of 1998 from data activities,
including Internet access.
Q. WERE THERE ANY STOCKS THAT DETRACTED FROM THE FUND'S PERFORMANCE?
A. Tel-Save Holdings was a disappointment for the fund. While the
company has been in merger discussions, nothing has been worked out on
that front, causing a lot of uncertainty with investors and hurting
the stock's performance.
Q. WHAT'S YOUR OUTLOOK, NICK?
A. The large-cap companies that have been long-time players in this
sector, in general, have limited growth potential and additional risk
in their ability to sustain their growth. On the other hand, there is
a whole host of new entrants that have strong growth potential, and I
will continue to look closely at these companies. If concerns about
Asia and corporate earnings continue, I think utility stocks will
continue to benefit from the flight to safety. Typically, however, I
don't try to predict general market, economic and political trends. I
will continue to try to identify companies that offer the best growth
prospects relative to their valuations and that can meet or exceed
their earnings expectations.
NICK THAKORE ON
CONSOLIDATION IN THE
TELECOMMUNICATIONS INDUSTRY:
"CONSOLIDATION IN THE
TELECOMMUNICATIONS INDUSTRY IS A
LOGICAL RESULT OF THE INDUSTRY
DYNAMICS THAT ARE IN PLACE. FIRST,
NOWHERE EXCEPT IN THE U.S. ARE
LOCAL AND LONG-DISTANCE
COMPANIES SEPARATE. THIS IS SIMPLY
A FUNCTION OF REGULATORY DECREES,
NOT EFFICIENT ECONOMICS. SECONDLY,
AS COMPETITION INCREASES WITH
COMPANIES ENTERING EACH OTHER'S
MARKETS, COMPANIES SEEK GREATER
SCALE AND COST-CUTTING
OPPORTUNITIES TO HELP THEM OFFSET
THE IMPACT OF COMPETITION. FINALLY,
LONG-DISTANCE COMPANIES HAVE
BEEN FRUSTRATED IN THEIR ABILITY TO
ENTER LOCAL MARKETS USING REGIONAL
BELL OPERATING COMPANIES (RBOC)
FACILITIES. TO COMPETE,
LONG-DISTANCE COMPANIES WOULD
HAVE TO SPEND BILLIONS OF DOLLARS
STRINGING LINES FOR THEIR OWN LOCAL
NETWORKS; THIS CAN BE DONE IN A
MORE TIMELY MANNER THROUGH
ACQUISITION. FOR THESE REASONS, I
BELIEVE IT IS LOGICAL TO ASSUME THAT
CONSOLIDATION IN THE
TELECOMMUNICATIONS INDUSTRY WILL
CONTINUE."
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, 1998,
MORE THAN $1.8 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)
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.
<TABLE>
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INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
MCI Communications Corp. 8.9 6.8
WorldCom, Inc. 6.9 3.3
AT&T Corp. 6.3 5.2
GTE Corp. 4.5 1.5
Qwest Communications International, Inc. 4.4 0.0
Coastal Corp. (The) 3.2 1.4
MediaOne Group, Inc. $3.63 PIES 2.9 0.0
BellSouth Corp. 2.6 2.1
Niagara Mohawk Power Corp. 2.4 1.8
BCE, Inc. 1.8 1.5
</TABLE>
<TABLE>
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TOP UTILITY INDUSTRIES AS OF JULY 31, 1998
% OF FUND'S % OF FUNDS INVESTMENTS
INVESTMENTS IN THESE UTILITY INDUSTRIES
6 MONTHS AGO
Telephone Services 45.6 38.4
Electric Utility 21.7 24.5
Gas 9.0 10.9
</TABLE>
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1998 * AS OF JANUARY 31, 1998 **
ROW: 1, COL: 1, VALUE: 84.40000000000001
ROW: 1, COL: 2, VALUE: 4.2
ROW: 1, COL: 3, VALUE: 11.4
STOCKS 81.2%
CONVERTIBLE
SECURITIES 3.2%
SHORT-TERM
INVESTMENTS 15.6%
FOREIGN
INVESTMENTS 10.8%
STOCKS 84.4%
CONVERTIBLE
SECURITIES 4.2%
SHORT-TERM
INVESTMENTS 11.4%
FOREIGN
INVESTMENTS 7.9%
ROW: 1, COL: 1, VALUE: 81.2
ROW: 1, COL: 2, VALUE: 3.2
ROW: 1, COL: 3, VALUE: 15.6
*
**
<TABLE>
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INVESTMENTS JULY 31, 1998 (UNAUDITED)
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
COMMON STOCKS - 84.4%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.0%
Harsco Corp. 12,700 $ 548
CONSTRUCTION & REAL ESTATE - 0.0%
CONSTRUCTION - 0.0%
Kenetech Corp. (a) 41,700 11
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Developers Diversified Realty Corp. 12,100 448
TOTAL CONSTRUCTION & REAL ESTATE 459
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.4%
Dynegy, Inc. 589,250 8,176
ENERGY - 3.6%
OIL & GAS - 3.6%
Burlington Resources, Inc. 42,200 1,530
Coastal Corp. (The) 1,807,000 59,179
EEX Corp. (a) 455,099 3,186
Occidental Petroleum Corp. 32,300 719
Pennzoil Co. 6,200 279
Royal Dutch Petroleum Co. 20,400 1,040
Texaco, Inc. 12,400 754
Total SA Class B 4,100 469
67,156
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
OEC Medical Systems, Inc. 900 20
HOLDING COMPANIES - 0.8%
CEI Citicorp Holdings SA Class B (a) 224,346 920
CINergy Corp. 384,779 12,145
Iven SA (a) 3,200,000 1,555
14,620
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
ELECTRICAL EQUIPMENT - 1.4%
Alcatel Alsthom Compagnie Generale d'Electricite SA 134,000 $ 26,658
American Superconductor Corp. (a) 27,400 276
26,934
MEDIA & LEISURE - 1.2%
BROADCASTING - 1.2%
CBS Corp. 56,700 1,924
TCI Satellite Entertainment, Inc. Class A (a) 49,900 260
Tele-Communications, Inc.:
(TCI Group) Series A (a) 64 3
(TCI Ventures Group) Series A (a) 1,063,372 20,935
23,122
PRECIOUS METALS - 0.1%
Barrick Gold Corp. 69,400 1,134
Newmont Mining Corp. 32,500 613
1,747
SERVICES - 0.1%
Chemed Corp. 33,300 1,059
Hagler Bailly, Inc. 800 19
1,078
TECHNOLOGY - 0.2%
COMMUNICATIONS EQUIPMENT - 0.0%
Intermedia Communications, Inc. (a) 19,387 717
COMPUTER SERVICES & SOFTWARE - 0.1%
NCR Corp. (a) 29,650 1,004
Titan Corp. (a) 38,200 217
1,221
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Itron, Inc. (a) 140,100 1,397
TOTAL TECHNOLOGY 3,335
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 76.6%
CELLULAR - 0.0%
SkyTel Communications, Inc. (a) 13,300 $ 259
ELECTRIC UTILITY - 21.4%
Allegheny Energy, Inc. 487,900 13,295
Ameren Corp. 169,641 6,415
American Electric Power Co., Inc. 418,300 18,013
Baltimore Gas & Electric Co. 39,000 1,180
BEC Energy 116,800 4,468
CalEnergy, Inc. (a) 22,300 606
Carolina Power & Light Co. 28,500 1,160
Central & South West Corp. 246,400 6,268
Central Hudson Gas & Electric Corp. 47,100 2,031
Central Maine Power Co. 185,100 3,505
CILCORP, Inc. 183,900 8,609
Citizens Utilities Co. Class B 431,018 3,771
CLECO Corp. 90,300 2,681
CMS Energy Corp. 100,000 4,219
CMS Energy Corp. Class G 35,100 867
Compania Energertica Minas Gerais 125,794,989 4,273
Consolidated Edison, Inc. 520,000 22,003
Dominion Resources, Inc. 36,800 1,500
DPL, Inc. 615,150 10,496
DQE, Inc. 216,350 7,545
DTE Energy Co. 120,000 4,815
Duke Energy Corp. 525,593 30,025
Electricity Generating PCL (For. Reg.) 26,800 46
Energy East Corp. 164,800 6,592
Firstenergy Corp. 226,675 6,248
Florida Progress Corp. 10,000 389
FPL Group, Inc. 130,000 7,906
GPU, Inc. 248,700 8,891
Hawaiian Electric Industries, Inc. 35,000 1,323
Houston Industries, Inc. 446,790 12,482
Idaho Power Co. 116,100 3,505
Interstate Energy Corp. 96,498 2,829
IPALCO Enterprises, Inc. 200,000 8,463
Kansas City Power & Light Co. 28,400 822
LG&E Energy Corp. 173,421 4,227
Montana Power Co. 46,500 1,630
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
National Grid Group PLC 262,225 $ 1,824
Nevada Power Co. 50,000 1,181
New Century Energies, Inc. 228,775 9,523
New England Electric System 39,300 1,601
Niagara Mohawk Power Corp. (a) 2,922,300 44,382
NIPSCO Industries, Inc. 290,200 7,727
Northeast Utilities (a) 736,800 11,236
Northern States Power Co. 12,600 332
OGE Energy Corp. 33,200 865
PacifiCorp 643,900 13,804
PG&E Corp. 506,800 15,426
Pinnacle West Capital Corp. 128,300 5,485
Potomac Electric Power Co. 259,100 6,251
PP&L Resources, Inc. 29,200 677
Public Service Co. of New Mexico 434,800 9,348
Public Service Enterprise Group, Inc. 29,000 948
Puget Sound Power & Light Co. 98,700 2,498
Rochester Gas & Electric Corp. 28,500 859
Southern Co. 244,300 6,230
Southern Electric PLC 79,300 718
Texas Utilities Co. 205,687 8,240
TNP Enterprises, Inc. 17,700 571
Unicom Corp. 400,300 13,835
Unisource Energy Corp. (a) 431,120 6,143
United Illuminating Co. 39,400 2,009
Utilicorp United, Inc. 116,650 4,112
Wisconsin Energy Corp. 42,400 1,206
WPS Resources Corp. 25,000 809
400,938
GAS - 9.0%
AGL Resources, Inc. 30,800 579
Columbia Gas System, Inc. 278,100 14,791
Consolidated Natural Gas Co. 282,800 14,617
Eastern Enterprises Co. 397,800 15,887
Energen Corp. 54,800 942
Enron Corp. 378,223 20,022
Equitable Resources, Inc. 28,500 702
K N Energy, Inc. 242,600 11,994
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - CONTINUED
Marketspan Corp. 309,800 $ 8,539
MCN Energy Group, Inc. 463,600 11,503
MDU Resources Group, Inc. 72,075 1,635
National Fuel Gas Co. 69,400 2,867
NICOR, Inc. 168,100 6,472
Peoples Energy Corp. 83,300 2,916
Questar Corp. 574,400 10,698
Sempra Energy (a) 545,536 13,741
Southern Union Co. 51,103 850
UGI Corp. 116,583 2,740
Washington Gas Light Co. 117,500 2,791
Western Resources, Inc. 8,500 332
WICOR, Inc. 81,200 1,741
Williams Companies, Inc. 651,440 20,887
167,246
TELEPHONE SERVICES - 45.6%
Advanced Communications Group, Inc. 50,000 466
ALLTEL Corp. 186,000 7,800
AT&T Corp. 1,938,619 117,529
BC Telecom, Inc. 71,100 2,003
BCE, Inc. 841,000 33,877
Bell Atlantic Corp. 200,000 9,075
BellSouth Corp. 714,500 48,809
Cincinnati Bell, Inc. 784,500 25,202
e.spire Communications, Inc. (a) 44,700 894
Equant NV 7,700 333
Excel Communications, Inc. (a) 23,100 495
France Telecom SA 10,500 716
Frontier Corp. 194,100 6,514
Global Telesystems Group, Inc. (a) 87,600 4,687
GST Telecommunications, Inc. (a) 250,000 3,313
GTE Corp. 1,540,300 83,754
ITC Deltacom, Inc. 1,700 81
Maritime Telegraph & Telephone Co. Ltd. 111,300 2,856
MCI Communications Corp. 2,575,800 166,781
McLeodUSA, Inc. Class A (a) 304,300 11,373
Newtel Enterprises Ltd. 114,500 2,802
NEXTLINK Communications, Inc. Class A (a) 1,400 52
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Qwest Communications International, Inc. (a) 2,044,475 $ 82,546
Southern New England Telecommunications Corp. 200,000 13,775
Sprint Corp. 209,600 14,672
STAR Telecommunications, Inc. (a) 400,000 7,350
Tel-Save Holdings, Inc. (a) 872,100 10,901
Telecom Italia Mobile (TIM) SA 2,882,100 19,254
Telebras sponsored ADR (a) 160,000 19,450
Telefonica de Espana SA sponsored ADR 90,327 13,143
Telus Corp. 400,000 9,128
U.S. LEC Corp. Class A 27,500 564
WinStar Communications, Inc. (a) 73,100 2,412
WorldCom, Inc. (a) 2,450,760 129,584
852,191
WATER - 0.6%
American Water Works, Inc. 318,357 9,531
E Town Corp. 15,415 625
Severn Trent PLC 56,905 976
Yorkshire Water PLC 100,800 839
11,971
TOTAL UTILITIES 1,432,605
TOTAL COMMON STOCKS 1,579,800
(Cost $1,094,857)
</TABLE>
<TABLE>
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CONVERTIBLE PREFERRED STOCKS - 4.2%
MEDIA & LEISURE - 2.9%
BROADCASTING - 2.9%
MediaOne Group, Inc. $3.63 PIES (a) 930,000 54,056
TECHNOLOGY - 1.0%
COMMUNICATIONS EQUIPMENT - 1.0%
Intermedia Communications, Inc. Series D, $1.75 388,500 18,745
depositary shares (a)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 0.3%
ELECTRIC UTILITY - 0.3%
Citizens Utilities Trust $2.50 EPPICS 141,300 $ 6,208
TOTAL CONVERTIBLE PREFERRED STOCKS 79,009
(Cost $73,388)
</TABLE>
<TABLE>
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CASH EQUIVALENTS - 11.4%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements $ 121,244 121,187
(U.S. Treasury obligations), in a joint
trading account at 5.62%, dated
7/31/98 due 8/3/98
SHARES
Taxable Central Cash Fund (b) 91,300,774 91,301
TOTAL CASH EQUIVALENTS 212,488
(Cost $212,488)
TOTAL INVESTMENT IN SECURITIES - 100% $ 1,871,297
(Cost $1,380,733)
</TABLE>
SECURITY TYPE ABBREVIATIONS
EPPICS - Equity Providing Preferred
Income Convertible Securities
PIES - Premium Income Equity
Securities
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.62%. 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, 1998, the aggregate cost of investment securities for
income tax purposes was $1,383,000,000. Net unrealized appreciation
aggregated $488,297,000, of which $509,059,000 related to appreciated
investment securities and $20,762,000 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 $1,130,000 is still available to offset future
capital gains of the fund, to the extent provided by regulations.
FINANCIAL STATEMENTS
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STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1998 (UNAUDITED)
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (INCLUDING REPURCHASE $ 1,871,297
AGREEMENTS OF $121,187) (COST $1,380,733) -
SEE ACCOMPANYING SCHEDULE
FOREIGN CURRENCY HELD AT VALUE (COST $139) 139
RECEIVABLE FOR INVESTMENTS SOLD 2,449
RECEIVABLE FOR FUND SHARES SOLD 2,339
DIVIDENDS RECEIVABLE 2,983
INTEREST RECEIVABLE 432
OTHER RECEIVABLES 19
TOTAL ASSETS 1,879,658
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 74
PAYABLE FOR INVESTMENTS PURCHASED 63,083
PAYABLE FOR FUND SHARES REDEEMED 3,406
ACCRUED MANAGEMENT FEE 918
OTHER PAYABLES AND ACCRUED EXPENSES 423
COLLATERAL ON SECURITIES LOANED, AT VALUE 7,201
TOTAL LIABILITIES 75,105
NET ASSETS $ 1,804,553
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 1,203,696
UNDISTRIBUTED NET INVESTMENT INCOME 1,034
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 109,257
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 490,566
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS, FOR 84,570 SHARES OUTSTANDING $ 1,804,553
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE $21.34
PER SHARE ($1,804,553 (DIVIDED BY) 84,570 SHARES)
</TABLE>
<TABLE>
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STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED)
INVESTMENT INCOME $ 19,725
DIVIDENDS
INTEREST (INCLUDING INCOME ON SECURITIES LOANED OF $115) 2,330
TOTAL INCOME 22,055
EXPENSES
MANAGEMENT FEE $ 4,329
BASIC FEE
PERFORMANCE ADJUSTMENT 1,029
TRANSFER AGENT FEES 1,644
ACCOUNTING AND SECURITY LENDING FEES 349
NON-INTERESTED TRUSTEES' COMPENSATION 6
CUSTODIAN FEES AND EXPENSES 62
REGISTRATION FEES 27
AUDIT 20
LEGAL 6
INTEREST 2
MISCELLANEOUS 4
TOTAL EXPENSES BEFORE REDUCTIONS 7,478
EXPENSE REDUCTIONS (154) 7,324
NET INVESTMENT INCOME 14,731
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 111,727
FOREIGN CURRENCY TRANSACTIONS 33 111,760
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 53,495
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 1 53,496
NET GAIN (LOSS) 165,256
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 179,987
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
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STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED YEAR ENDED
JULY 31, 1998 JANUARY 31,
(UNAUDITED) 1998
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 14,731 $ 31,163
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 111,760 216,140
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 53,496 102,443
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 179,987 349,746
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (15,713) (31,789)
FROM NET INVESTMENT INCOME
FROM NET REALIZED GAIN (20,711) (171,605)
TOTAL DISTRIBUTIONS (36,424) (203,394)
SHARE TRANSACTIONS 431,438 796,964
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 33,172 185,940
COST OF SHARES REDEEMED (541,913) (670,869)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (77,303) 312,035
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 66,260 458,387
NET ASSETS
BEGINNING OF PERIOD 1,738,293 1,279,906
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 1,804,553 $ 1,738,293
INCOME OF $1,034 AND $2,016, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 20,522 40,935
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 1,625 9,844
REDEEMED (26,164) (35,868)
NET INCREASE (DECREASE) (4,017) 14,911
</TABLE>
<TABLE>
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FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED JULY 31,
JULY 31, 1998
(UNAUDITED) 1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 19.62 $ 17.37 $ 16.41 $ 13.47 $ 15.84 $ 13.94
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INVESTMENT INCOME .18 D .43 D .48 D .54 .55 .50
NET REALIZED AND 1.98 4.46 1.50 3.22 (1.58) 2.14
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT 2.16 4.89 1.98 3.76 (1.03) 2.64
OPERATIONS
LESS DISTRIBUTIONS (.19) (.44) (.48) (.54) (.54) (.52)
FROM NET INVESTMENT
INCOME
FROM NET REALIZED GAIN (.25) (2.20) (.54) (.28) (.68) (.22)
IN EXCESS OF NET - - - - (.12) -
REALIZED GAIN
TOTAL DISTRIBUTIONS (.44) (2.64) (1.02) (.82) (1.34) (.74)
NET ASSET VALUE, END $ 21.34 $ 19.62 $ 17.37 $ 16.41 $ 13.47 $ 15.84
OF PERIOD
TOTAL RETURN B, C 11.12% 29.16% 12.73% 28.61% (6.38)% 19.34%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 1,805 $ 1,738 $ 1,280 $ 1,546 $ 1,171 $ 1,456
(IN MILLIONS)
RATIO OF EXPENSES TO .84% A .87% .84% .80% .88% .87%
AVERAGE NET ASSETS
RATIO OF EXPENSES TO .82% A, E .85% E .81% E .77% E .87% E .86% E
AVERAGE NET ASSETS
AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT 1.66% A 2.34% 2.96% 3.69% 3.87% 3.39%
INCOME TO AVERAGE
NET ASSETS
PORTFOLIO TURNOVER RATE 45% A 57% 56% 98% 98% 47%
AVERAGE COMMISSION RATE F $ .0475 $ .0104 $ .0048
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL
STATEMENTS).
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS).
F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1998 (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, 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 require 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. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Under the Plan, deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of a
cross-section of Fidelity funds, including shares of the fund.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, foreign currency transactions,
partnerships, non-taxable dividends, capital loss carryforwards, and
losses deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part
of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
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 more joint
trading accounts. These
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 Fidelity Investments Money Management, Inc., 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 earned 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 $383,352,000 and $379,814,000, 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
(plus/minus).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 annualized rate of .60% 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 .19% 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 $39,000 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 $6,473,000 and $7,201,000, respectively.
6. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund has
established borrowing arrangements with certain banks. Under the most
restrictive arrangement, the fund must pledge to the bank securities
having a market value in excess of 220% of the total bank borrowings.
The interest rate on the borrowings is the bank's base rate, as
revised from time to time. The maximum loan and the average daily loan
balances during the period for which loans were outstanding amounted
to $6,973,000 and $6,537,000, respectively. The weighted average
interest rate was 5.85%.
7. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $138,000 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 $2,000 and $14,000, 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 Xpress(registered trademark) provides 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.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
For mutual fund and brokerage trading.
For quotes.*
For account balances and holdings.
To review orders and mutual
fund activity.
To change your PIN.
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.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_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 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
48 West Putnam Avenue
Greenwich, CT
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
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
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
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
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
OREGON
16850 SW 72 Avenue
Tigard, 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
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
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 500
Merrimack, NH 03054-0500
(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 500
Merrimack, NH 03054-0500
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
Robert A. Lawrence, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
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(registered trademark) Fund
Real Estate Investment Portfolio
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 (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE