FIDELITY
EQUITY-INCOME
FUND
ANNUAL REPORT
JANUARY 31, 1999
(fidelity_logo_graphic)(registered trademark)
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 33 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 37 Notes to the financial
statements.
REPORT OF INDEPENDENT 43 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 44
PROXY VOTING RESULTS 45
OF SPECIAL NOTE 47
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
After the first month of 1999, U.S. stock markets seem to have
maintained their momentum from 1998, as the S&P 500, the Dow and
NASDAQ all reached record highs in January. The technology sector, and
Internet stocks in particular, were the main contributors. In the bond
markets, domestic securities continued to trade at historically low
yields, while positive economic news helped credit-sensitive sectors
outperform Treasury bonds.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. 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 JANUARY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY EQUITY-INCOME 12.79% 124.55% 303.14%
Russell 3000 Value 15.82% 142.29% 356.24%
S&P 500 (registered trademark) 32.49% 196.12% 462.78%
Equity Income Funds Average 10.96% 108.86% 264.22%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Russell 3000 Value Index - a market capitalization-weighted index of
U.S. domiciled value oriented stocks - and the Standard & Poor's 500
Index - a market capitalization-weighted 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
Inc. The past one year average represents a peer group of 229 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 JANUARY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY EQUITY-INCOME 12.79% 17.56% 14.96%
Russell 3000 Value 15.82% 19.36% 16.39%
S&P 500 32.49% 24.25% 18.86%
Equity Income Funds Average 10.96% 15.76% 13.68%
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 different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Equity-Income Russell 3000 Value
00023 RS008
1989/01/31 10000.00 10000.00
1989/02/28 9910.48 9864.06
1989/03/31 10102.77 10078.78
1989/04/30 10479.51 10488.89
1989/05/31 10729.38 10905.44
1989/06/30 10762.34 10855.97
1989/07/31 11461.70 11558.75
1989/08/31 11601.57 11840.61
1989/09/30 11460.47 11731.28
1989/10/31 10852.13 11288.95
1989/11/30 10997.35 11412.42
1989/12/31 11154.41 11644.18
1990/01/31 10470.21 10911.89
1990/02/28 10486.80 11186.47
1990/03/31 10493.96 11317.43
1990/04/30 10099.54 10878.84
1990/05/31 10749.91 11758.09
1990/06/30 10706.37 11507.62
1990/07/31 10553.55 11385.40
1990/08/31 9734.23 10362.72
1990/09/30 9029.89 9842.23
1990/10/31 8849.21 9681.35
1990/11/30 9404.16 10348.58
1990/12/31 9590.50 10614.23
1991/01/31 10057.89 11112.89
1991/02/28 10763.47 11875.32
1991/03/31 10920.09 12084.43
1991/04/30 10974.69 12174.02
1991/05/31 11547.99 12634.43
1991/06/30 11042.98 12099.19
1991/07/31 11632.43 12593.07
1991/08/31 11894.92 12832.11
1991/09/30 11836.76 12745.02
1991/10/31 12018.50 12951.63
1991/11/30 11543.17 12296.04
1991/12/31 12410.41 13311.23
1992/01/31 12533.06 13403.11
1992/02/29 12915.13 13753.14
1992/03/31 12741.03 13557.34
1992/04/30 13170.34 14085.93
1992/05/31 13299.13 14177.39
1992/06/30 13145.90 14063.27
1992/07/31 13473.35 14605.38
1992/08/31 13203.69 14171.15
1992/09/30 13310.04 14372.99
1992/10/31 13446.15 14411.44
1992/11/30 13888.52 14917.79
1992/12/31 14231.71 15294.64
1993/01/31 14653.60 15769.19
1993/02/28 15006.82 16283.02
1993/03/31 15500.40 16773.99
1993/04/30 15470.72 16543.68
1993/05/31 15747.77 16891.43
1993/06/30 15938.07 17246.25
1993/07/31 16182.51 17448.29
1993/08/31 16726.25 18082.90
1993/09/30 16702.25 18148.37
1993/10/31 16988.83 18175.19
1993/11/30 16717.33 17791.89
1993/12/31 17264.40 18147.33
1994/01/31 17953.14 18830.16
1994/02/28 17463.37 18242.12
1994/03/31 16703.98 17550.15
1994/04/30 17069.88 17870.46
1994/05/31 17287.29 18053.79
1994/06/30 17056.65 17617.91
1994/07/31 17536.82 18142.55
1994/08/31 18150.37 18683.82
1994/09/30 17727.30 18107.63
1994/10/31 17893.67 18297.62
1994/11/30 17158.39 17558.46
1994/12/31 17306.39 17794.38
1995/01/31 17413.49 18275.17
1995/02/28 18061.78 18993.12
1995/03/31 18516.15 19377.04
1995/04/30 19123.99 19985.66
1995/05/31 19749.03 20786.13
1995/06/30 20045.41 21109.56
1995/07/31 20756.16 21847.89
1995/08/31 20912.17 22190.65
1995/09/30 21560.87 22945.39
1995/10/31 21189.03 22648.98
1995/11/30 22199.97 23772.06
1995/12/31 22811.56 24382.96
1996/01/31 23545.28 25085.12
1996/02/29 23773.82 25293.81
1996/03/31 24218.95 25733.02
1996/04/30 24519.47 25888.30
1996/05/31 24826.11 26243.74
1996/06/30 24856.78 26233.35
1996/07/31 24011.14 25199.03
1996/08/31 24579.02 25958.76
1996/09/30 25474.98 26956.08
1996/10/31 26257.68 27921.59
1996/11/30 27891.40 29892.54
1996/12/31 27607.61 29648.30
1997/01/31 28664.73 30982.98
1997/02/28 29122.39 31421.77
1997/03/31 28226.89 30320.88
1997/04/30 29091.78 31510.84
1997/05/31 31031.23 33345.27
1997/06/30 32405.56 34801.72
1997/07/31 34744.24 37305.30
1997/08/31 33275.15 36160.41
1997/09/30 35104.49 38367.74
1997/10/31 33873.45 37298.29
1997/11/30 35011.83 38823.09
1997/12/31 35885.30 39974.37
1998/01/31 35741.51 39393.19
1998/02/28 38055.80 42018.74
1998/03/31 39973.69 44504.69
1998/04/30 39959.79 44794.97
1998/05/31 39452.39 44042.67
1998/06/30 39924.80 44530.48
1998/07/31 39003.46 43503.50
1998/08/31 32875.14 37000.87
1998/09/30 34761.07 39121.56
1998/10/31 37403.19 41995.93
1998/11/30 39092.19 43886.56
1998/12/31 40379.73 45371.14
1999/01/29 40314.31 45623.83
IMATRL PRASUN SHR__CHT 19990131 19990216 134645 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Equity-Income Fund on January 31, 1989. As the
chart shows, by January 31, 1999, the value of the investment would
have grown to $40,314 - a 303.14% increase on the initial investment.
For comparison, look at how the Russell 3000 Value Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $45,624 - a 356.24% increase.
Beginning with this report, the fund will compare its performance to
that of the Russell 3000 Value Index rather than the Standard & Poor's
500 Index. The Russell 3000 Value Index more closely reflects the
fund's investment strategy.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
After celebrating many happy
returns in 1998, U.S. stock market
investors found new reasons to
cheer in early 1999, as the
Standard and Poor's 500 Index,
Dow Jones Industrial Average, and
NASDAQ all reached record highs
in January. For the 12-month
period ending January 31, 1999,
the S&P 500 Index - a popular
performance measure of U.S. stock
markets - boasted a 32.49%
return. Remarkable symmetries
between the first month of 1999
and the 11-month period preceding
it were noticeably apparent. As
was the case a year ago, the U.S.
economy demonstrated remarkable
resiliency. The triumvirate of low
inflation, low unemployment and
low interest rates continued to offset
economic uncertainty abroad and
political unrest at home. Extreme
volatility was also evident. But while
the impact of Brazil's currency
devaluation in mid-January did not
quite have the same disastrous
results as Russia's devaluation of the
ruble last August, the aftershocks
were still felt worldwide. Three
separate 0.25% interest-rate cuts by
the Federal Reserve Board late last
fall helped pull the U.S. stock
market out of the tailspin Russia's
actions caused, while Brazil's
battered currency - and U.S.
investors' pulse rates - stabilized
quickly after it was freed to float
against other currencies.
(photograph of Steve Petersen)
An interview with Steve Petersen, Portfolio Manager of Fidelity
Equity-Income Fund
Q. HOW DID THE FUND PERFORM, STEVE?
A. For the 12-month period ending January 31, 1999, the fund returned
12.79%, outperforming the 10.96% return of the equity income funds
average, as tracked by Lipper Inc. By comparison, the Russell 3000
Value Index returned 15.82% and the Standard & Poor's 500 Index
returned 32.49% during the same period.
Q. STARTING WITH THIS REPORT, THE FUND COMPARES ITS PERFORMANCE WITH
THE RUSSELL 3000 VALUE INDEX. WHY?
A. Given the fund's focus on stocks with "value" characteristics, the
Russell 3000 Value Index more closely reflects the fund's investment
strategy than the S&P 500 index, which measures the performance of
both growth and value stocks. The Russell 3000 Value Index focuses
more on large, mid- and small-cap companies with value characteristics
- - rather than growth stocks. Given that this is an equity-income fund,
I look for stocks that have dividend yields either equal to or greater
than the S&P 500's. Stocks with "value" characteristics are those that
I think are either misperceived or mis-priced, where the company's
fundamentals argue for a higher valuation. Or, they may be in the
early stages of turning around their operations; they've been weak
performers, and now have better fundamentals, so these companies have
the potential for better stock-price performance going forward.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD?
A. The fund invests primarily in large-capitalization stocks, but its
holdings in medium and small companies, as well as its emphasis on
dividend-paying stocks rather than growth stocks, negatively affected
its performance during the year. The fund's limited technology-stock
holdings - which accounted for a significant contribution to the stock
market's performance during 1998 - also had a negative impact, as did
the higher percentage of energy stocks in the portfolio. Energy stocks
suffered as oil and gas prices dropped due to declining demand
worldwide, reflecting Asia's economic slowdown. On the other hand, the
fund benefited from the strong performance of utilities stocks, in
particular from the good performance of telephone company stocks.
Q. WHY DID TELEPHONE COMPANIES DO SO WELL?
A. In general, their earnings were better than expected as these
companies went through the process of deregulation. Technology pushed
up consumer demand faster than anticipated as consumers added phone
lines at a surprising pace, reflecting growing demand for Internet
access and data transmission in the home. Telephone companies also
successfully cut costs during the year and branched out into different
technologies, helping their earnings growth and increasing their
attractiveness to investors.
Q. WHICH HOLDINGS PERFORMED PARTICULARLY WELL?
A. AT&T, one of the fund's top holdings, had a great year. After going
through a management change, its new leadership has been building the
company's competitive strength in the long-distance phone business.
Schering-Plough performed strongly during the year. It produces the
leading allergy drug, Claritin, and had steady, stronger-than-expected
earnings. American Express, another top holding, did well, reflecting
its successful transformation over the last few years into a stronger
company. General Electric, the fund's number-one holding at the end of
the period, continued its good performance. The company recently
released a statement that its earnings outlook remains strong. GE was
also active in making acquisitions internationally that have the
potential to boost earnings.
Q. WHICH HOLDINGS DISAPPOINTED?
A. Energy companies suffered from the significant decline in the price
of oil, which dropped $5-$7 per barrel since 1997. As a result, oil
companies BP Amoco, Occidental Petroleum, Royal Dutch Petroleum and
Chevron all performed poorly. Companies that provide service to the
oil companies, such as Halliburton and Schlumberger, fared even worse.
That's because oil companies, which tend to spend only the cash flow
that they generate, had less business for their suppliers as their
revenues declined.
Q. STEVE, WHAT'S YOUR OUTLOOK?
A. Near term, I believe that we're in for more of the same. The U.S.
economy looks good, with low inflation and healthy consumer spending.
However, worldwide trends are not exceptionally strong, and
multinational corporations are still exposed to the problems in Asia,
Russia and other emerging markets. In this environment, investors
probably will continue to focus on large-capitalization growth
companies, rather than small-cap and cyclical stocks.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(checkmark)FUND FACTS
FUND NUMBER: 023
TRADING SYMBOL: FEQIX
GOAL: to increase the value of
the fund's shares over the long
term by investing mainly in
income-producing equities
START DATE: May 16, 1966
SIZE: as of January 31,
1999, more than $23 billion
MANAGER: Stephen Petersen,
since 1993; manager,
Fidelity Balanced Fund, 1996
to 1997; manager, various
institutional accounts, since
1987; joined Fidelity in
1980
STEPHEN PETERSEN ON
"THE VALUE PHILOSOPHY":
"The concept of buying value in the
marketplace has been a
challenging one, at least over the
last few years. The spread between
value and growth has been at its
widest in the last 20 years, with
growth stocks outperforming
value stocks dramatically - a
very unusual phenomenon. Value
investing versus growth investing
has been out of favor since 1994,
and, to a more extreme degree,
since the fourth quarter of 1997,
coinciding with the problems in
Asia.
"However, this situation hasn't
deterred me from my
commitment to a value
philosophy, because historically,
whenever there's been such a wide
discrepancy in performance, the
underperformers have generally
snapped back. Over time, the
performance of growth and value
indexes, on average, has not been
all that different on a per-year
basis. So, if investors are not in
value stocks, they could miss out
on significant opportunities
offered by value investing over
time. And, at the point when value
stocks come back, those investors
will also run the risk of missing
that surge of outperformance.
Like diversifying between stocks
and bonds, I believe that
diversifying between growth and
value is a prudent way to invest
within the equity markets."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF JANUARY
31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
General Electric Co. 4.1 3.6
Citigroup, Inc. 2.4 2.5
Fannie Mae 2.4 1.9
AT&T Corp. 2.3 1.3
American Express Co. 2.2 2.3
BP Amoco PLC sponsored ADR 2.1 1.8
Philip Morris Companies, Inc. 2.1 1.8
Bank One Corp. 2.1 1.0
BankAmerica Corp. 1.8 1.4
Bank of New York Co., Inc. 1.7 1.5
TOP FIVE MARKET SECTORS AS OF
JANUARY 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
FINANCE 25.3 26.6
UTILITIES 13.7 10.2
ENERGY 9.6 9.8
INDUSTRIAL MACHINERY & 8.8 7.9
EQUIPMENT
BASIC INDUSTRIES 5.9 6.2
</TABLE>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF JANUARY 31, 1999 *
Stocks 93.4%
Bonds 0.5%
Convertible
securities 5.8%
Short-term
investments 0.3%
*FOREIGN
INVESTMENTS 9.3%
Row: 1, Col: 1, Value: 93.4
Row: 1, Col: 2, Value: 0.5
Row: 1, Col: 3, Value: 5.8
Row: 1, Col: 4, Value: 0.3
AS OF JULY 31, 1998 **
Stocks 93.1%
Bonds 0.1%
Convertible
securities 6.3%
Short-term
investments 0.5%
**FOREIGN
INVESTMENTS 11.2%
Row: 1, Col: 1, Value: 93.1
Row: 1, Col: 2, Value: 0.1
Row: 1, Col: 3, Value: 6.3
Row: 1, Col: 4, Value: 0.5
INVESTMENTS JANUARY 31, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 93.4%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 3.7%
AEROSPACE & DEFENSE - 2.5%
AlliedSignal, Inc. 3,486,900 $ 135,989
Harsco Corp. 1,763,000 47,050
Textron, Inc. 2,305,400 171,608
United Technologies Corp. 1,871,500 223,527
578,174
DEFENSE ELECTRONICS - 0.9%
Northrop Grumman Corp. 396,100 22,578
Raytheon Co.:
Class A 112,556 6,275
Class B 3,292,600 184,180
213,033
SHIP BUILDING & REPAIR - 0.3%
General Dynamics Corp. 1,043,600 60,659
TOTAL AEROSPACE & DEFENSE 851,866
BASIC INDUSTRIES - 5.7%
CHEMICALS & PLASTICS - 2.5%
Dow Chemical Co. 177,900 15,666
du Pont (E.I.) de Nemours & 1,528,100 78,220
Co.
Great Lakes Chemical Corp. 1,899,300 71,936
Hanna (M.A.) Co. 1,814,200 20,070
Hercules, Inc. 1,762,100 47,467
Hoechst AG 1,039,600 45,348
IMC Global, Inc. 1,969,200 35,815
Lawter International, Inc. 706,600 7,508
Millennium Chemicals, Inc. 1,541,857 26,597
Monsanto Co. 1,682,900 80,043
Nalco Chemical Co. 964,200 26,516
Olin Corp. 1,300,700 30,729
Solutia, Inc. 2,330,100 44,563
Union Carbide Corp. 1,014,000 40,116
Witco Corp. 1,391,500 21,394
591,988
IRON & STEEL - 0.3%
Dofasco, Inc. 1,613,100 21,669
Inland Steel Industries, Inc. 1,551,495 23,466
(f)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - CONTINUED
Nucor Corp. 326,100 $ 15,979
USX-U.S. Steel Group 581,100 15,145
76,259
METALS & MINING - 1.2%
Alcan Aluminium Ltd. 2,496,100 64,170
Alcoa, Inc. 2,049,694 171,406
Kaiser Aluminum Corp. (a) 685,101 3,511
Noranda, Inc. 248,300 2,678
Phelps Dodge Corp. 721,400 31,336
273,101
PACKAGING & CONTAINERS - 0.1%
Tupperware Corp. 637,000 13,098
PAPER & FOREST PRODUCTS - 1.6%
Bowater, Inc. 558,600 21,820
Champion International Corp. 1,328,800 46,591
Domtar, Inc. 2,284,800 13,607
Fort James Corp. 1,130,700 40,564
Georgia-Pacific Corp. 1,187,000 76,562
Kimberly-Clark Corp. 1,919,000 95,590
Weyerhaeuser Co. 1,437,400 77,799
372,533
TOTAL BASIC INDUSTRIES 1,326,979
CONSTRUCTION & REAL ESTATE -
1.7%
BUILDING MATERIALS - 0.5%
American Standard Companies, 1,039,500 35,733
Inc. (a)
Masco Corp. 1,956,700 63,226
Sherwin-Williams Co. 947,700 24,285
123,244
CONSTRUCTION - 0.0%
Alstom SA 578,200 13,826
ENGINEERING - 0.2%
EG & G, Inc. 823,400 23,364
Fluor Corp. 378,500 14,430
37,794
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE - 0.0%
Fastighets AB Tornet 528,030 $ 7,847
Mandamus AB (a) 57,815 318
8,165
REAL ESTATE INVESTMENT TRUSTS
- - 1.0%
Alexandria Real Estate 232,800 6,649
Equities, Inc.
Crescent Real Estate Equities 1,357,800 28,768
Co.
Duke Realty Investments, Inc. 358,200 8,239
Equity Office Properties Trust 886,000 22,593
Equity Residential Properties 1,154,300 46,966
Trust (SBI)
Macerich Co. 469,400 11,559
Public Storage, Inc. 545,600 13,879
Starwood Hotels & Resorts 2,990,900 74,773
Worldwide, Inc.
Weeks Corp. 360,700 9,919
223,345
TOTAL CONSTRUCTION & REAL 406,374
ESTATE
DURABLES - 3.1%
AUTOS, TIRES, & ACCESSORIES -
2.1%
Bayerische Motoren Werke 20,700 14,649
(BMW) AG
Bayerische Motoren Werke 7,940 5,502
(BMW) AG (RFD) (a)
DaimlerChrysler AG (Reg.) 1,252,105 129,671
Eaton Corp. 578,900 40,306
Ford Motor Co. 1,671,800 102,711
Meritor Automotive, Inc. 1,338,400 23,338
Navistar International Corp. 602,100 20,509
(a)
Pep Boys-Manny, Moe & Jack 39,588 624
Snap-On, Inc. 1,669,800 56,773
TRW, Inc. 1,621,700 77,943
Volvo AB Class B 593,500 16,025
488,051
CONSUMER DURABLES - 0.2%
Minnesota Mining & 541,100 42,003
Manufacturing Co.
CONSUMER ELECTRONICS - 0.3%
General Motors Corp. Class H 481,200 23,699
(a)
Newell Co. 830,000 34,497
58,196
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.5%
Dexter Corp. 1,027,800 $ 30,127
Kellwood Co. 818,000 22,700
Liz Claiborne, Inc. 484,100 18,517
NIKE, Inc. Class B 1,032,300 47,228
Unifi, Inc. 438,000 7,309
125,881
TOTAL DURABLES 714,131
ENERGY - 9.5%
ENERGY SERVICES - 0.9%
Halliburton Co. 4,670,600 138,658
Schlumberger Ltd. 1,725,700 82,186
220,844
OIL & GAS - 8.6%
Amerada Hess Corp. 1,536,700 72,993
Anadarko Petroleum Corp. 1,205,100 32,613
BP Amoco PLC 6,415,552 86,744
BP Amoco PLC sponsored ADR 5,983,327 485,397
Burlington Resources, Inc. 1,895,000 57,324
Chevron Corp. 2,885,041 215,657
Coastal Corp. (The) 1,007,500 30,036
Conoco, Inc. Class A (a) 1,478,200 29,472
Elf Aquitaine SA sponsored ADR 1,761,700 96,233
Exxon Corp. 2,103,800 148,186
Mobil Corp. 915,000 80,234
Occidental Petroleum Corp. 3,782,500 56,974
Phillips Petroleum Co. 1,490,400 57,567
Royal Dutch Petroleum Co. (NY 4,283,200 171,596
Registry Gilder 1.25)
Santa Fe Energy Resources, 863,275 5,018
Inc. (a)
Texaco, Inc. 130,633 6,189
Tosco Corp. 200 4
Total SA:
Class B 1,315,943 134,720
sponsored ADR 1,791,992 91,728
Ultramar Diamond Shamrock 912,900 20,084
Corp.
Unocal Corp. 980,089 27,933
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
USX-Marathon Group 3,318,900 $ 75,505
Valero Energy Corp. 337,500 6,349
1,988,556
TOTAL ENERGY 2,209,400
FINANCE - 24.3%
BANKS - 9.2%
Bank of New York Co., Inc. 11,057,034 392,525
Bank of Nova Scotia 1,547,100 33,272
Bank One Corp. 9,089,229 476,048
BankAmerica Corp. 6,235,417 416,994
Chase Manhattan Corp. 2,276,100 175,117
Comerica, Inc. 1,895,739 118,365
National Bank of Canada 4,722,100 73,275
Royal Bank of Canada 619,200 32,001
U.S. Bancorp 3,928,500 132,341
Wells Fargo & Co. 8,161,168 285,131
2,135,069
CREDIT & OTHER FINANCE - 7.0%
American Express Co. 5,069,800 521,556
Associates First Capital 4,827,404 195,812
Corp. Class A
Citigroup, Inc. 9,943,400 557,452
Fleet Financial Group, Inc. 2,916,596 129,242
Household International, Inc. 5,240,278 230,245
1,634,307
FEDERAL SPONSORED CREDIT - 2.7%
Fannie Mae 7,605,400 554,244
Freddie Mac 443,200 27,478
SLM Holding Corp. 853,900 37,625
619,347
INSURANCE - 3.9%
Allstate Corp. 5,397,970 202,761
American Bankers Insurance 619,100 28,479
Group, Inc.
Berkshire Hathaway, Inc.:
Class A (a) 1,057 68,705
Class B (a) 21 45
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Chubb Corp. (The) 488,800 $ 28,717
CIGNA Corp. 731,900 60,290
Conseco, Inc. 651,444 20,154
Fremont General Corp. (f) 3,571,256 80,800
Hartford Financial Services 3,407,200 176,961
Group, Inc.
Highlands Insurance Group, 787,590 10,239
Inc. (a)(f)
Marsh & McLennan Companies, 475,800 29,916
Inc.
PMI Group, Inc. 598,900 25,678
Reliastar Financial Corp. 2,172,221 90,011
Torchmark Corp. 1,584,100 51,978
Travelers Property Casualty 1,267,700 36,526
Corp. Class A
911,260
SAVINGS & LOANS - 1.1%
Washington Mutual, Inc. 5,914,380 248,404
SECURITIES INDUSTRY - 0.4%
First Marathon, Inc. Class A 1,146,000 14,219
(non-vtg.)
Lehman Brothers Holdings, 917,060 50,152
Inc.
Nomura Securities Co. Ltd. 652,000 5,679
Waddell & Reed Financial, Inc.:
Class A 613,235 12,955
Class B 387,946 8,123
91,128
TOTAL FINANCE 5,639,515
HEALTH - 5.8%
DRUGS & PHARMACEUTICALS - 4.5%
American Home Products Corp. 3,735,200 219,210
Bristol-Myers Squibb Co. 1,846,900 236,749
Lilly (Eli) & Co. 706,600 66,200
Merck & Co., Inc. 1,475,800 216,574
Schering-Plough Corp. 5,586,200 304,448
1,043,181
MEDICAL EQUIPMENT & SUPPLIES
- - 0.9%
Baxter International, Inc. 1,075,800 76,315
Becton, Dickinson & Co. 320,500 11,458
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - CONTINUED
Johnson & Johnson 1,287,800 $ 109,463
Pall Corp. 887,500 20,579
217,815
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
Columbia/HCA Healthcare Corp. 4,784,700 86,723
Humana, Inc. (a) 14,300 256
United HealthCare Corp. 222,400 9,952
96,931
TOTAL HEALTH 1,357,927
HOLDING COMPANIES - 0.1%
U.S. Industries, Inc. 959,860 18,117
INDUSTRIAL MACHINERY &
EQUIPMENT - 8.5%
ELECTRICAL EQUIPMENT - 5.4%
Alcatel Alsthom Compagnie 587,565 67,570
Generale d'Electricite SA
(RFD)
Emerson Electric Co. 1,667,300 97,016
General Electric Co. 9,204,100 965,272
Honeywell, Inc. 412,900 26,916
Loral Space & Communications 634,300 13,955
Ltd. (a)
Siemens AG 1,194,900 84,834
1,255,563
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.1%
Case Corp. 591,300 11,198
Coltec Industries, Inc. (a) 650,700 11,916
Ingersoll-Rand Co. 1,358,400 64,524
Parker-Hannifin Corp. 1,213,300 37,309
Stewart & Stevenson Services, 506,000 4,269
Inc.
Tyco International Ltd. 4,716,070 363,432
492,648
POLLUTION CONTROL - 1.0%
Allied Waste Industries, Inc. 1,211,000 24,674
(a)
Browning-Ferris Industries, 2,029,282 55,805
Inc.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - CONTINUED
Ogden Corp. 1,080,800 $ 28,101
Waste Management, Inc. 2,459,720 122,832
231,412
TOTAL INDUSTRIAL MACHINERY & 1,979,623
EQUIPMENT
MEDIA & LEISURE - 3.8%
BROADCASTING - 1.7%
CBS Corp. 3,342,614 113,649
Infinity Broadcasting Corp. 666,000 18,440
Class A (a)
Time Warner, Inc. 4,157,173 259,823
391,912
ENTERTAINMENT - 1.0%
King World Productions, Inc. 976,400 26,729
(a)
Viacom, Inc. Class B 2,329,000 197,965
(non-vtg.) (a)
224,694
LEISURE DURABLES & TOYS - 0.1%
Brunswick Corp. 1,073,300 26,497
LODGING & GAMING - 0.1%
Circus Circus Enterprises, 961,000 13,094
Inc. (a)
Mirage Resorts, Inc. (a) 774,800 11,089
24,183
PUBLISHING - 0.4%
American Greetings Corp. 474,300 18,735
Class A
Harcourt General, Inc. 1,112,500 53,400
Reader's Digest Association, 1,134,800 32,626
Inc. Class A (non-vtg.)
104,761
RESTAURANTS - 0.5%
McDonald's Corp. 1,447,600 114,089
TOTAL MEDIA & LEISURE 886,136
NONDURABLES - 5.1%
AGRICULTURE - 0.3%
Edperbrascan Corp. Class A 6,169,050 81,644
(ltd. vtg.)
BEVERAGES - 0.6%
Anheuser-Busch Companies, 907,100 64,121
Inc.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
PepsiCo, Inc. 625,300 $ 24,426
Seagram Co. Ltd. 928,100 44,219
132,766
FOODS - 0.5%
Bestfoods 634,100 31,903
Corn Products International, 856,300 22,745
Inc.
Goodman Fielder Ltd. 5,085,305 4,937
Heinz (H.J.) Co. 879,400 49,521
Nabisco Holdings Corp. Class A 412,800 17,363
126,469
HOUSEHOLD PRODUCTS - 1.6%
Avon Products, Inc. 714,200 26,381
Clorox Co. 545,500 68,256
Gillette Co. 821,500 48,263
Procter & Gamble Co. 630,400 57,288
Unilever NV 26,400 2,018
Unilever NV (NY shares) 588,800 45,043
Unilever PLC 11,656,600 118,387
365,636
TOBACCO - 2.1%
Dimon, Inc. 685,850 4,544
Philip Morris Companies, Inc. 10,155,000 477,285
481,829
TOTAL NONDURABLES 1,188,344
PRECIOUS METALS - 0.1%
Newmont Mining Corp. 1,280,700 22,652
RETAIL & WHOLESALE - 3.9%
APPAREL STORES - 1.4%
Charming Shoppes, Inc. (a) 1,334,600 4,921
Footstar, Inc. (a) 1,130,354 28,612
Intimate Brands, Inc. Class A 366,100 14,598
Limited, Inc. (The) 2,148,539 73,319
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
APPAREL STORES - CONTINUED
Payless ShoeSource, Inc. (a) 544,100 $ 28,327
TJX Companies, Inc. 6,160,446 182,118
331,895
GENERAL MERCHANDISE STORES -
2.5%
Consolidated Stores Corp. (a) 500,000 8,344
Dayton Hudson Corp. 1,876,100 119,601
Federated Department Stores, 2,575,240 107,677
Inc. (a)
Hudson's Bay Co. 1,289,500 13,397
Hudson's Bay Co. (g) 642,800 6,678
Wal-Mart Stores, Inc. 3,716,200 319,593
575,290
TOTAL RETAIL & WHOLESALE 907,185
SERVICES - 0.9%
LEASING & RENTAL - 0.1%
Ryder Systems, Inc. 1,402,100 34,176
PRINTING - 0.4%
Donnelley (R.R.) & Sons Co. 1,302,600 49,092
New England Business Service, 587,800 19,434
Inc.
Wallace Computer Services, 896,600 21,518
Inc.
90,044
SERVICES - 0.4%
ACNielsen Corp. (a) 1,474,433 33,728
Dun & Bradstreet Corp. 787,300 24,013
Manpower, Inc. 705,500 17,373
Modis Professional Services, 1,003,500 14,613
Inc. (a)
89,727
TOTAL SERVICES 213,947
TECHNOLOGY - 3.4%
COMPUTER SERVICES & SOFTWARE
- - 0.9%
Electronic Data Systems Corp. 2,208,500 115,808
First Data Corp. 1,172,000 44,902
NCR Corp. (a) 928,400 45,260
205,970
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - 1.4%
International Business 876,500 $ 160,619
Machines Corp.
Unisys Corp. (a) 4,529,771 150,049
Xerox Corp. 125,543 15,567
326,235
ELECTRONIC INSTRUMENTS - 0.0%
Thermo Electron Corp. (a) 534,000 8,878
ELECTRONICS - 1.1%
AMP, Inc. 951,712 50,084
Motorola, Inc. 2,356,500 170,257
Texas Instruments, Inc. 356,100 35,209
255,550
TOTAL TECHNOLOGY 796,633
TRANSPORTATION - 1.4%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 444,900 26,138
Viad Corp. 1,966,500 56,414
82,552
RAILROADS - 1.0%
Burlington Northern Santa Fe 4,065,400 140,764
Corp.
CSX Corp. 2,229,800 89,749
Union Pacific Corp. 253,400 13,034
243,547
TOTAL TRANSPORTATION 326,099
UTILITIES - 12.4%
ELECTRIC UTILITY - 3.1%
Allegheny Energy, Inc. 2,456,600 77,690
American Electric Power Co., 2,112,500 92,554
Inc.
Avista Corp. 1,445,700 26,745
Central & South West Corp. 911,600 24,100
CILCORP, Inc. 325,000 18,728
CINergy Corp. 1,083,198 33,918
CMP Group, Inc. 892,900 16,072
CMS Energy Corp. 297,400 12,732
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Consolidated Edison, Inc. 1,007,350 $ 49,801
DPL, Inc. 2,038,475 38,604
Duke Energy Corp. 859,227 53,111
Entergy Corp. 4,190,800 123,367
Niagara Mohawk Power Corp. (a) 3,055,600 46,789
PG&E Corp. 2,713,598 86,666
Pinnacle West Capital Corp. 485,200 19,408
720,285
GAS - 0.4%
Questar Corp. 2,305,700 38,476
Sempra Energy 2,704,551 62,205
100,681
TELEPHONE SERVICES - 8.9%
ALLTEL Corp. 1,143,200 73,808
Ameritech Corp. 3,687,800 240,168
AT&T Corp. 5,994,800 544,028
Bell Atlantic Corp. 6,012,992 360,780
BellSouth Corp. 4,249,000 189,612
GTE Corp. 2,563,400 173,030
MCI WorldCom, Inc. (a) 2,763,693 220,405
Pathnet, Inc. warrants 1,040 10
4/15/08 (a)(g)
SBC Communications, Inc. 3,638,600 196,484
Sprint Corp. (FON Group) 693,900 58,201
SUNCOM Telecommunications, 2,855,214 -
Inc. warrants 6/30/01 (a)
2,056,526
TOTAL UTILITIES 2,877,492
TOTAL COMMON STOCKS 21,722,420
(Cost $14,122,553)
PREFERRED STOCKS - 4.0%
CONVERTIBLE PREFERRED STOCKS
- - 4.0%
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.2%
Monsanto Co. $1.625 ACES 939,300 45,908
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES -
0.0%
Republic Industries, Inc. 465,300 $ 7,270
$1.55 ACES
ENERGY - 0.1%
OIL & GAS - 0.1%
Occidental Petroleum Corp. 329,200 15,946
$3.00
Tosco Financing Trust $2.875 76,600 3,466
(g)
19,412
FINANCE - 1.0%
CLOSED END INVESTMENT COMPANY
- - 0.1%
Readers Digest Automatic 985,200 27,524
Common Exchange Trust $1.93
TRACES
CREDIT & OTHER FINANCE - 0.5%
DECS Trust (Dimon) $2.008 93,000 802
Federal-Mogul Financing Trust 183,500 12,180
$3.50
Life Re Corp./Life Re Capital 83,800 6,337
Trust II $3.96
Union Pacific Capital Trust:
$3.125 TIDES (g) 817,600 40,880
$3.125 823,100 41,155
WBK Trust $3.135 STRYPES 423,400 13,761
115,115
INSURANCE - 0.2%
Aetna, Inc. Class C, $4.7578 335,700 26,898
PRIDES
Conseco, Inc. $3.50 PRIDES 363,200 14,573
41,471
SECURITIES INDUSTRY - 0.2%
Merrill Lynch & Co., Inc. 329,100 7,035
$2.39 STRYPES
Salomon Smith Barney
Holdings, Inc.:
$2.03 DECS 490,100 22,300
$3.48 DECS 129,500 8,806
38,141
TOTAL FINANCE 222,251
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.2%
Loral Space & Communications
Ltd. Series C:
$3.00 (g) 388,600 $ 23,510
$3.00 302,300 18,289
41,799
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
Ingersoll Rand Co./Ingersoll 1,126,900 23,383
Rand Finance $0.195 Growth
PRIDES
TOTAL INDUSTRIAL MACHINERY & 65,182
EQUIPMENT
MEDIA & LEISURE - 0.9%
BROADCASTING - 0.7%
Evergreen Media Corp. $3.00 395,800 46,012
(g)
MediaOne Group, Inc.:
$3.63 PIES 528,700 43,486
Class D $2.25 763,500 84,749
174,247
ENTERTAINMENT - 0.2%
Premier Parks, Inc. $4.05 PIES 581,100 34,866
PUBLISHING - 0.0%
Taylor (J.N.) Holdings Ltd. 956,400 -
9.5% (a)
Tribune Co. $1.75 DECS 216,300 5,110
TOTAL MEDIA & LEISURE 214,223
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands
International, Inc.:
Series A, $2.875 474,500 16,845
Series B, $3.75 178,500 7,620
24,465
RETAIL & WHOLESALE - 0.2%
GENERAL MERCHANDISE STORES -
0.2%
K mart Financing I $3.875 607,400 38,114
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Wang Laboratories, Inc.:
$3.25 (g) 228,300 $ 11,215
$3.25 276,100 13,563
24,778
UTILITIES - 1.1%
CELLULAR - 0.2%
AirTouch Communications, Inc. 698,400 54,737
Class B, $1.74 DECS
ELECTRIC UTILITY - 0.5%
Houston Industries, Inc. 612,600 65,165
$3.216 ACES
Texas Utilities Co. $1.6575 986,600 46,053
Growth PRIDES
111,218
GAS - 0.2%
Enron Corp. Series J, $10.50 31,800 28,652
Williams Companies, Inc. 166,600 25,698
$3.50 (a)
54,350
TELEPHONE SERVICES - 0.2%
Qwest Trends Trust $2.04 (g) 802,000 43,709
TOTAL UTILITIES 264,014
TOTAL CONVERTIBLE PREFERRED 925,617
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 0.0%
CONSTRUCTION & REAL ESTATE -
0.0%
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
California Federal Preferred 63,160 1,658
Capital Corp. $2.28
MEDIA & LEISURE - 0.0%
BROADCASTING - 0.0%
CSC Holdings, Inc. 11.125% 40,072 4,628
pay-in-kind
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.0%
PRIMEDIA, Inc. 8.625% 11,949 $ 1,153
TOTAL MEDIA & LEISURE 5,781
TOTAL NONCONVERTIBLE 7,439
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 933,056
(Cost $708,860)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 2.3%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D)
CONVERTIBLE BONDS - 1.8%
CONSTRUCTION & REAL ESTATE -
0.0%
BUILDING MATERIALS - 0.0%
Hexcel Corp. 7% 8/1/03 B2 $ 6,758 6,082
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
Liberty Property LP 8.3% Ba2 1,358 1,604
7/1/01
TOTAL CONSTRUCTION & REAL 7,686
ESTATE
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES -
0.0%
Magna International, Inc. Baa1 6,040 6,134
4.875% 2/15/05 (g)
CONSUMER ELECTRONICS - 0.2%
Matsushita Electric
Industrial Co. Ltd.:
1.3% 3/29/02 Aa2 JPY 959,000 10,564
1.4% 3/31/04 Aa2 JPY 442,000 4,926
Sunbeam Corp. 0% 3/25/18 (g) Caa2 128,730 16,252
31,742
TOTAL DURABLES 37,876
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
FINANCE - 0.0%
INSURANCE - 0.0%
Loews Corp. 3.125% 9/15/07 A2 $ 9,210 $ 7,385
MEDIA & LEISURE - 0.4%
BROADCASTING - 0.1%
Jacor Communications, Inc. B3 7,150 3,647
liquid yield option notes:
0% 2/9/18
0% 6/12/11 B3 18,492 17,752
21,399
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5% 5/15/06 Baa3 5,634 5,409
PUBLISHING - 0.3%
News America Holdings, Inc. Baa3 99,380 63,106
liquid yield option notes:
0% 3/11/13
TOTAL MEDIA & LEISURE 89,914
NONDURABLES - 0.1%
AGRICULTURE - 0.1%
Edperbrascan Corp. 7% 5/31/06 - CAD 14,000 12,970
(g)
FOODS - 0.0%
Chiquita Brands B3 1,680 1,562
International, Inc. 7%
3/28/01
TOTAL NONDURABLES 14,532
RETAIL & WHOLESALE - 0.3%
APPAREL STORES - 0.1%
Baker (J.), Inc. 7% 6/1/02 B3 13,300 8,645
Charming Shoppes, Inc. 7.5% B2 5,338 4,671
7/15/06
13,316
DRUG STORES - 0.0%
Rite Aid Corp.:
5.25% 9/15/02 (g) Baa2 670 978
5.25% 9/15/02 - 230 336
1,314
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.2%
Amazon.com, Inc. 4.75% 2/1/99 Caa3 $ 18,470 $ 18,470
(g)
Home Depot, Inc. 3.25% 10/1/01 A1 11,260 29,726
48,196
TOTAL RETAIL & WHOLESALE 62,826
SERVICES - 0.2%
ADT Operations, Inc. liquid Baa1 19,295 40,440
yield option notes 0% 7/6/10
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Softkey International, Inc. - 29,030 28,595
5.5% 11/1/00 (g)
COMPUTERS & OFFICE EQUIPMENT
- - 0.2%
Apple Computer, Inc. 6% 6/1/01 Caa1 16,500 24,100
Quantum Corp. 7% 8/1/04 B2 16,080 16,000
40,100
ELECTRONICS - 0.3%
Micron Technology, Inc. 7% B2 36,417 47,843
7/1/04
Solectron Corp. 0% 1/27/19 (g) Baa3 40,870 19,362
67,205
TOTAL TECHNOLOGY 135,900
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
Continental Airlines, Inc. B2 9,150 11,072
6.75% 4/15/06 (g)
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
Cam-Net Communications - 4,225 -
Network, Inc. 11.5% 4/4/99
(h)(i)
TOTAL CONVERTIBLE BONDS 407,631
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS - 0.5%
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES -
0.1%
Daimlerchrysler Luxemborg SA A1 DEM 9,740 $ 10,635
4.125% 7/5/03 unit
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
GS Escrow Corp. 7% 8/1/03 Ba1 4,000 3,985
Macsaver Financial Services, Ba1 2,000 1,590
Inc. 7.875% 8/1/03
5,575
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Tenet Healthcare Corp. 8.125% Ba3 5,330 5,477
12/1/08 (g)
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.2%
Adelphia Communications Corp.:
7.75% 1/15/09 (g) B1 6,660 6,752
9.875% 3/1/07 B1 3,920 4,371
Century Communications Corp. Ba3 3,440 1,840
0% 1/15/08
CSC Holdings, Inc. 7.875% Ba2 1,200 1,270
2/15/18
Falcon Holding Group B2 2,660 1,862
LP/Falcon Funding Corp. 0%
4/15/10 (e)
FrontierVision Operating B3 640 714
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Iridium Operating LLC/Iridium B3 1,980 1,653
Capital Corp. 10.875% 7/15/05
NTL, Inc. 11.5% 10/1/08 (g) B3 14,280 16,244
Telewest PLC 0% 10/1/07 (e) B1 3,640 3,158
37,864
ENTERTAINMENT - 0.0%
Regal Cinemas, Inc. 8.875% B3 6,660 6,527
12/15/10 (g)
LODGING & GAMING - 0.0%
HMH Properties, Inc. 7.875% Ba2 2,110 2,041
8/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.0%
Dominos, Inc. 10.375% 1/15/09 B3 $ 2,220 $ 2,287
(g)
TOTAL MEDIA & LEISURE 48,719
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Consumer Products B2 3,910 3,822
Corp. 9% 11/1/06 (g)
RETAIL & WHOLESALE - 0.0%
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
Amazon.com, Inc. 0% 5/1/08 (e) Caa2 2,220 1,426
TECHNOLOGY - 0.0%
COMMUNICATIONS EQUIPMENT - 0.0%
Intermedia Communications, B2 1,540 1,478
Inc. 8.6% 6/1/08
COMPUTER SERVICES & SOFTWARE
- - 0.0%
ICG Services, Inc. 0% 5/1/08 - 3,170 1,704
(e)
TOTAL TECHNOLOGY 3,182
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
Kitty Hawk, Inc. 9.95% B1 480 482
11/15/04
UTILITIES - 0.2%
CELLULAR - 0.1%
Nextel Communications, Inc.:
0% 9/15/07 (e) B2 9,990 6,818
12% 11/1/08 (g) B2 4,160 4,649
Teligent, Inc. 0% 3/1/08 (e) Caa1 6,430 3,151
14,618
TELEPHONE SERVICES - 0.1%
GST Network Funding, Inc. 0% - 3,190 1,451
5/1/08 (e)(g)
Hyperion Telecommunications, B3 530 562
Inc. 12.25% 9/1/04
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) (D) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Level 3 Communications, Inc. B3 $ 7,910 $ 4,667
0% 12/1/08 (e)(g)
McLeodUSA, Inc. 9.5% 11/1/08 B2 1,970 2,118
(g)
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B3 5,550 5,411
10.75% 11/15/08 (g) B3 4,000 4,150
Pathnet, Inc. 12.25% 4/15/08 - 1,040 572
Qwest Communications Ba1 3,060 3,244
International, Inc. 7.5%
11/1/08 (g)
WinStar Communications, Inc. Caa1 2,710 1,911
0% 10/15/05 (e)
24,086
TOTAL UTILITIES 38,704
TOTAL NONCONVERTIBLE BONDS 118,022
TOTAL CORPORATE BONDS 525,653
(Cost $456,596)
COMMERCIAL MORTGAGE
SECURITIES - 0.0%
Bardell Associates Note Trust - 2,512 2,669
12.5% 11/1/08 (h) (Cost
$2,559)
INDEXED SECURITIES - 0.0%
OTHER SECURITIES - 0.0%
Merrill Lynch & Co. Inc. Aa3 5,000 5,450
Japan Index equity
participation securities 0%
1/31/00 (Cost $4,188)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 0.3%
MATURITY AMOUNT (000S) VALUE (NOTE 1) (000S)
Investments in repurchase $ 4,901 $ 4,899
agreements (U.S. Treasury
obligations), in a joint
trading account at 4.25%,
dated 1/29/99 due 2/1/99
SHARES
Taxable Central Cash Fund (c) 52,730,325 52,730
TOTAL CASH EQUIVALENTS 57,629
(Cost $57,629)
TOTAL INVESTMENT IN $ 23,246,877
SECURITIES - 100%
(Cost $15,352,385)
</TABLE>
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
TRACES - Trust Automatic Common
Exchange Securities
CURRENCY ABBREVIATIONS
CAD - Canadian dollar
DEM - German deutsche mark
JPY - Japanese yen
LEGEND
(a) Non-income producing
(b) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
(c) At period end, the seven-day yield on the Taxable Central Cash
Fund was 4.81%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(d) Principal amount is stated in United States dollars unless
otherwise noted.
(e) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(f) Affiliated company (see Note 9 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 $350,701,000 or 1.5% of net assets.
(h) Restricted securities - Investment in securities not registered
under the Securities Act of 1933 (see Note 2 of Notes to Financial
Statements).
SECURITY ACQUISTION DATE ACQUISITION COST (000S)
Bardell Associates Note 4/19/94 $ 2,559
Trust 12.5% 11/1/08
Cam-Net Communications 4/12/96 $ 2,673
Network, Inc. 11.5% 4/4/99
(i) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
INCOME TAX INFORMATION
At January 31, 1999, the aggregate cost of investment securities for
income tax purposes was $15,361,350,000. Net unrealized appreciation
aggregated $7,885,527,000, of which $8,900,387,000 related to
appreciated investment securities and $1,014,860,000 related to
depreciated investment securities.
The fund hereby designates approximately $1,129,171,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) JANUARY
31, 1999
ASSETS
Investment in securities, at $ 23,246,877
value (including repurchase
agreements of $4,899) (cost
$15,352,385) - See
accompanying schedule
Receivable for investments 163,488
sold
Receivable for fund shares 31,801
sold
Dividends receivable 38,196
Interest receivable 5,320
Other receivables 609
TOTAL ASSETS 23,486,291
LIABILITIES
Payable for investments $ 79,263
purchased
Payable for fund shares 71,299
redeemed
Accrued management fee 9,519
Other payables and accrued 4,610
expenses
Collateral on securities 55,015
loaned, at value
TOTAL LIABILITIES 219,706
NET ASSETS $ 23,266,585
Net Assets consist of:
Paid in capital $ 14,871,287
Undistributed net investment 20,609
income
Accumulated undistributed net 480,050
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 7,894,639
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 419,496 $ 23,266,585
shares outstanding
NET ASSET VALUE, offering $55.46
price and redemption price
per share ($23,266,585
(divided by) 419,496 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED
JANUARY 31, 1999
INVESTMENT INCOME $ 472,675
Dividends (including $1,314
received from affiliated
issuers)
Interest (including income on 47,973
securities loaned of $1,877)
520,648
Less foreign taxes withheld (7,085)
TOTAL INCOME 513,563
EXPENSES
Management fee $ 110,429
Transfer agent fees 43,058
Accounting and security 962
lending fees
Non-interested trustees' 115
compensation
Custodian fees and expenses 776
Registration fees 492
Audit 95
Legal 160
Interest 25
Reports to shareholders 985
Miscellaneous 75
Total expenses before 157,172
reductions
Expense reductions (3,839) 153,333
NET INVESTMENT INCOME 360,230
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 1,220,677
(including realized gain of
$8,966 on sales of
investments in affiliated
issuers)
Foreign currency transactions (2,111) 1,218,566
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 1,066,316
Assets and liabilities in (118) 1,066,198
foreign currencies
NET GAIN (LOSS) 2,284,764
NET INCREASE (DECREASE) IN $ 2,644,994
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED JANUARY 31, 1999 YEAR ENDED JANUARY 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 360,230 $ 350,823
income
Net realized gain (loss) 1,218,566 947,882
Change in net unrealized 1,066,198 2,658,073
appreciation (depreciation)
NET INCREASE (DECREASE) IN 2,644,994 3,956,778
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (359,850) (352,802)
From net investment income
From net realized gain (993,948) (774,993)
TOTAL DISTRIBUTIONS (1,353,798) (1,127,795)
Share transactions Net 6,654,024 6,976,733
proceeds from sales of shares
Reinvestment of distributions 1,317,537 1,101,392
Cost of shares redeemed (7,268,343) (4,658,832)
NET INCREASE (DECREASE) IN 703,218 3,419,293
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 1,994,414 6,248,276
IN NET ASSETS
NET ASSETS
Beginning of period 21,272,171 15,023,895
End of period (including $ 23,266,585 $ 21,272,171
undistributed net investment
income of $20,609 and
$21,363, respectively)
OTHER INFORMATION
Shares
Sold 120,581 141,602
Issued in reinvestment of 24,642 22,381
distributions
Redeemed (133,223) (94,339)
Net increase (decrease) 12,000 69,644
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JANUARY 31,
1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 52.20 $ 44.47 $ 39.15 $ 30.89 $ 35.19
of period
Income from Investment
Operations
Net investment income .85 B .94 B 1.01 B .93 1.02
Net realized and unrealized 5.65 9.79 7.17 9.65 (2.12)
gain (loss)
Total from investment 6.50 10.73 8.18 10.58 (1.10)
operations
Less Distributions
From net investment income (.85) (.96) (1.02) (.96) (.98)
From net realized gain (2.39) (2.04) (1.84) (1.36) (2.22)
Total distributions (3.24) (3.00) (2.86) (2.32) (3.20)
Net asset value, end of period $ 55.46 $ 52.20 $ 44.47 $ 39.15 $ 30.89
TOTAL RETURN A 12.79% 24.69% 21.74% 35.21% (3.01)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 23,267 $ 21,272 $ 15,024 $ 11,010 $ 7,439
(in millions)
Ratio of expenses to average .67% .67% .68% .68% .70%
net assets
Ratio of expenses to average .66% C .65% C .66% C .67% C .69% C
net assets after expense
reductions
Ratio of net investment 1.54% 1.90% 2.46% 2.86% 3.37%
income to average net assets
Portfolio turnover rate 30% 23% 30% 39% 50%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO
FINANCIAL STATEMENTS).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C 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 8 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1999
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 and settlement date 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 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. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. 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
2. OPERATING POLICIES - CONTINUED
FOREIGN CURRENCY CONTRACTS - CONTINUED
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 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.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
OPTIONS. The fund may use options to manage its exposure 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. 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.
2. OPERATING POLICIES - CONTINUED
OPTIONS - CONTINUED
Realized gains (losses) on purchased options are included in realized
gains (losses) on investment securities, except purchased options on
foreign currency which are included in realized gains (losses) on
foreign currency transactions.
Exchange-traded options are valued using the last sale price or, in
the absence of a sale, the last offering price. Options traded
over-the-counter are valued using dealer-supplied valuations.
INDEXED SECURITIES. The fund may invest in indexed securities whose
values are linked either directly or inversely to changes in foreign
currencies, interest rates, commodities, indices, or other underlying
instruments. The fund uses 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 $2,669,000 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, the fund had no investments in loans and other direct debt
instruments.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $7,272,515,000 and $6,882,601,000, 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 .20% (.18% prior to
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEES - CONTINUED
December 1, 1998). 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 annual rate of .47% 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 annual 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 $1,362,000 for the
period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a borrower.
The maximum loan and the average daily loan balances during the period
for which loans were outstanding amounted to $59,261,000 and
$49,119,000, respectively. The weighted average interest rate was
5.74%. Interest expense includes $24,000 paid under the interfund
lending program.
6. 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.
The market value of the loaned securities is determined at the close
of business of the fund and any additional required collateral is
delivered to the fund on the next business day. At period end, the
value of the securities loaned amounted to $52,414,000. The fund
received cash collateral of $55,015,000.
7. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund has
established borrowing arrangements with certain banks. Under the most
restrictive arrangement,
7. BANK BORROWINGS - CONTINUED
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 balance during the period for
which the loan was outstanding amounted to $2,309,000. The weighted
average interest rate was 5.81%. Interest expense includes $1,000 paid
under the bank borrowing program.
8. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $2,113,000 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 $21,000 and $1,705,000, respectively, under these
arrangements.
9. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of
at least 5% of the voting securities. Transactions during the period
with companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Fremont General Corp. $ 3,528 $ 4,766 $ 1,105 $ 80,800
Highlands Insurance Group, Inc. 780 - - 10,239
Inland Steel Industries, Inc. 8,529 14,903 138 23,466
Zurn Industries, Inc. - 1,585 71 -
TOTALS $ 12,837 $ 21,254 $ 1,314 $ 114,505
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Equity-Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Equity-Income Fund (a fund of Fidelity Devonshire Trust) at
January 31, 1999, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Equity-Income Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at January
31, 1999, by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 11, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity Equity-Income Fund voted to pay on
March 8, 1999, to shareholders of record at the opening of business on
March 5, 1999, a distribution of $0.78 per share derived from capital
gains realized from sales of portfolio securities and a dividend of
$0.18 per share from net investment income.
A total of 97% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of the applicable
percentage for use in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on November 18,
1998. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 11,686,179,596.28 90.301
Withheld 1,255,148,568.70 9.699
TOTAL 12,941,328,164.98 100.000
PHYLLIS BURKE DAVIS
Affirmative 11,682,992,125.34 90.277
Withheld 1,258,336,039.64 9.723
TOTAL 12,941,328,164.98 100.000
ROBERT M. GATES
Affirmative 11,681,467,382.29 90.265
Withheld 1,259,860,782.69 9.735
TOTAL 12,941,328,164.98 100.000
EDWARD C. JOHNSON 3D
Affirmative 11,683,371,215.62 90.280
Withheld 1,257,956,949.36 9.720
TOTAL 12,941,328,164.98 100.000
E. BRADLEY JONES
Affirmative 11,669,294,690.53 90.171
Withheld 1,272,033,474.45 9.829
TOTAL 12,941,328,164.98 100.000
DONALD J. KIRK
Affirmative 11,689,271,881.03 90.325
Withheld 1,252,056,283.95 9.675
TOTAL 12,941,328,164.98 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 11,690,803,868.46 90.337
Withheld 1,250,524,296.52 9.663
TOTAL 12,941,328,164.98 100.000
WILLIAM O. MCCOY
Affirmative 11,690,491,696.56 90.335
Withheld 1,250,836,468.42 9.665
TOTAL 12,941,328,164.98 100.000
GERALD C. MCDONOUGH
Affirmative 11,674,205,667.03 90.209
Withheld 1,267,122,497.95 9.791
TOTAL 12,941,328,164.98 100.000
MARVIN L. MANN
Affirmative 11,689,754,284.66 90.329
Withheld 1,251,573,880.32 9.671
TOTAL 12,941,328,164.98 100.000
ROBERT C. POZEN
Affirmative 11,687,715,714.99 90.313
Withheld 1,253,612,449.99 9.687
TOTAL 12,941,328,164.98 100.000
THOMAS R. WILLIAMS
Affirmative 11,675,479,177.58 90.219
Withheld 1,265,848,987.40 9.781
TOTAL 12,941,328,164.98 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of Equity-Income Fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 9,210,889,448.60 87.555
Against 110,634,040.18 1.052
Abstain 1,198,538,538.38 11.393
TOTAL 10,520,062,027.16 100.000
PROPOSAL 3
To adopt an Amended and Restated Declaration of Trust.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 10,550,495,730.26 81.926
Against 613,430,706.07 4.764
Abstain 1,714,127,002.49 13.310
TOTAL 12,878,053,438.82 100.000
Broker Non-Votes 63,274,726.16
PROPOSAL 4
To approve an amended management contract for Equity-Income Fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 8,481,020,437.93 80.618
Against 472,957,372.40 4.495
Abstain 1,566,084,216.83 14.887
TOTAL 10,520,062,027.16 100.000
PROPOSAL 5
To approve a Distribution and Service Plan pursuant to Rule 12b-1 for
Equity-Income Fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 8,336,422,698.51 79.243
Against 595,656,690.79 5.662
Abstain 1,587,982,637.86 15.095
TOTAL 10,520,062,027.16 100.000
PROPOSAL 6
To adopt a new fundamental investment policy for Equity-Income Fund to
invest all of its assets in another open-end investment company
managed by FMR or an affiliate with substantially the same investment
objective and policies.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 7,870,520,285.52 74.814
Against 1,058,097,429.10 10.058
Abstain 1,591,444,312.54 15.128
TOTAL 10,520,062,027.16 100.000
PROPOSAL 7
To amend Equity-Income Fund's fundamental investment limitation
concerning diversification, to exclude securities of other investment
companies from the limitation.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 7,630,800,111.98 72.536
Against 1,428,870,045.79 13.582
Abstain 1,460,391,869.39 13.882
TOTAL 10,520,062,027.16 100.000
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Stephen R. Petersen, Vice President
Richard A. Spillane, Jr., Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy 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
EQU-ANN-0399 72338
1.471443.101
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity(registered trademark) Fund
Global Balanced Fund
Growth & Income Portfolio
Growth & Income II 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)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(fidelity_logo_graphic)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY
REAL ESTATE INVESTMENT
PORTFOLIO
ANNUAL REPORT
JANUARY 31, 1999
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 14 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 18 Notes to the financial
statements.
REPORT OF INDEPENDENT 23 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 24
PROXY VOTING RESULTS 25
OF SPECIAL NOTE 27
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
After the first month of 1999, U.S. stock markets seem to have
maintained their momentum from 1998, as the S&P 500, the Dow and
NASDAQ all reached record highs in January. The technology sector, and
Internet stocks in particular, were the main contributors. In the bond
markets, domestic securities continued to trade at historically low
yields, while positive economic news helped credit-sensitive sectors
outperform Treasury bonds.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. 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 JANUARY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY REAL ESTATE -18.98% 47.90% 186.99%
S&P 500 (registered trademark) 32.49% 196.12% 462.78%
Wilshire Real Estate Securities -18.06% 52.42% 56.34%
Real Estate Funds Average -16.20% 41.82% 127.84%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, 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 market capitalization-weighted 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 Inc. The past one year average represents a peer group of 104
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 JANUARY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY REAL ESTATE -18.98% 8.14% 11.12%
S&P 500 32.49% 24.25% 18.86%
Wilshire Real Estate Securities -18.06% 8.80% 4.57%
Real Estate Funds Average -16.20% 6.97% 8.41%
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 S&P 500
Wilshire Real Estate
00303 SP001
WA005
1989/01/31 10000.00 10000.00
10000.00
1989/02/28 10033.30 9751.00
10026.00
1989/03/31 10110.47 9978.20
10096.18
1989/04/30 10380.98 10496.07
10279.93
1989/05/31 10572.60 10921.16
10456.75
1989/06/30 10935.12 10858.91
10573.86
1989/07/31 11484.16 11839.47
10908.00
1989/08/31 11644.30 12071.52
10792.37
1989/09/30 11506.88 12022.03
10768.63
1989/10/31 11077.69 11743.12
10230.20
1989/11/30 11216.89 11982.68
10077.77
1989/12/31 11263.72 12270.26
10073.74
1990/01/31 11017.07 11446.92
9599.26
1990/02/28 10946.60 11594.59
9595.42
1990/03/31 11005.33 11901.85
9573.35
1990/04/30 10862.56 11604.30
9387.63
1990/05/31 10814.97 12735.72
9346.33
1990/06/30 10982.00 12649.12
9364.08
1990/07/31 11054.33 12608.64
9005.44
1990/08/31 10270.77 11468.82
7953.60
1990/09/30 9757.56 10910.29
7031.78
1990/10/31 9476.32 10863.37
6525.49
1990/11/30 10075.47 11565.15
6791.08
1990/12/31 10284.23 11887.81
6703.48
1991/01/31 11242.93 12406.12
7355.72
1991/02/28 11591.55 13293.16
7788.24
1991/03/31 12358.23 13614.86
8482.17
1991/04/30 12698.71 13647.53
8413.47
1991/05/31 13001.36 14237.10
8543.88
1991/06/30 12582.95 13585.05
8122.66
1991/07/31 12850.94 14218.11
8088.55
1991/08/31 12914.75 14555.08
7990.68
1991/09/30 13289.44 14312.01
7899.58
1991/10/31 13069.88 14503.79
7721.84
1991/11/30 12940.73 13919.29
7465.48
1991/12/31 14314.44 15511.65
8046.29
1992/01/31 15178.01 15223.14
8425.27
1992/02/29 14850.90 15421.04
8404.21
1992/03/31 14759.87 15120.33
8222.68
1992/04/30 14548.26 15564.86
8086.18
1992/05/31 14984.71 15641.13
8118.53
1992/06/30 14812.30 15408.08
7874.16
1992/07/31 15465.00 16038.27
7903.29
1992/08/31 15504.96 15709.48
7783.95
1992/09/30 15933.13 15894.86
8079.74
1992/10/31 16107.49 15950.49
8166.20
1992/11/30 16402.55 16494.40
8236.42
1992/12/31 17107.06 16697.28
8641.66
1993/01/31 17948.84 16837.54
9242.25
1993/02/28 18383.30 17066.53
9689.58
1993/03/31 19707.21 17426.63
10339.75
1993/04/30 18818.26 17004.91
9753.48
1993/05/31 18585.77 17460.64
9600.35
1993/06/30 19069.58 17511.28
9851.88
1993/07/31 19193.76 17441.23
10051.88
1993/08/31 19497.33 18102.25
10260.96
1993/09/30 20397.70 17962.87
10725.78
1993/10/31 20063.76 18334.70
10424.38
1993/11/30 18895.00 18160.52
9969.88
1993/12/31 19247.44 18380.26
9957.92
1994/01/31 19403.46 19005.19
10256.65
1994/02/28 20353.77 18490.15
10676.15
1994/03/31 19625.81 17683.98
10181.84
1994/04/30 19897.60 17910.33
10295.88
1994/05/31 20326.73 18204.06
10510.04
1994/06/30 19719.38 17758.06
10302.99
1994/07/31 19676.07 18340.53
10326.69
1994/08/31 19589.46 19092.49
10319.46
1994/09/30 19356.52 18624.72
10147.12
1994/10/31 18584.01 19043.78
9775.74
1994/11/30 17928.11 18350.20
9393.51
1994/12/31 19639.75 18622.34
10121.50
1995/01/31 18776.79 19105.22
9794.58
1995/02/28 19074.36 19849.75
10101.15
1995/03/31 19149.89 20435.51
10159.73
1995/04/30 18848.55 21037.34
10086.58
1995/05/31 19541.62 21878.20
10420.45
1995/06/30 19949.91 22386.43
10601.77
1995/07/31 20300.71 23128.76
10772.45
1995/08/31 20712.52 23186.82
10903.88
1995/09/30 21080.74 24165.30
11104.51
1995/10/31 20494.30 24079.03
10760.27
1995/11/30 20602.33 25136.10
10872.18
1995/12/31 21783.57 25620.22
11502.76
1996/01/31 22175.93 26492.33
11661.50
1996/02/29 22254.40 26737.92
11892.40
1996/03/31 22271.35 26995.40
11988.73
1996/04/30 22239.61 27393.32
12042.68
1996/05/31 22699.95 28099.79
12311.23
1996/06/30 23070.12 28206.85
12557.45
1996/07/31 23150.51 26960.67
12445.69
1996/08/31 24163.34 27529.27
12974.63
1996/09/30 24939.24 29078.62
13299.00
1996/10/31 25703.85 29880.61
13659.40
1996/11/30 26907.70 32139.28
14226.27
1996/12/31 29674.69 31502.60
15744.21
1997/01/31 30036.77 33470.89
15969.35
1997/02/28 30135.52 33733.30
15992.01
1997/03/31 30142.88 32347.20
16046.39
1997/04/30 29196.25 34278.32
15528.09
1997/05/31 30026.63 36365.19
15990.82
1997/06/30 31644.05 37994.35
16783.97
1997/07/31 32851.45 41017.56
17336.16
1997/08/31 32650.22 38719.76
17207.87
1997/09/30 35937.87 40840.44
19381.23
1997/10/31 34888.83 39476.37
18557.53
1997/11/30 35125.71 41303.73
18930.53
1997/12/31 36022.69 42012.91
19352.68
1998/01/31 35423.78 42477.58
19079.81
1998/02/28 34772.02 45541.06
18835.59
1998/03/31 35693.63 47873.22
19206.65
1998/04/30 34433.00 48354.82
18601.64
1998/05/31 33982.78 47523.60
18423.07
1998/06/30 33803.06 49454.01
18325.42
1998/07/31 31419.74 48927.32
17049.97
1998/08/31 28454.24 41853.41
15278.48
1998/09/30 29903.08 44534.54
16134.08
1998/10/31 29406.84 48156.98
15913.04
1998/11/30 29719.29 51075.78
16212.20
1998/12/31 29321.30 54018.76
15980.37
1999/01/29 28698.65 56277.83
15633.60
IMATRL PRASUN SHR__CHT 19990131 19990218 142244 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Real Estate Investment Portfolio on January 31,
1989. As the chart shows, by January 31, 1999, the value of the
investment would have grown to $28,699 - a 186.99% increase on the
initial investment. For comparison, look at how both the Wilshire Real
Estate Securities Index and Standard & Poor's 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 $15,634 - a 56.34% increase. If $10,000 was
invested in the S&P 500 Index, it would have grown to $56,278 - a
462.78% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
After celebrating many happy
returns in 1998, U.S. stock market
investors found new reasons to
cheer in early 1999, as the
Standard and Poor's 500 Index,
Dow Jones Industrial Average, and
NASDAQ all reached record highs
in January. For the 12-month
period ending January 31, 1999,
the S&P 500 Index - a popular
performance measure of U.S. stock
markets - boasted a 32.49%
return. Remarkable symmetries
between the first month of 1999
and the 11-month period preceding
it were noticeably apparent. As
was the case a year ago, the U.S.
economy demonstrated remarkable
resiliency. The triumvirate of low
inflation, low unemployment and
low interest rates continued to offset
economic uncertainty abroad and
political unrest at home. Extreme
volatility was also evident. But while
the impact of Brazil's currency
devaluation in mid-January did not
quite have the same disastrous
results as Russia's devaluation of the
ruble last August, the aftershocks
were still felt worldwide. Three
separate 0.25% interest-rate cuts by
the Federal Reserve Board late last
fall helped pull the U.S. stock
market out of the tailspin Russia's
actions caused, while Brazil's
battered currency - and U.S.
investors' pulse rates - stabilized
quickly after it was freed to float
against other currencies.
(photograph of Steve Buller)
An interview with Steve Buller, Portfolio Manager of Fidelity Real
Estate Investment Portfolio
Q. HOW DID THE FUND PERFORM, STEVE?
A. It was a difficult period for the fund. For the 12 months that
ended January 31, 1999, the fund returned -18.98%. This performance
slightly lagged the real estate funds average tracked by Lipper Inc.
and the Wilshire Real Estate Securities Index, which returned -16.20%
and -18.06%, respectively, during the same period. The Standard &
Poor's 500 Index returned 32.49% during the period.
Q. WHY DID THE FUND UNDERPERFORM THE AVERAGE AND THE INDEX?
A. Despite some positive economic and business fundamentals, the real
estate investment trust (REIT) market stumbled for a number of
reasons. Fears of overbuilding and that REITs were unjustifiably
bidding up property prices soured investor sentiment. During the fall
of 1998, the credit crunch caused by the near-collapse of the hedge
fund Long-Term Capital Management essentially shut down the commercial
mortgage backed securities market as a source of new construction
financing. As a result, overbuilding was not a major problem for the
market. However, the inability to raise new capital did reduce the
number of new projects and lowered expected growth rates for the real
estate sector. The fund's underperformance relative to the average and
the index was due primarily to two holdings in the fund, Starwood
Hotels & Resorts and Patriot American Hospitality. These REITs were
especially hard hit by legislative changes that prohibited
paired-share REITs - common stocks of two different entities under the
same management that trade as one unit - from acting in the same
management capacity for new properties.
Q. DID ANY OTHER MARKET FORCES INFLUENCE THE BEARISH INVESTMENT
ENVIRONMENT?
A. 1998 was a transition time for REITs. Coming out of the real estate
depression of the late `80's and 1990, REITs were bought and sold like
growth stocks. Unusually high returns were achieved and REITs became
expensive from 1991 to 1997. However, over the past year, the real
estate market has moved into a more balanced environment - where
supply and demand for property are near equilibrium. This environment
lends itself to annual returns that are in the area of 10% to 15%, so
the perception that REITs no longer could provide the potential
returns of aggressive growth stocks drove their stock prices even
lower, and many investors left the market.
Q. HOW DID THE VARIOUS SECTORS OF THE REIT MARKET PERFORM?
A. By the second half of 1998, there really was no place to hide as
just about every REIT declined in value. Hotel and office space REITs
were hardest hit. These sectors were hurt primarily by the perception
of overbuilding, weakened demand in certain regions and the negative
impact of legislative changes. The REIT bear market was kindest to
retail real estate and manufactured housing, while apartments also
provided stable returns.
Q. DID YOU PURSUE ANY SPECIFIC STRATEGY TO MINIMIZE RISKS TO THE FUND
IN THIS DIFFICULT MARKET?
A. When I took over the fund on October 1, 1998, I reduced the number
of holdings in the fund and lowered the fund's exposure to foreign
stocks. I did not want to expose the fund to currency risk and I saw
better opportunities in the U.S. In an effort to reduce risk and
minimize losses to the fund, I moved some fund assets into REITs with
higher dividend yields because they provided more stability in this
declining market.
Q. WERE THERE ANY BRIGHT SPOTS FOR THE FUND?
A. As I mentioned earlier, the retail sector performed the best for
the fund. Apartment Investment & Management Co., a REIT that operates
diversified apartment communities, held up fairly well due to its
reliable earnings and strong fundamental business outlook. Kimco
Realty, a REIT involved in the ownership and operation of community
shopping centers, also provided stable returns.
Q. WHAT'S YOUR OUTLOOK, STEVE?
A. The underlying business fundamentals of many REITs seems to warrant
annual returns in the area of 12% to 15%, with approximately half of
that return derived from dividend income. If REIT buyers begin to
adopt realistic return expectations, then I believe the market can
improve and provide consistent gains. The underlying businesses are
good, driven by a relatively strong economy. A reduced supply of new
properties combined with steady demand should also help performance.
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.
(checkmark)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 January 31,
1999, more than $1.0 billion
MANAGER: Steven Buller, since
October 1998; manager,
associate portfolio manager,
Fidelity Real Estate Investment
Portfolio, since 1997;
manager, Fidelity Select
Environmental Services,
1997-1998; analyst, high
income group 1992-1995;
joined Fidelity in 1992
STEVE BULLER ON THE INTERNET'S
POTENTIAL IMPACT ON THE
REIT MARKET:
"The euphoria and hype
surrounding Internet stocks
clearly reflect the huge growth
potential of these companies.
However, I think investors may be
overestimating the potential
impact on retail real estate stocks.
The Internet is in many ways simply
another form of catalog shopping.
The VCR did not destroy the movie
theater, but rather changed the
way theaters did business.
Advances in telecommunications
have changed our work
environment, but have not
dramatically reduced the need for
traditional office space. Similarly,
I don't believe the Internet will
lead to the death of the mall.
"A more likely scenario is that
while retail shopping over the
Internet may accelerate the
consolidation of bad retail real
estate property, good retail real
estate will always be in high
demand. This was certainly the
case during the past year as
consumers continued to visit the
malls in droves and provided solid
sales growth. As a result, retail
REITs were among the strongest
performers within the REIT
market. As usual, however, one of
the keys to financial success will
be to understand how the changing
business environment influences
our investments and to use this
knowledge to locate the best
opportunities."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF JANUARY
31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
Public Storage, Inc. 7.1 5.7
Starwood Hotels & Resorts 7.0 7.7
Worldwide, Inc.
Apartment Investment & 6.1 4.3
Management Co. Class A
Mack-Cali Realty Corp. 5.9 4.8
Equity Office Properties Trust 5.9 2.8
Duke Realty Investments, Inc. 5.1 5.5
Equity Residential Properties 4.1 2.3
Trust (SBI)
Reckson Associates Realty Corp. 4.0 3.4
Simon Property Group, Inc. 3.8 2.5
New Plan Excel Realty Trust 3.5 2.7
TOP FIVE REIT SECTORS AS OF
JANUARY 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
Office Buildings 26.8 24.2
Industrial Buildings 20.1 18.9
Apartments 17.1 12.9
Shopping Centers 9.6 8.7
Hotels 9.5 12.1
</TABLE>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF JANUARY 31, 1999 *
Stocks 97.4%
Convertible
securities 0.1%
Short-term
investments 2.5%
*FOREIGN
INVESTMENTS 3.1%
Row: 1, Col: 1, Value: 97.4
Row: 1, Col: 2, Value: 0.1
Row: 1, Col: 3, Value: 2.5
AS OF JULY 31, 1998 **
Stocks 94.8%
Convertible
securities 0.4%
Short-term
investments 4.8%
**FOREIGN
INVESTMENTS 4.1%
Row: 1, Col: 1, Value: 94.8
Row: 1, Col: 2, Value: 0.4
Row: 1, Col: 3, Value: 4.8
INVESTMENTS JANUARY 31, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 97.4%
SHARES VALUE (NOTE 1) (000S)
REAL ESTATE - 4.6%
OPERATORS, NON-RESIDENTAL -
1.7%
CR Leasing & Development, Inc.:
Class A (d) 46 $ 0
Class B (non-vtg.) (d) 216 2
Ramco-Gershenson Properties 118,500 1,829
Trust (SBI)
Trizec Hahn Corp. (sub-vtg.) 830,700 16,931
18,762
REAL ESTATE AGENTS - 0.4%
Rouse Co. (The) 183,500 4,335
REAL ESTATE DEALERS - 0.1%
Excel Legacy Corp. (a) 391,300 1,443
REAL ESTATE, GENERAL - 1.6%
Boardwalk Equities, Inc. (a) 1,482,400 14,224
Boardwalk Equities, Inc. 254,100 2,438
(a)(c)
16,662
SUBDIVIDED REAL ESTATE
DEVELOPMENT - 0.8%
Catellus Development Corp. (a) 549,000 8,441
TOTAL REAL ESTATE 49,643
REAL ESTATE INVESTMENT TRUSTS
- - 92.5%
REITS - APARTMENTS - 17.1%
Apartment Investment & 1,755,500 65,612
Management Co. Class A
Archstone Communities Trust 142,900 2,795
AvalonBay Communities, Inc. 790,404 25,342
BRE Properties, Inc. Class A 508,800 12,211
Camden Property Trust (SBI) 408,800 10,169
Colonial Properties Trust 342,000 9,362
(SBI)
Equity Residential Properties 1,079,962 43,941
Trust (SBI)
Home Properties of N.Y., Inc. 211,361 5,482
Pennsylvania Real Estate 104,000 2,080
Investment Trust
Post Properties, Inc. 210,000 7,823
184,817
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
REAL ESTATE INVESTMENT TRUSTS
- - CONTINUED
REITS - FACTORY OUTLETS - 0.1%
Tanger Factory Outlet 30,600 $ 616
Centers, Inc.
REITS - HOTELS - 9.4%
FelCor Lodging Trust, Inc. 341,400 7,447
Innkeepers USA Trust 783,124 9,104
Patriot American Hospitality, 565,711 3,041
Inc. unit
Starwood Hotels & Resorts 2,999,783 74,995
Worldwide, Inc.
Sunstone Hotel Investors, 780,000 6,484
Inc.
101,071
REITS - INDUSTRIAL BUILDINGS
- - 20.1%
AMB Property Corp. 243,400 5,385
Bedford Property Investors, 494,800 7,700
Inc.
CenterPoint Properties Trust 860,000 28,058
Duke Realty Investments, Inc. 2,402,368 55,254
Liberty Property Trust (SBI) 614,700 14,522
Public Storage, Inc. 2,990,200 76,064
Spieker Properties, Inc. 582,900 19,819
Weeks Corp. 365,700 10,057
216,859
REITS - MALLS - 7.4%
CBL & Associates Properties, 249,800 6,151
Inc.
General Growth Properties, 509,500 17,641
Inc.
Simon Property Group, Inc. 1,571,500 41,350
Taubman Centers, Inc. 160,000 2,080
Urban Shopping Centers, Inc. 418,000 12,932
80,154
REITS - MOBILE HOME PARKS -
2.0%
Manufactured Home 345,500 8,184
Communities, Inc.
Sun Communities, Inc. 415,000 13,954
22,138
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
REAL ESTATE INVESTMENT TRUSTS
- - CONTINUED
REITS - OFFICE BUILDINGS -
26.8%
Arden Realty Group, Inc. 90,000 $ 2,025
Boston Properties, Inc. 757,100 24,606
Brandywine Realty Trust 190,100 3,137
Crescent Real Estate Equities 1,504,100 31,868
Co.
Crocker Realty, Inc.:
Class A (d) 1,497 16
Class B (non-vtg.) (d) 1,521,600 16,235
Equity Office Properties Trust 2,482,710 63,309
Glenborough Realty Trust, 1,191,100 20,919
Inc.
Mack-Cali Realty Corp. 2,148,900 64,198
PS Business Parks, Inc. 248,360 5,635
PS Business Parks, Inc. (d) 453,134 10,280
Reckson Associates Realty 1,974,800 43,446
Corp.
SL Green Realty Corp. 154,400 3,127
288,801
REITS - SHOPPING CENTERS - 9.6%
Bradley Real Estate, Inc. 632,555 12,730
(SBI)
Kimco Realty Corp. 635,700 24,792
Konover Property Trust, Inc. 435,000 2,828
(a)
Malan Realty Investors, Inc. 200,500 2,807
Mid-Atlantic Realty Trust 320,500 3,385
New Plan Excel Realty Trust 1,809,400 37,997
Realty Income Corp. 330,600 7,893
Vornado Realty Trust 330,000 11,653
104,085
TOTAL REAL ESTATE INVESTMENT 998,541
TRUSTS
SECURITIES INDUSTRY - 0.3%
INVESTMENT MANAGERS - 0.3%
Reckson Service Industries, 698,236 2,793
Inc.
TOTAL COMMON STOCKS 1,050,977
(Cost $960,747)
CONVERTIBLE PREFERRED STOCKS
- - 0.1%
SHARES VALUE (NOTE 1) (000S)
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
REITS - HOTELS - 0.1%
Innkeepers USA Trust Series 62,500 $ 1,211
A, $2.16 (Cost $1,563)
CASH EQUIVALENTS - 2.5%
Taxable Central Cash Fund (b) 26,803,597 26,804
(Cost $26,804)
TOTAL INVESTMENT IN $ 1,078,992
SECURITIES - 100%
(Cost $989,114)
</TABLE>
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 4.81%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(c) 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 $2,438,000 or 0.2% of net assets.
(d) Restricted securities - Investment in securities not registered
under the Securities Act of 1933 (see Note 2 of Notes to Financial
Statements).
SECURITY ACQUISTION DATE ACQUISITION COST (000S)
CR Leasing & Development, 11/19/97 $ 0
Inc. Class A
Class B (non-vtg.) 11/19/97 $ 2
Crocker Realty, Inc. Class A 11/19/97 $ 15
Class B (non-vtg.) 11/19/97 - 12/28/98 $ 15,215
PS Business Parks, Inc. 5/6/98 $ 10,368
INCOME TAX INFORMATION
At January 31, 1999, the aggregate cost of investment securities for
income tax purposes was $993,319,000. Net unrealized appreciation
aggregated $85,673,000, of which $159,233,000 related to appreciated
investment securities and $73,560,000 related to depreciated
investment securities.
The fund hereby designates approximately $48,988,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
The fund intends to elect to defer to its fiscal year ending January
31, 2000 approximately $29,239,000 of losses recognized during the
period November 1, 1998 to January 31, 1999.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) JANUARY
31, 1999
ASSETS
Investment in securities, at $ 1,078,992
value (cost $989,114) - See
accompanying schedule
Receivable for investments 11,459
sold
Receivable for fund shares 577
sold
Dividends receivable 2,472
Interest receivable 71
Redemption fees receivable 1
Other receivables 163
TOTAL ASSETS 1,093,735
LIABILITIES
Payable for investments $ 33
purchased
Payable for fund shares 8,443
redeemed
Accrued management fee 572
Other payables and accrued 313
expenses
TOTAL LIABILITIES 9,361
NET ASSETS $ 1,084,374
Net Assets consist of:
Paid in capital $ 1,007,081
Undistributed net investment 4,446
income
Accumulated undistributed net (17,031)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 89,878
(depreciation) on investments
NET ASSETS, for 71,290 shares $ 1,084,374
outstanding
NET ASSET VALUE, offering $15.21
price and redemption price
per share ($1,084,374
(divided by) 71,290 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED
JANUARY 31, 1999
INVESTMENT INCOME $ 82,693
Dividends (including $18,160
received from affiliated
issuers)
Interest 4,178
TOTAL INCOME 86,871
EXPENSES
Management fee $ 10,060
Transfer agent fees 4,052
Accounting fees and expenses 652
Non-interested trustees' 6
compensation
Custodian fees and expenses 90
Registration fees 81
Audit 46
Legal 14
Reports to shareholders 146
Miscellaneous 7
Total expenses before 15,154
reductions
Expense reductions (455) 14,699
NET INVESTMENT INCOME 72,172
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (4,096)
(including realized loss of
$5,564 on sales of
investments in affiliated
issuers)
Foreign currency transactions (14) (4,110)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (429,373)
Assets and liabilities in 1 (429,372)
foreign currencies
NET GAIN (LOSS) (433,482)
NET INCREASE (DECREASE) IN $ (361,310)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED JANUARY 31, 1999 YEAR ENDED JANUARY 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 72,172 $ 92,148
income
Net realized gain (loss) (4,110) 102,218
Change in net unrealized (429,372) 154,418
appreciation (depreciation)
NET INCREASE (DECREASE) IN (361,310) 348,784
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (74,648) (91,259)
From net investment income
From net realized gain (27,019) (65,254)
In excess of net realized (13,599) -
gain
TOTAL DISTRIBUTIONS (115,266) (156,513)
Share transactions Net 321,876 1,046,591
proceeds from sales of shares
Reinvestment of distributions 107,713 148,396
Cost of shares redeemed (1,349,682) (1,103,764)
NET INCREASE (DECREASE) IN (920,093) 91,223
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
Redemption fees 566 1,140
TOTAL INCREASE (DECREASE) (1,396,103) 284,634
IN NET ASSETS
NET ASSETS
Beginning of period 2,480,477 2,195,843
End of period (including $ 1,084,374 $ 2,480,477
undistributed net investment
income of $4,446 and $7,650,
respectively)
OTHER INFORMATION
Shares
Sold 17,819 54,293
Issued in reinvestment of 6,222 7,571
distributions
Redeemed (76,071) (58,833)
Net increase (decrease) (52,030) 3,031
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JANUARY 31,
1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 20.11 $ 18.25 $ 14.13 $ 12.62 $ 13.68
of period
Income from Investment
Operations
Net investment income .75 B .79 B .86 B .72 .67
Net realized and unrealized (4.48) 2.41 3.97 1.50 (1.10)
gain (loss)
Total from investment (3.73) 3.20 4.83 2.22 (.43)
operations
Less Distributions
From net investment income (.78) D (.79) (.72) (.71) (.63)
From net realized gain (.27) D (.56) - - -
In excess of net realized gain (.13) D - - - -
Total distributions (1.18) (1.35) (.72) (.71) (.63)
Redemption fees added to paid .01 .01 .01 - -
in capital
Net asset value, end of period $ 15.21 $ 20.11 $ 18.25 $ 14.13 $ 12.62
TOTAL RETURN A (18.98)% 17.93% 35.45% 18.10% (3.23)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,084 $ 2,480 $ 2,196 $ 731 $ 490
(in millions)
Ratio of expenses to average .89% .86% .94% .99% 1.06%
net assets
Ratio of expenses to average .86% C .84% C .90% C .95% C 1.03% C
net assets after expense
reductions
Ratio of net investment 4.23% 4.06% 5.63% 6.28% 5.67%
income to average net assets
Portfolio turnover rate 28% 76% 55% 85% 75%
</TABLE>
A 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).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C 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).
D THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1999
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
and settlement date 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income is accrued as earned. Investment
income is recorded net of foreign taxes withheld where recovery of
such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
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 litigation proceeds, passive foreign investment
companies (PFIC), partnerships, non-taxable dividends, and losses
deferred due to wash sales and excise tax regulations. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments 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.
2. OPERATING POLICIES -
CONTINUED
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.
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 $26,533,000 or 2.4% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities,
other than short-term securities,
aggregated $461,669,000 and $1,305,741,000, 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 annual rate of .59% of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .24% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $361,000 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 $430,000 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 $21,000, 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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 Trust 1,119 8,211 1,856 -
Duke Realty Investments, Inc. - 13,081 4,166 -
Excel Legacy Corp. 922 955 - -
Glenborough Realty Trust, Inc. - 8,277 2,408 -
Home Properties of N.Y., Inc. - - - -
Mack-Cali Realty Corp. 3,772 10,949 3,069 -
Malan Realty Investors, Inc. - 39 110 -
New Plan Excel Realty Trust, Inc. 1,109 15,397 2,470 -
Reckson Associates Realty Corp. - 20,745 3,163 -
Red Lions Inns LP - 5,004 248 -
Starwood Hotels &
Resorts Worldwide, Inc. - - - -
Tanger Factory Outlet Centers, Inc. 1,042 5,612 670 -
TOTALS $ 7,964 $ 88,270 $ 18,160 $ -
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Real Estate Investment Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Real Estate Investment Portfolio (a fund of Fidelity
Devonshire Trust) at January 31, 1999, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fidelity Real Estate Investment Portfolio's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at January 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 11, 1999
DISTRIBUTIONS
A total of 13% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of the applicable
percentage for use in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on November 18,
1998. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 11,686,179,596.28 90.301
Withheld 1,255,148,568.70 9.699
TOTAL 12,941,328,164.98 100.000
PHYLLIS BURKE DAVIS
Affirmative 11,682,992,125.34 90.277
Withheld 1,258,336,039.64 9.723
TOTAL 12,941,328,164.98 100.000
ROBERT M. GATES
Affirmative 11,681,467,382.29 90.265
Withheld 1,259,860,782.69 9.735
TOTAL 12,941,328,164.98 100.000
EDWARD C. JOHNSON 3D
Affirmative 11,683,371,215.62 90.280
Withheld 1,257,956,949.36 9.720
TOTAL 12,941,328,164.98 100.000
E. BRADLEY JONES
Affirmative 11,669,294,690.53 90.171
Withheld 1,272,033,474.45 9.829
TOTAL 12,941,328,164.98 100.000
DONALD J. KIRK
Affirmative 11,689,271,881.03 90.325
Withheld 1,252,056,283.95 9.675
TOTAL 12,941,328,164.98 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 11,690,803,868.46 90.337
Withheld 1,250,524,296.52 9.663
TOTAL 12,941,328,164.98 100.000
WILLIAM O. MCCOY
Affirmative 11,690,491,696.56 90.335
Withheld 1,250,836,468.42 9.665
TOTAL 12,941,328,164.98 100.000
GERALD C. MCDONOUGH
Affirmative 11,674,205,667.03 90.209
Withheld 1,267,122,497.95 9.791
TOTAL 12,941,328,164.98 100.000
MARVIN L. MANN
Affirmative 11,689,754,284.66 90.329
Withheld 1,251,573,880.32 9.671
TOTAL 12,941,328,164.98 100.000
ROBERT C. POZEN
Affirmative 11,687,715,714.99 90.313
Withheld 1,253,612,449.99 9.687
TOTAL 12,941,328,164.98 100.000
THOMAS R. WILLIAMS
Affirmative 11,675,479,177.58 90.219
Withheld 1,265,848,987.40 9.781
TOTAL 12,941,328,164.98 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of Real Estate Investment Portfolio.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 686,845,442.19 96.115
Against 7,611,064.22 1.065
Abstain 20,150,473.29 2.820
TOTAL 714,606,979.70 100.000
PROPOSAL 3
To adopt an Amended and Restated
Declaration of Trust.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 10,550,495,730.26 81.926
Against 613,430,706.07 4.764
Abstain 1,714,127,002.49 13.310
TOTAL 12,878,053,438.82 100.000
Broker Non-Votes 63,274,726.16
PROPOSAL 4
To approve an amended management contract for Real Estate Investment
Portfolio.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 636,458,579.93 90.218
Against 24,209,973.68 3.431
Abstain 44,802,331.61 6.351
TOTAL 705,470,885.22 100.000
Broker Non-Votes 9,136,094.48
PROPOSAL 5
To adopt a new fundamental investment policy for Real Estate
Investment Portfolio to invest all of its assets in another open-end
investment company managed by FMR or an affiliate with substantially
the same investment objective and policies.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 611,028,134.97 86.613
Against 47,667,176.85 6.757
Abstain 46,775,573.40 6.630
TOTAL 705,470,885.22 100.000
Broker Non-Votes 9,136,094.48
PROPOSAL 6
To make Real Estate Investment Portfolio's current fundamental 65%
investment policy non-fundamental.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 616,484,905.48 87.386
Against 39,878,332.91 5.653
Abstain 49,107,646.83 6.961
TOTAL 705,470,885.22 100.000
Broker Non-Votes 9,136,094.48
PROPOSAL 7
To replace Real Estate Investment Portfolio's non-fundamental
investment policy concerning the purchase and sale of real estate with
a fundamental investment policy.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 624,693,578.21 88.550
Against 28,838,050.50 4.088
Abstain 51,939,256.51 7.362
TOTAL 705,470,885.22 100.000
Broker Non-Votes 9,136,094.48
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
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
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
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 EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE
WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU
SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL
BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 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
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
19200 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
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
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
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
Matthew N. Karstetter, Deputy 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
REA-ANN-0399 72337
1.700141.101
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(registered trademark) Fund
Global Balanced Fund
Growth & Income Portfolio
Growth & Income II 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)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(fidelity_logo_graphic)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY
UTILITIES
FUND
ANNUAL REPORT
JANUARY 31, 1999
(fidelity_logo_graphic)(registered trademark)
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 13 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 17 Notes to the financial
statements.
REPORT OF INDEPENDENT 22 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 23
PROXY VOTING RESULTS 24
OF SPECIAL NOTE 26
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
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:
After the first month of 1999, U.S. stock markets seem to have
maintained their momentum from 1998, as the S&P 500, the Dow and
NASDAQ all reached record highs in January. The technology sector, and
Internet stocks in particular, were the main contributors. In the bond
markets, domestic securities continued to trade at historically low
yields, while positive economic news helped credit-sensitive sectors
outperform Treasury bonds.
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 an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
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. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. 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 JANUARY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY UTILITIES 32.60% 132.45% 375.91%
S&P 500 (registered trademark) 32.49% 196.12% 462.78%
Russell 3000 Utilities 42.26% 150.69% 397.90%
Utility Funds Average 18.69% 86.30% 279.09%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, 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 market capitalization-weighted index
of common stocks - and the Russell 3000 Utilities Index - a market
capitalization-weighted index comprised of over 200 utility stocks
that are included in the Russell 3000 Index. 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 Inc. The past one year
average represents a peer group of 101 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 JANUARY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY UTILITIES 32.60% 18.38% 16.88%
S&P 500 32.49% 24.25% 18.86%
Russell 3000 Utilities 42.26% 20.18% 17.41%
Utility Funds Average 18.69% 13.15% 14.09%
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 different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Utilities S&P 500
Russell 3000 Utilities
00311 SP001
RS018
1989/01/31 10000.00 10000.00
10000.00
1989/02/28 9810.81 9751.00
9830.00
1989/03/31 9920.21 9978.20
10119.99
1989/04/30 10221.37 10496.07
10770.70
1989/05/31 10714.19 10921.16
11386.78
1989/06/30 10934.20 10858.91
11526.84
1989/07/31 11508.71 11839.47
12415.56
1989/08/31 11388.25 12071.52
12391.97
1989/09/30 11444.53 12022.03
12736.47
1989/10/31 11482.15 11743.12
12721.18
1989/11/30 11848.90 11982.68
13059.57
1989/12/31 12399.34 12270.26
13824.86
1990/01/31 11769.53 11446.92
12486.61
1990/02/28 11799.05 11594.59
12490.36
1990/03/31 11788.66 11901.85
12770.14
1990/04/30 11313.06 11604.30
12177.61
1990/05/31 11859.49 12735.72
13030.04
1990/06/30 11909.93 12649.12
12669.11
1990/07/31 11920.20 12608.64
12508.21
1990/08/31 11313.92 11468.82
11442.51
1990/09/30 11488.61 10910.29
11625.59
1990/10/31 12188.37 10863.37
12364.98
1990/11/30 12459.92 11565.15
12526.96
1990/12/31 12628.36 11887.81
12679.79
1991/01/31 12574.80 12406.12
12602.44
1991/02/28 13024.67 13293.16
13086.38
1991/03/31 13178.99 13614.86
13383.44
1991/04/30 13178.99 13647.53
13410.20
1991/05/31 13178.99 14237.10
13273.42
1991/06/30 13080.56 13585.05
13180.51
1991/07/31 13490.37 14218.11
13631.28
1991/08/31 13822.64 14555.08
13916.17
1991/09/30 14260.09 14312.01
14205.63
1991/10/31 14439.75 14503.79
14437.18
1991/11/30 14552.03 13919.29
14298.58
1991/12/31 15303.35 15511.65
15370.98
1992/01/31 14800.10 15223.14
14766.90
1992/02/29 14742.91 15421.04
14495.19
1992/03/31 14571.57 15120.33
14437.21
1992/04/30 15049.52 15564.86
15193.72
1992/05/31 15352.61 15641.13
15113.19
1992/06/30 15505.15 15408.08
15293.04
1992/07/31 16342.95 16038.27
16284.03
1992/08/31 16366.55 15709.48
16127.70
1992/09/30 16413.89 15894.86
16334.13
1992/10/31 16390.01 15950.49
16255.73
1992/11/30 16545.20 16494.40
16538.58
1992/12/31 16971.51 16697.28
17246.43
1993/01/31 17156.12 16837.54
17524.10
1993/02/28 18066.84 17066.53
18619.35
1993/03/31 18552.97 17426.63
19034.57
1993/04/30 18378.06 17004.91
18798.54
1993/05/31 18428.04 17460.64
19088.03
1993/06/30 19295.35 17511.28
19901.18
1993/07/31 19534.81 17441.23
20329.06
1993/08/31 20429.63 18102.25
21117.83
1993/09/30 20441.93 17962.87
20931.99
1993/10/31 20276.77 18334.70
20879.66
1993/11/30 19438.25 18160.52
19651.94
1993/12/31 19620.31 18380.26
19720.72
1994/01/31 20473.36 19005.19
19860.74
1994/02/28 19633.23 18490.15
18790.24
1994/03/31 18890.39 17683.98
18168.28
1994/04/30 19368.62 17910.33
18587.97
1994/05/31 19023.23 18204.06
18275.69
1994/06/30 18873.24 17758.06
18021.66
1994/07/31 19462.61 18340.53
18681.25
1994/08/31 19609.95 19092.49
18832.57
1994/09/30 19086.20 18624.72
18431.44
1994/10/31 19072.69 19043.78
18593.64
1994/11/30 18464.85 18350.20
17983.76
1994/12/31 18583.01 18622.34
18118.64
1995/01/31 19166.40 19105.22
19126.04
1995/02/28 19436.75 19849.75
19259.92
1995/03/31 19538.64 20435.51
19150.14
1995/04/30 20127.24 21037.34
19590.59
1995/05/31 20586.63 21878.20
20099.95
1995/06/30 20720.30 22386.43
20497.93
1995/07/31 21329.29 23128.76
21049.32
1995/08/31 21793.29 23186.82
21666.07
1995/09/30 22800.65 24165.30
23100.36
1995/10/31 22903.09 24079.03
23326.74
1995/11/30 23488.47 25136.10
23795.61
1995/12/31 24273.76 25620.22
24873.55
1996/01/31 24649.28 26492.33
25405.45
1996/02/29 24003.38 26737.92
24758.63
1996/03/31 23814.42 26995.40
24417.20
1996/04/30 24561.48 27393.32
24611.79
1996/05/31 24515.74 28099.79
24771.69
1996/06/30 25085.03 28206.85
25286.84
1996/07/31 23979.02 26960.67
23078.54
1996/08/31 24332.33 27529.27
23073.69
1996/09/30 24606.88 29078.62
23264.77
1996/10/31 25550.92 29880.61
23779.24
1996/11/30 26912.81 32139.28
24828.79
1996/12/31 27050.29 31502.60
25206.53
1997/01/31 27786.14 33470.89
25687.98
1997/02/28 27866.12 33733.30
26096.42
1997/03/31 26697.06 32347.20
24580.22
1997/04/30 27379.93 34278.32
24880.09
1997/05/31 28810.71 36365.19
26166.40
1997/06/30 29508.23 37994.35
27001.10
1997/07/31 30441.10 41017.56
27578.93
1997/08/31 29606.43 38719.76
26837.05
1997/09/30 31708.05 40840.44
28938.40
1997/10/31 31790.41 39476.37
29624.24
1997/11/30 34063.51 41303.73
32651.83
1997/12/31 35596.94 42012.91
34434.62
1998/01/31 35889.62 42477.58
34999.35
1998/02/28 37224.96 45541.06
35601.34
1998/03/31 40102.05 47873.22
38848.18
1998/04/30 39301.87 48354.82
37492.38
1998/05/31 39171.61 47523.60
37079.96
1998/06/30 39786.65 49454.01
38229.44
1998/07/31 39880.09 48927.32
38764.65
1998/08/31 35282.85 41853.41
36167.42
1998/09/30 38615.28 44534.54
39784.16
1998/10/31 40191.41 48156.98
41486.93
1998/11/30 41523.62 51075.78
42764.72
1998/12/31 45755.30 54018.76
47390.16
1999/01/29 47591.04 56277.83
49789.66
IMATRL PRASUN SHR__CHT 19990131 19990216 100317 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Utilities Fund on January 31, 1989. As the chart
shows, by January 31, 1999, the value of the investment would have
grown to $47,591 - a 375.91% increase on the initial investment. For
comparison, look at how both the Standard & Poor's 500 Index and the
Russell 3000 Utilities Index did over the same period. With dividends
and capital gains, if any, reinvested, the same $10,000 in the S&P 500
Index would have grown to $56,278 - a 462.78% increase. If $10,000 was
put in the Russell 3000 Utilities Index, it would have grown to
$49,790 - a 397.90% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
After celebrating many happy
returns in 1998, U.S. stock market
investors found new reasons to
cheer in early 1999, as the
Standard and Poor's 500 Index,
Dow Jones Industrial Average, and
NASDAQ all reached record highs
in January. For the 12-month
period ending January 31, 1999,
the S&P 500 Index - a popular
performance measure of U.S. stock
markets - boasted a 32.49%
return. Remarkable symmetries
between the first month of 1999
and the 11-month period preceding
it were noticeably apparent. As
was the case a year ago, the U.S.
economy demonstrated remarkable
resiliency. The triumvirate of low
inflation, low unemployment and
low interest rates continued to offset
economic uncertainty abroad and
political unrest at home. Extreme
volatility was also evident. But while
the impact of Brazil's currency
devaluation in mid-January did not
quite have the same disastrous
results as Russia's devaluation of the
ruble last August, the aftershocks
were still felt worldwide. Three
separate 0.25% interest-rate cuts by
the Federal Reserve Board late last
fall helped pull the U.S. stock
market out of the tailspin Russia's
actions caused, while Brazil's
battered currency - and U.S.
investors' pulse rates - stabilized
quickly after it was freed to float
against other currencies.
(photographo of Peter Saperstone)
NOTE TO SHAREHOLDERS:
Peter Saperstone, became Portfolio Manager of Fidelity Utilities Fund
on October 30, 1998.
Q. HOW DID THE FUND PERFORM, PETER?
A. For the 12 months that ended January 31, 1999, the fund had a total
return of 32.60%. This underperformed the Russell 3000 Utilities
Index, which returned 42.26%. During the same period, the fund
outpaced the 14.00% return for the Standard & Poor's Utilities Index
and the utility funds average tracked by Lipper Inc., which returned
18.69%. The fund changed its utilities benchmark index from the S&P
Utilities Index to the Russell 3000 Utilities Index because the
Russell index better represents the broad universe of utilities
stocks, including telephone companies which were eliminated from the
S&P Utilities Index.
Q. WHAT FACTORS CAUSED THE FUND TO OUTPERFORM THE S&P UTILITIES INDEX,
YET LAG THE RUSSELL INDEX?
A. As I mentioned, this was a transition year for the fund in terms of
the benchmark I managed against. Broadly speaking, telephone stocks
dramatically outperformed electric utilities. The fund's 55% telephone
services weight therefore helped it outpace the S&P Utilities
benchmark, which has no telephone exposure. But the fund was
underweight telephone stocks relative to the Russell index. This is
the chief reason why the fund out-paced one benchmark and lagged the
other.
Q. WHY DID THE TELEPHONE SERVICES SECTOR CONTINUE TO PERFORM SO WELL?
A. Demand for telecommunications services continues to grow at three
times the rate of the Gross Domestic Product. The explosive growth of
the Internet and other data services for both business and residential
use is benefiting the entire telecommunications sector. As a result,
these stocks performed very well during the period.
Q. WERE THERE ANY NEW DEVELOPMENTS REGARDING THE DEREGULATION OF THE
TELECOMMUNICATIONS INDUSTRY?
A. Deregulation continues to be a slow process. It has been three
years since the telecommunications act and the regional Bell operating
companies (RBOCs) still are not allowed to enter the long-distance
market. This delay benefits the long-distance companies that already
have the ability to operate in the local markets. In addition,
long-distance capability is crucial in order to capitalize on the
explosive growth of data traffic. The companies that can offer a
nationwide and international data network have a big advantage over
those that are slow to enter this market.
Q. WHAT WAS THE MARKET ENVIRONMENT LIKE FOR ELECTRIC UTILITIES?
A. It was a difficult environment. However, many of these stocks have
been out of favor for a while and started to look inexpensive
considering the stable earnings growth of some electric utility
companies. I've begun to buy some electric utilities given their
attractive valuations.
Q. WHICH STOCKS WERE THE MAJOR CONTRIBUTORS TO TOTAL RETURN?
A. MCI WorldCom's stock continued to provide a significant boost to
the fund's total return. The company continues to be one of the most
compelling growth stories in the industry. MCI WorldCom is one of the
best-positioned fast-growing telecommunications companies in the data
and Internet market, which could drive higher revenue growth than the
industry. Given its end-to-end network assets and synergies from the
merger with MCI, MCI WorldCom could generate higher operating profit
margins compared to the industry over time. Another solid performer
for the fund was Qwest Communications. This company offers a
high-capacity fiber-optic network to deliver data communications; the
stock appreciated significantly in response to the strong growth
outlook for data-networking traffic.
Q. WHICH STOCKS DETRACTED FROM PERFORMANCE?
A. Owning shares of Tel-Save.com was quite a roller-coaster ride
during the period. During January the stock dropped from a high of
approximately $22 to close at around $12.50 at the end of the period.
The stock dropped primarily in response to investors' concerns
regarding management changes. A number of the fund's international
stocks, most notably Telebras, hurt fund performance.
Q. WHAT'S YOUR OUTLOOK, PETER?
A. I don't anticipate any major changes to the fund's holdings and
asset allocation. In the short term, the fund is positioned to take
advantage of the growth potential in the telecom sector. However, if
the market continues to bid up the prices of
telephone utilities, I may continue to take some profits for the fund.
Most likely, any changes to the fund's holdings would be in an effort
to lower the fund's risk profile or to capitalize on any opportunities
in other sectors, such as electric utilities, which offer some
compelling stock valuations.
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.
(checkmark)FUND FACTS
GOAL: 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 January 31,
1999, more than $2.2
billion
MANAGER: Peter Saperstone,
since October 1998;
manager, Fidelity Select
Telecommunication, since
1998; manager, Fidelity
Select Defense and
Aerospace Portfolio, 1997-
1998; manager, Fidelity
Select Air Transportation
Portfolio, 1997-1998;
manager, Fidelity Select
Construction and Housing
Portfolio, 1996-
1997; joined Fidelity in
1995
PETER SAPERSTONE ON CHANGES
OCCURRING IN THE
TELECOMMUNICATIONS INDUSTRY:
"Changes in the
telecommunications industry are
being driven primarily by new
technology and deregulation. On
the technology front, old phone
systems are giving way to digital
technology that will be the
underpinnings of tomorrow's
global communications networks.
At the heart of this profound
change is the Internet. The
Internet's explosive growth in
customer traffic and increasing
demand for data requires speedy
networks that can service
customers needs. The technology
and business environment is
changing rapidly and the trend
seems to be toward companies
that can carry both data and voice
traffic.
"On the deregulation side, new
competition is entering the local
markets and regional barriers are
being broken down for all
telephone service providers. By
increasing competition, this new
market environment is also
creating opportunities for the
industry. I will be closely
monitoring developments within
technology and deregulation to
determine which companies
are most likely to be the winners in
this changing business
environment."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF JANUARY
31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
MCI WorldCom, Inc. 15.2 15.8
AT&T Corp. 5.8 6.3
Qwest Communications 5.4 4.4
International, Inc.
GTE Corp. 4.6 4.5
Tele-Communications, Inc. 3.9 0.0
(TCI Group) Series A
Bell Atlantic Corp. 3.5 0.5
MediaOne Group, Inc. $3.63 PIES 3.3 2.9
BellSouth Corp. 2.8 2.6
Duke Energy Corp. 2.5 1.6
ALLTEL Corp. 2.5 0.4
TOP UTILITY INDUSTRIES AS OF
JANUARY 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
Telephone Services 55.1 45.6
Electric Utility 13.2 21.7
Gas 4.4 9.0
</TABLE>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF JANUARY 31, 1999 *
Stocks 82.0%
Convertible
securities 3.7%
Short-term
investments 14.3%
*FOREIGN
INVESTMENTS 3.2%
Row: 1, Col: 1, Value: 82.0
Row: 1, Col: 2, Value: 3.7
Row: 1, Col: 3, Value: 14.3
AS OF JULY 31, 1998 **
Stocks 84.4%
Convertible
securities 4.2%
Short-term
investments 11.4%
**FOREIGN
INVESTMENTS 7.9%
Row: 1, Col: 1, Value: 84.40000000000001
Row: 1, Col: 2, Value: 4.2
Row: 1, Col: 3, Value: 11.4
INVESTMENTS JANUARY 31, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 82.0%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 1.5%
Cordant Technologies, Inc. 650,000 $ 20,638
Howmet International, Inc. (a) 884,700 13,713
34,351
ENERGY - 2.1%
OIL & GAS - 2.1%
Coastal Corp. (The) 1,607,000 47,909
HOLDING COMPANIES - 0.0%
Iven SA (a) 2,875,000 290
MEDIA & LEISURE - 5.2%
BROADCASTING - 3.9%
Tele-Communications, Inc. 1,285,164 88,114
(TCI Group) Series A (a)
ENTERTAINMENT - 1.3%
Tele-Communications, Inc. 1,063,372 28,977
(TCI Ventures Group) Series
A (a)
TOTAL MEDIA & LEISURE 117,091
UTILITIES - 73.2%
CELLULAR - 0.6%
Nextel Communications, Inc. 431,800 13,818
Class A (a)
SkyTel Communications, Inc. 13,300 351
(a)
14,169
ELECTRIC UTILITY - 13.0%
Allegheny Energy, Inc. 487,900 15,430
Citizens Utilities Co. Class B 458,331 3,581
CMS Energy Corp. 1,100,000 47,094
Consolidated Edison, Inc. 520,000 25,708
DPL, Inc. 615,150 11,649
Duke Energy Corp. 925,593 57,213
Entergy Corp. 800,000 23,550
Niagara Mohawk Power Corp. (a) 2,922,300 44,748
Northeast Utilities (a) 736,800 11,282
PG&E Corp. 1,006,800 32,155
Scottish & Southern Energy PLC 79,300 758
Southern Co. 244,300 6,581
Unicom Corp. 400,300 14,261
294,010
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
GAS - 4.4%
Columbia Gas System, Inc. 278,100 $ 14,392
Consolidated Natural Gas Co. 282,800 14,511
Eastern Enterprises Co. 397,800 16,011
Enron Corp. 378,223 24,963
KeySpan Energy 309,800 8,384
Williams Companies, Inc. 651,440 21,498
99,759
TELEPHONE SERVICES - 55.1%
ALLTEL Corp. 886,000 57,202
Ameritech Corp. 700,000 45,588
AT&T Corp. 1,438,619 130,555
BCE, Inc. 841,000 37,731
Bell Atlantic Corp. 1,295,700 77,742
BellSouth Corp. 1,429,000 63,769
Cincinnati Bell, Inc. 784,500 15,935
Frontier Corp. 194,100 7,012
Global TeleSystems Group, 290,300 18,180
Inc. (a)
GST Telecommunications, Inc. 250,000 2,125
(a)
GTE Corp. 1,540,300 103,970
MCI WorldCom, Inc. (a) 4,304,797 343,304
McLeodUSA, Inc. Class A (a) 304,300 12,647
Qwest Communications 2,044,475 122,541
International, Inc. (a)
SBC Communications, Inc. 1,002,160 54,117
Sprint Corp. (FON Group) 609,600 51,130
Tel-Save.com, Inc. (a)(c) 2,562,100 32,507
Telebras sponsored ADR 160,000 10,070
PFD-Holdr (a)
Telecom Italia Mobile Spa 2,882,100 19,434
U.S. WEST, Inc. 550,000 33,928
WinStar Communications, Inc. 73,100 3,139
(a)
1,242,626
WATER - 0.1%
American Water Works, Inc. 56,957 1,691
TOTAL UTILITIES 1,652,255
TOTAL COMMON STOCKS 1,851,896
(Cost $1,174,518)
CONVERTIBLE PREFERRED STOCKS
- - 3.7%
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - 3.3%
BROADCASTING - 3.3%
MediaOne Group, Inc. $3.63 905,000 $ 74,436
PIES
TECHNOLOGY - 0.2%
COMMUNICATIONS EQUIPMENT - 0.2%
Intermedia Communications, 160,500 3,631
Inc. Series D, $1.75
depositary shares
UTILITIES - 0.2%
ELECTRIC UTILITY - 0.2%
Citizens Utilities Trust 141,300 5,723
$2.50 EPPICS
TOTAL CONVERTIBLE PREFERRED 83,790
STOCKS
(Cost $64,657)
CASH EQUIVALENTS - 14.3%
Taxable Central Cash Fund (b) 321,892,210 321,892
(Cost $321,892)
TOTAL INVESTMENT IN $ 2,257,578
SECURITIES - 100%
(Cost $1,561,067)
</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 4.81%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(c) Affiliated company (see Note 8 of Notes to Financial Statements).
INCOME TAX INFORMATION
At January 31, 1999, the aggregate cost of investment securities for
income tax purposes was $1,565,044,000. Net unrealized appreciation
aggregated $692,534,000, of which $722,606,000 related to appreciated
investment securities and $30,072,000 related to depreciated
investment securities.
The fund hereby designates approximately $130,888,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) JANUARY
31, 1999
ASSETS
Investment in securities, at $ 2,257,578
value (cost $1,561,067) -
See accompanying schedule
Receivable for investments 5,103
sold
Receivable for fund shares 3,304
sold
Dividends receivable 4,266
Interest receivable 839
Other receivables 27
TOTAL ASSETS 2,271,117
LIABILITIES
Payable for investments $ 1,297
purchased
Payable for fund shares 3,827
redeemed
Accrued management fee 1,066
Other payables and accrued 394
expenses
Collateral on securities 19,480
loaned, at value
TOTAL LIABILITIES 26,064
NET ASSETS $ 2,245,053
Net Assets consist of:
Paid in capital $ 1,392,425
Undistributed net investment 2,051
income
Accumulated undistributed net 153,833
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 696,744
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 93,117 shares $ 2,245,053
outstanding
NET ASSET VALUE, offering $24.11
price and redemption price
per share ($2,245,053
(divided by) 93,117 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED
JANUARY 31, 1999
INVESTMENT INCOME $ 37,689
Dividends
Interest (including income on 7,134
securities loaned of $318)
TOTAL INCOME 44,823
EXPENSES
Management fee Basic fee $ 8,919
Performance adjustment 2,082
Transfer agent fees 3,426
Accounting and security 703
lending fees
Non-interested trustees' 11
compensation
Custodian fees and expenses 103
Registration fees 63
Audit 43
Legal 11
Interest 2
Reports to shareholders 110
Miscellaneous 11
Total expenses before 15,484
reductions
Expense reductions (401) 15,083
NET INVESTMENT INCOME 29,740
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 247,695
Foreign currency transactions (57) 247,638
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 259,441
Assets and liabilities in 233 259,674
foreign currencies
NET GAIN (LOSS) 507,312
NET INCREASE (DECREASE) IN $ 537,052
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED JANUARY 31, 1999 YEAR ENDED JANUARY 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 29,740 $ 31,163
income
Net realized gain (loss) 247,638 216,140
Change in net unrealized 259,674 102,443
appreciation (depreciation)
NET INCREASE (DECREASE) IN 537,052 349,746
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (29,380) (31,789)
From net investment income
From net realized gain (111,326) (171,605)
TOTAL DISTRIBUTIONS (140,706) (203,394)
Share transactions Net 835,843 796,964
proceeds from sales of shares
Reinvestment of distributions 126,670 185,940
Cost of shares redeemed (852,099) (670,869)
NET INCREASE (DECREASE) IN 110,414 312,035
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 506,760 458,387
IN NET ASSETS
NET ASSETS
Beginning of period 1,738,293 1,279,906
End of period (including $ 2,245,053 $ 1,738,293
undistributed net investment
income of $2,051 and $2,016,
respectively)
OTHER INFORMATION
Shares
Sold 39,125 40,935
Issued in reinvestment of 5,990 9,844
distributions
Redeemed (40,585) (35,868)
Net increase (decrease) 4,530 14,911
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JANUARY 31,
1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 19.62 $ 17.37 $ 16.41 $ 13.47 $ 15.84
of period
Income from Investment
Operations
Net investment income .35 B .43 B .48 B .54 .55
Net realized and unrealized 5.78 4.46 1.50 3.22 (1.58)
gain (loss)
Total from investment 6.13 4.89 1.98 3.76 (1.03)
operations
Less Distributions
From net investment income (.35) (.44) (.48) (.54) (.54)
From net realized gain (1.29) (2.20) (.54) (.28) (.68)
In excess of net realized - - - - (.12)
gain
Total distributions (1.64) (2.64) (1.02) (.82) (1.34)
Net asset value, end of period $ 24.11 $ 19.62 $ 17.37 $ 16.41 $ 13.47
TOTAL RETURN A 32.60% 29.16% 12.73% 28.61% (6.38)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,245 $ 1,738 $ 1,280 $ 1,546 $ 1,171
(in millions)
Ratio of expenses to average .85% .87% .84% .80% .88%
net assets
Ratio of expenses to average .83% C .85% C .81% C .77% C .87% C
net assets after expense
reductions
Ratio of net investment 1.63% 2.34% 2.96% 3.69% 3.87%
income to average net assets
Portfolio turnover rate 55% 57% 56% 98% 98%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF NOTES TO
FINANCIAL STATEMENTS).
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C 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).
NOTES TO FINANCIAL STATEMENTS
For the period ended January 31, 1999
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
and settlement date 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
the fair market value of the securities received. Interest income is
accrued as earned. Investment income is recorded net of foreign taxes
withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
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. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. 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,
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.
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.
2. OPERATING POLICIES - CONTINUED
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 $921,687,000 and $983,188,000, 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 annual 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 that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .19% of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $89,000 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.
The market value of the loaned securities is determined at the close
of business of the fund and any additional required collateral is
delivered to the fund on the next business day. At period end, the
value of the securities loaned amounted to $20,278,000. The fund
received cash collateral of $19,480,000.
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 $375,000 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 $3,000 and $23,000, respectively, under these arrangements.
8. 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
Tel-Save.com, Inc. $ - $ - $ - $ 32,507
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Devonshire Trust and the Shareholders of
Fidelity Utilities Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Utilities Fund (a fund of Fidelity Devonshire Trust) at
January 31, 1999, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Utilities Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at January
31, 1999, by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 11, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity Utilities Fund voted to pay on March
8, 1999, to shareholders of record at the opening of business on March
5, 1999, a distribution of $1.35 per share derived from capital gains
realized from sales of portfolio securities and a dividend of $.07 per
share from net investment income.
A total of 84.73% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of the applicable
percentage for use in preparing 1999 income tax returns.
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on November 18,
1998. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL 1
To elect as Trustees the following twelve nominees.
# OF % OF
VOTES CAST VOTES CAST
RALPH F. COX
Affirmative 11,686,179,596.28 90.301
Withheld 1,255,148,568.70 9.699
TOTAL 12,941,328,164.98 100.000
PHYLLIS BURKE DAVIS
Affirmative 11,682,992,125.34 90.277
Withheld 1,258,336,039.64 9.723
TOTAL 12,941,328,164.98 100.000
ROBERT M. GATES
Affirmative 11,681,467,382.29 90.265
Withheld 1,259,860,782.69 9.735
TOTAL 12,941,328,164.98 100.000
EDWARD C. JOHNSON 3D
Affirmative 11,683,371,215.62 90.280
Withheld 1,257,956,949.36 9.720
TOTAL 12,941,328,164.98 100.000
E. BRADLEY JONES
Affirmative 11,669,294,690.53 90.171
Withheld 1,272,033,474.45 9.829
TOTAL 12,941,328,164.98 100.000
DONALD J. KIRK
Affirmative 11,689,271,881.03 90.325
Withheld 1,252,056,283.95 9.675
TOTAL 12,941,328,164.98 100.000
# OF % OF
VOTES CAST VOTES CAST
PETER S. LYNCH
Affirmative 11,690,803,868.46 90.337
Withheld 1,250,524,296.52 9.663
TOTAL 12,941,328,164.98 100.000
WILLIAM O. MCCOY
Affirmative 11,690,491,696.56 90.335
Withheld 1,250,836,468.42 9.665
TOTAL 12,941,328,164.98 100.000
GERALD C. MCDONOUGH
Affirmative 11,674,205,667.03 90.209
Withheld 1,267,122,497.95 9.791
TOTAL 12,941,328,164.98 100.000
MARVIN L. MANN
Affirmative 11,689,754,284.66 90.329
Withheld 1,251,573,880.32 9.671
TOTAL 12,941,328,164.98 100.000
ROBERT C. POZEN
Affirmative 11,687,715,714.99 90.313
Withheld 1,253,612,449.99 9.687
TOTAL 12,941,328,164.98 100.000
THOMAS R. WILLIAMS
Affirmative 11,675,479,177.58 90.219
Withheld 1,265,848,987.40 9.781
TOTAL 12,941,328,164.98 100.000
PROPOSAL 2
To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of Utilities Fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 914,784,035.57 95.806
Against 10,757,673.32 1.127
Abstain 29,287,523.93 3.067
TOTAL 954,829,232.82 100.000
PROPOSAL 3
To adopt an Amended and Restated Declaration of Trust.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 10,550,495,730.26 81.926
Against 613,430,706.07 4.764
Abstain 1,714,127,002.49 13.310
TOTAL 12,878,053,438.82 100.000
Broker Non-Votes 63,274,726.16
PROPOSAL 4
To approve an amended management contract for Utilities Fund.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 812,220,197.66 90.213
Against 38,485,477.72 4.275
Abstain 49,627,468.80 5.512
TOTAL 900,333,144.18 100.000
Broker Non-Votes 54,496,088.64
PROPOSAL 5
To adopt a new fundamental investment policy for Utilities Fund to
invest all of its assets in another open-end investment company
managed by FMR or an affiliate with substantially the same investment
objective and policies.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 767,150,098.00 85.207
Against 78,498,779.97 8.719
Abstain 54,684,266.21 6.074
TOTAL 900,333,144.18 100.000
Broker Non-Votes 54,496,088.64
PROPOSAL 6
To amend Utilities Fund's fundamental investment limitation concerning
the concentration of its investments in the public utilities industry.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 802,909,753.13 89.179
Against 51,028,033.61 5.668
Abstain 46,395,357.44 5.153
TOTAL 900,333,144.18 100.000
Broker Non-Votes 54,496,088.64
PROPOSAL 7
To amend Utilities Fund's fundamental investment limitation concerning
diversification, to exclude securities of other investment companies
from the limitation.
# OF % OF
VOTES CAST VOTES CAST
Affirmative 782,559,968.39 86.919
Against 62,487,273.00 6.940
Abstain 55,285,902.79 6.141
TOTAL 900,333,144.18 100.000
Broker Non-Votes 54,496,088.64
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
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
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
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 EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
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
19200 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
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
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
Matthew N. Karstetter, Deputy 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
UIF-ANN-0399 71630
1.700458.101
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 (registered trademark) Fund
Global Balanced Fund
Growth & Income Portfolio
Growth & Income II 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)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(fidelity_logo_graphic)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
