-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NxrDO0pUxqj0bU2HFaWJ7YMYJylJFYe8K5jA/LomVIQQc97bezq38xYeXn1U76IU scNmzPSZ/u5KXZrUPsk16A== 0000024238-99-000001.txt : 19990218 0000024238-99-000001.hdr.sgml : 19990218 ACCESSION NUMBER: 0000024238-99-000001 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY CONTRAFUND CENTRAL INDEX KEY: 0000024238 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046056833 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01400 FILM NUMBER: 99544414 BUSINESS ADDRESS: STREET 1: FIDELITY INVESTMENTS COMPANY STREET 2: 82 DEVONSHIRE STREET MAIL ZONE ZZ2 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: (617)439-1220 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAIL ZONE ZH1 CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: FIDELITY CONTRAFUND INC DATE OF NAME CHANGE: 19850618 FORMER COMPANY: FORMER CONFORMED NAME: CONTRAFUND INC DATE OF NAME CHANGE: 19810203 N-30D 1 FIDELITY CONTRAFUNDSM ANNUAL REPORT DECEMBER 31, 1998 (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 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 27 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 31 Footnotes to the financial statements. REPORT OF INDEPENDENT 37 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 38 OF SPECIAL NOTE 39 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. To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: Resurgent stock market performance in the fourth quarter helped the Dow Jones Industrial Average post a double-digit return for the fourth year in a row - a first in the Dow's 100-plus year history. Three interest-rate cuts made late in the year by the Federal Reserve Board helped spark the equity rally. Meanwhile, while the majority of bonds posted positive performance, most bond returns for 1998 trailed their gains from 1997. 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 DECEMBER 31, 1998 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS FIDELITY CONTRAFUND 31.57% 165.90% 762.49% FIDELITY CONTRAFUND (INCL. 27.62% 157.92% 736.62% 3.00% SALES CHARGE) S&P 500 (registered trademark) 28.58% 193.90% 479.73% Growth Funds Average 22.86% 138.97% 388.00% 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. To measure how the fund's performance stacked up against its peers, you can compare it to the growth 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 980 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 DECEMBER 31, 1998 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS FIDELITY CONTRAFUND 31.57% 21.60% 24.04% FIDELITY CONTRAFUND (INCL. 27.62% 20.86% 23.67% 3.00% SALES CHARGE) S&P 500 28.58% 24.06% 19.21% Growth Funds Average 22.86% 18.63% 16.72% 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 Contrafund S&P 500 00022 SP001 1988/12/31 9700.00 10000.00 1989/01/31 10344.11 10732.00 1989/02/28 10282.77 10464.77 1989/03/31 10827.19 10708.60 1989/04/30 11524.98 11264.38 1989/05/31 12123.08 11720.59 1989/06/30 12046.40 11653.78 1989/07/31 13150.59 12706.12 1989/08/31 13526.32 12955.15 1989/09/30 13787.04 12902.04 1989/10/31 13372.96 12602.71 1989/11/30 13679.68 12859.81 1989/12/31 13885.73 13168.44 1990/01/31 13149.24 12284.84 1990/02/28 13422.32 12443.31 1990/03/31 13711.95 12773.06 1990/04/30 13571.27 12453.74 1990/05/31 14853.92 13667.97 1990/06/30 15044.25 13575.03 1990/07/31 14762.90 13531.59 1990/08/31 13612.65 12308.34 1990/09/30 13041.66 11708.92 1990/10/31 13107.86 11658.57 1990/11/30 13885.73 12411.72 1990/12/31 14432.28 12758.00 1991/01/31 15838.08 13314.25 1991/02/28 17035.91 14266.22 1991/03/31 18034.11 14611.46 1991/04/30 18133.93 14646.53 1991/05/31 19290.18 15279.26 1991/06/30 18208.80 14579.47 1991/07/31 19498.13 15258.87 1991/08/31 20479.70 15620.51 1991/09/30 20537.92 15359.65 1991/10/31 21128.52 15565.47 1991/11/30 20013.87 14938.18 1991/12/31 22358.27 16647.11 1992/01/31 22995.83 16337.47 1992/02/29 23742.08 16549.86 1992/03/31 23097.74 16227.13 1992/04/30 23348.31 16704.21 1992/05/31 23598.89 16786.06 1992/06/30 23026.14 16535.95 1992/07/31 23607.84 17212.27 1992/08/31 23169.33 16859.42 1992/09/30 23563.09 17058.36 1992/10/31 24091.09 17118.06 1992/11/30 25254.48 17701.79 1992/12/31 25911.88 17919.52 1993/01/31 26732.53 18070.05 1993/02/28 26908.89 18315.80 1993/03/31 28194.80 18702.26 1993/04/30 28385.30 18249.67 1993/05/31 29509.28 18738.76 1993/06/30 29518.81 18793.10 1993/07/31 29842.67 18717.93 1993/08/31 31290.51 19427.34 1993/09/30 31357.19 19277.75 1993/10/31 31633.42 19676.80 1993/11/30 30442.76 19489.87 1993/12/31 31463.81 19725.69 1994/01/31 32453.43 20396.37 1994/02/28 32220.58 19843.63 1994/03/31 30946.55 18978.44 1994/04/30 31326.70 19221.37 1994/05/31 31152.04 19536.60 1994/06/30 29949.93 19057.95 1994/07/31 30556.12 19683.05 1994/08/31 31830.15 20490.06 1994/09/30 31408.90 19988.05 1994/10/31 32302.77 20437.78 1994/11/30 30833.53 19693.44 1994/12/31 31110.94 19985.49 1995/01/31 30607.49 20503.72 1995/02/28 31840.43 21302.75 1995/03/31 33001.43 21931.39 1995/04/30 34491.23 22577.27 1995/05/31 35323.45 23479.68 1995/06/30 37563.28 24025.12 1995/07/31 40440.11 24821.79 1995/08/31 40974.38 24884.09 1995/09/30 41724.42 25934.20 1995/10/31 40964.11 25841.62 1995/11/30 42042.92 26976.06 1995/12/31 42398.02 27495.62 1996/01/31 43357.05 28431.57 1996/02/29 43621.37 28695.13 1996/03/31 44832.10 28971.47 1996/04/30 46219.14 29398.51 1996/05/31 46607.04 30156.69 1996/06/30 46254.41 30271.59 1996/07/31 44091.56 28934.19 1996/08/31 45772.47 29544.41 1996/09/30 47653.20 31207.17 1996/10/31 49181.30 32067.87 1996/11/30 52037.67 34491.88 1996/12/31 51698.83 33808.59 1997/01/31 53710.37 35920.96 1997/02/28 52299.82 36202.58 1997/03/31 50940.58 34715.01 1997/04/30 52087.83 36787.50 1997/05/31 55217.84 39027.12 1997/06/30 57499.88 40775.54 1997/07/31 62375.71 44020.05 1997/08/31 60330.60 41554.04 1997/09/30 64358.46 43829.96 1997/10/31 62400.65 42366.04 1997/11/30 62300.89 44327.16 1997/12/31 63588.80 45088.26 1998/01/31 63411.52 45586.93 1998/02/28 67929.12 48874.66 1998/03/31 71397.96 51377.53 1998/04/30 72203.71 51894.39 1998/05/31 70674.15 51002.33 1998/06/30 74593.66 53074.04 1998/07/31 74825.83 52508.80 1998/08/31 63750.13 44917.08 1998/09/30 67615.02 47794.47 1998/10/31 69868.39 51682.07 1998/11/30 74539.03 54814.52 1998/12/31 83661.80 57972.94 IMATRL PRASUN SHR__CHT 19981231 19990121 145411 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Contrafund on December 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by December 31, 1998, the value of the investment would have grown to $83,662 - a 736.62% increase on the initial investment. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $57,973 - a 479.73% 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 For the first time in its history, the Dow Jones Industrial Average - an index of 30 blue-chip stocks - posted double-digit percentage gains in four consecutive years, thanks to an 18.07% increase for the 12-month period ending December 31, 1998. In that same time frame, the Standard & Poor's 500 Index returned 28.58%. The period began with the U.S. enjoying low inflation, stable interest rates and an unemployment rate at its lowest peacetime level in 41 years. But while the equity market continued its bull-like charge, mounting doubts lingered in many investors' minds about the impact of Asia's economic woes. Those fears soon became reality. Further prompted by Russia's currency devaluation and subsequent loan defaults, the Dow suffered a 512.61 point free-fall on August 31, a loss that erased all previous gains for the year to that point. Faced with global economic chaos, investors began fleeing the equity markets in droves, searching for safer, less volatile havens, particularly U.S. Treasuries. To address the lack of confidence in domestic and global equity markets, the U.S. Federal Reserve Board stepped in with three separate 0.25% interest-rate cuts in the late fall. Those cuts helped boost confidence in the U.S. economy, and stocks began to quickly ascend to their former lofty levels, culminating in a new Dow record of 9374.27 on November 23, 1998. (photograph of Will Danoff) An interview with Will Danoff, Portfolio Manager of Fidelity Contrafund Q. HOW DID THE FUND PERFORM, WILL? A. Very well. For the 12 months that ended December 31, 1998, the fund returned 31.57%. This topped both the Standard & Poor's 500 Index - which returned 28.58% during the same period - and the growth funds average, which returned 22.86% according to Lipper Inc. Q. WHAT MAIN FACTORS HELPED THE FUND OUTPERFORM ITS BENCHMARKS DURING THE PERIOD? A. The fund's considerable holdings in large-capitalization growth stocks fueled performance. The market environment over the past year has been very volatile and, in times of uncertainty, investors tend to buy stocks of larger, more well-known companies. The market typically assumes that a larger company has more resources with which to weather any type of downturn. In the past year's low-inflation environment, in fact, many companies were unable to grow their profits. Large-cap growth stocks, however, proved to be the exception and their earnings growth accounted for much of the market's gain in 1998. Thus, the fund's stakes in such large-cap growth companies as Microsoft and Tyco International benefited appropriately as each was able to grow its profits considerably. Other large-cap growth investments that performed well included drugstore chain CVS, which benefited from its acquisition of Revco, and apparel chain Gap, Inc., which was boosted by the success of its Old Navy stores. Large-cap cable TV-related investments such as Viacom - which operates movie rental chain Blockbuster and several popular cable channels- and Comcast also performed well. Q. ASIDE FROM YOUR FOCUS ON LARGE-CAP STOCKS DURING THIS VOLATILITY, WHAT OTHER STRATEGIES DID YOU PURSUE? A. During the first nine months of the period, when the economic difficulties in Southeast Asia dominated investors' minds, I positioned Contrafund defensively. I tried to emphasize companies with minimal emerging-markets exposure and those that could benefit from a good domestic economy. This led me to significant investments in areas such as retail and cable TV. As the market faltered in late August and early September, this strategy proved wise. Then the tables turned. In late September, the Federal Reserve Board cut interest rates, and two more subsequent cuts restored investors' optimism. Large-cap stocks led the market's surge and the S&P 500 gained over 20% in the fourth quarter of 1998 alone. Technology stocks - an area in which the fund was amply represented - performed exceptionally well down the stretch. Q. STICKING WITH TECHNOLOGY FOR A MOMENT, TECH STOCKS ACCOUNTED FOR AROUND 25% OF THE FUND'S TOTAL INVESTMENTS AT THE CLOSE OF THE PERIOD. WHY DID THESE STOCKS APPEAL TO YOU? A. Regardless of the external business environment, the technology sector typically contains companies that are growing their earnings rapidly. The outlook for tech stocks turned more positive during the last few months of the year as the Internet emerged as a huge trend for both businesses and consumers. The Internet explosion has stimulated sales of personal computers, computer hardware, and networking equipment and key components such as semiconductors. In addition, the Internet has triggered demand for software that enables Internet commerce and information-sharing, and has fostered many new companies that specialize in electronic commerce, access and communications. As a result, many of these companies experienced stronger-than-expected growth in 1998. Technology positions that helped the fund's performance during the period included America Online, Intel and Texas Instruments. Q. YOU INCREASED THE FUND'S UTILITIES-RELATED HOLDINGS DURING THE PERIOD, FROM AROUND 5% A YEAR AGO TO CLOSE TO 14% AT YEAR-END. WHAT WAS THE APPEAL? A. Telephone companies made up most of the increase in this area, as many were able to generate good earnings growth from merger-related cost savings and from new services such as Internet access and wireless communications. Telephone companies also tend to be a safe haven from turbulent economic conditions. Telephone-related stocks that helped the fund's performance included AT&T, which was undergoing a major revitalization led by new management, AirTouch Communications - - a global leader in wireless communications - and MCI WorldCom, one of the faster-growing telephone companies during the period. Q. DID YOU FIND OPPORTUNITIES IN ANY COMPANIES OR SECTORS THAT YOU FELT WERE OVERLOOKED OR UNDERVALUED BY THE MARKET DURING THE PERIOD? A. One relatively overlooked area in the market was mid-sized growth companies. Through the second half of 1998, stocks of larger, well-known companies led the market. Names such as IBM, GE and Lucent Technologies, for example, reached new price highs while the broader market of small- and medium-sized companies languished. In many cases, the share prices of these bigger stocks appreciated much faster than their earnings grew. To illustrate the gap between larger and smaller stocks during the period, the NASDAQ 100 Index - made up of the largest 100 over-the-counter companies - rose 85% in 1998. In contrast, the Russell 2000 Index - which measures the performance of smaller stocks - actually fell 3%. I tried to take advantage of this divergence and what I felt was the market's overly pessimistic view of mid-cap stocks by buying or adding to positions in companies in this area. The fund increased its investments in companies such as information management company Unisys; Outdoor Systems, which specializes in outdoor advertising; and Vitesse Semiconductor, which is a leader in high-speed semiconductors used for telecommunications. These mid-sized companies were growing faster than their larger brethren, were not as widely held by investors and had price-to-earnings ratios that were lower than their earnings growth rates. In addition, I felt these companies had excellent long-term growth potential because of their smaller size and outstanding management. Q. WHICH OTHER STOCKS PERFORMED WELL? WHICH PROVED DISAPPOINTING? A. Time Warner - the fund's second-largest individual holding at the end of the period - continued to reap the benefits of its strong media properties, the successful testing of its cable systems for new businesses such as Internet access and telephone service, and management's renewed focus on improving returns. Other good performers included pharmaceutical company Warner-Lambert and data storage company EMC. Disappointments included Gillette - which suffered from sales declines in several emerging markets despite the introduction of a new razor - and France-based telecommunications company Alcatel. Q. WHAT'S YOUR OUTLOOK? A. The U.S. economy appears to be quite stable, but we'll need to watch global developments carefully. The embattled Japanese economy is still weak and many American companies have adjusted their expectations downward to reflect problems there. Europe - which was fairly strong in 1998 - may weaken in 1999 and the emerging markets, while only a small part of the world economy, remain depressed. As such, I'll try to emphasize companies that I feel are not fully appreciated by the market, as well as those that have good growth prospects and limited exposure to the weakening world markets. Examples of these companies could include telecommunications and media companies, advertising agencies, retailers, business service companies and well-positioned technology companies. I also will look within the small- and medium-cap stock universes for overlooked growth companies. In particular, I'll keep an eye on companies that - either through internal cost-cutting programs or a new product launch - are experiencing improving fundamentals. 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. WILL DANOFF ON THE RECENT CORRELATION - OR LACK THEREOF - BETWEEN MARKET GAINS AND EARNINGS: "While the S&P 500 Index - a popular gauge of stock market performance - rose over 28% during the period, one underlying concern I have involves the correlation between the index's gains and the overall earnings of the companies that make up the index. "While the index itself was gaining over 28%, earnings for the underlying 500 companies in the index were relatively flat. For the past three years, in fact, the S&P 500 has doubled in appreciation while reported earnings have risen only 13% annually. As a result, the expansion of the price-to-earnings ratio - which measures how much an investor pays for a company's earnings power - accounted for much of the index's gain. "U.S. corporate earnings are suffering despite a robust domestic economy, thanks in large part to global deflation, the continuing recession in Japan and turmoil in the Asian and some South American markets. For a bottom-up, fundamental investor who believes strongly that stock prices follow earnings over time, this divergence we've seen between prices and earnings cannot continue and is cause for concern." FUND FACTS GOAL: to increase the value of the fund's shares over the long term by investing in companies whose value is not fully recognized by the public FUND NUMBER: 022 TRADING SYMBOL: FCNTX START DATE: May 17, 1967 SIZE: as of December 31, 1998, more than $38.6 billion MANAGER: Will Danoff, since 1990; manager, VIP II: Contrafund, since 1995; Fidelity Select Retailing Portfolio, 1986-1989; joined Fidelity in 1986 (checkmark) INVESTMENT CHANGES
TOP TEN STOCKS AS OF DECEMBER 31, 1998 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE STOCKS 6 MONTHS AGO MCI WorldCom, Inc. 5.4 4.1 Time Warner, Inc. 4.2 2.9 Microsoft Corp. 3.1 1.9 Tyco International Ltd. 3.1 2.6 CVS Corp. 2.7 1.7 America Online, Inc. 2.0 1.5 McDonald's Corp. 1.8 1.0 Intel Corp. 1.8 0.1 AT&T Corp. 1.6 1.2 Lucent Technologies, Inc. 1.5 2.2 TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1998 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 24.6 18.0 UTILITIES 14.0 9.5 MEDIA & LEISURE 13.6 10.5 RETAIL & WHOLESALE 9.8 10.3 HEALTH 7.8 6.9
ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF DECEMBER 31, 1998 * AS OF JUNE 30, 1998 ** Row: 1, Col: 1, Value: 7.0 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 2.3 Row: 1, Col: 4, Value: 90.7 Stocks 90.5% Bonds 2.4% Convertible securities 0.0% Short-term investments 7.1% *FOREIGN INVESTMENTS 2.4% Stocks 86.0% Bonds 4.8% Convertible securities 0.1% Short-term investments 9.1% **FOREIGN INVESTMENTS 6.9% Row: 1, Col: 1, Value: 9.1 Row: 1, Col: 2, Value: 1.0 Row: 1, Col: 3, Value: 4.8 Row: 1, Col: 4, Value: 87.0 INVESTMENTS DECEMBER 31, 1998 Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 90.5% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 0.1% AEROSPACE & DEFENSE - 0.1% Alliant Techsystems, Inc. (a) 441,400 $ 36,388 Orbital Sciences Corp. (a) 151,200 6,691 43,079 DEFENSE ELECTRONICS - 0.0% REMEC, Inc. (a) 495,550 8,920 TOTAL AEROSPACE & DEFENSE 51,999 BASIC INDUSTRIES - 0.4% CHEMICALS & PLASTICS - 0.4% Crompton & Knowles Corp. 1,985,317 41,071 Great Lakes Chemical Corp. 490,700 19,628 MacDermid, Inc. 487,600 19,077 Sealed Air Corp. (a) 1,171,424 59,816 139,592 METALS & MINING - 0.0% Martin Marietta Materials, 312,300 19,421 Inc. TOTAL BASIC INDUSTRIES 159,013 CONSTRUCTION & REAL ESTATE - 0.2% CONSTRUCTION - 0.1% Centex Corp. 88,000 3,966 Jacobs Engineering Group, 504,300 20,550 Inc. (a) Lennar Corp. 397,900 10,047 34,563 ENGINEERING - 0.0% URS Corp. (a) 169,500 3,962 REAL ESTATE - 0.0% Grand Palais Management Co. 398,400 - LP (a)(e) REAL ESTATE INVESTMENT TRUSTS - - 0.1% Equity Office Properties Trust 890,000 21,360 TOTAL CONSTRUCTION & REAL 59,885 ESTATE COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - 1.5% AUTOS, TIRES, & ACCESSORIES - 1.2% Arvin Industries, Inc. 680,200 $ 28,356 Copart, Inc. (a) 18,400 596 Danaher Corp. 3,002,800 163,090 LucasVarity PLC sponsored ADR 890,100 29,818 SPX Corp. (c) 3,131,947 209,840 TRW, Inc. 196,000 11,013 442,713 CONSUMER ELECTRONICS - 0.1% Maytag Corp. 408,700 25,442 Newell Co. 553,600 22,836 48,278 HOME FURNISHINGS - 0.0% Bombay Co., Inc. (The) (a) 961,300 5,347 Miller (Herman), Inc. 144,100 3,873 9,220 TEXTILES & APPAREL - 0.2% Quiksilver, Inc. (a) 84,700 2,541 Shaw Industries, Inc. 1,278,500 31,004 Stride Rite Corp. 917,600 8,029 Vans, Inc. (a)(c) 768,000 5,280 Warnaco Group, Inc. Class A 1,054,000 26,614 73,468 TOTAL DURABLES 573,679 ENERGY - 1.8% ENERGY SERVICES - 0.0% Halliburton Co. 437,000 12,946 OIL & GAS - 1.8% Amoco Corp. 1,576,700 93,025 British Petroleum PLC ADR 2,067,286 196,392 Chevron Corp. 892,400 74,013 Conoco, Inc. Class A (a) 420,600 8,780 Exxon Corp. 2,410,700 176,282 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - CONTINUED Mobil Corp. 1,326,100 $ 115,536 Tosco Corp. 1,043,400 26,998 691,026 TOTAL ENERGY 703,972 FINANCE - 7.6% BANKS - 2.0% Allied Irish Banks PLC 553,900 9,918 AmSouth Bancorp. 505,000 23,041 Bank of Ireland, Inc. 386,600 8,423 Bank of New York Co., Inc. 3,529,800 142,074 Bank One Corp. 2,507,600 128,044 BB&T Corp. 83,400 3,362 Chase Manhattan Corp. 257,000 17,492 Comerica, Inc. 94,200 6,423 Fifth Third Bancorp 246,000 17,543 Firstar Corp. 1,541,440 143,739 M&T Bank Corp. 300 156 North Fork Bancorp, Inc. 1,307,489 31,298 U.S. Bancorp 5,317,048 188,755 Wells Fargo & Co. 1,141,600 45,593 Westamerica Bancorp. 89,200 3,278 Zions Bancorp 138,900 8,664 777,803 CREDIT & OTHER FINANCE - 2.5% American Express Co. 1,272,000 130,062 Associates First Capital 12,683,898 537,480 Corp. Class A Fleet Financial Group, Inc. 85,700 3,830 Fortis Amev NV 430,300 35,618 Greenpoint Financial Corp. 2,254,300 79,182 Household International, Inc. 875,264 34,682 MBNA Corp. 1,602,700 39,967 Providian Financial Corp. 1,631,250 122,344 983,165 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED FEDERAL SPONSORED CREDIT - 2.2% Fannie Mae 7,471,700 $ 552,906 Freddie Mac 5,043,400 324,984 877,890 INSURANCE - 0.7% ACE Ltd. 245,800 8,465 AFLAC, Inc. 2,261,300 99,497 Allstate Corp. 512,600 19,799 American International Group, 272,750 26,354 Inc. Medical Assurance, Inc. 98,560 3,259 Mutual Risk Management Ltd. 1,534,400 60,033 Progressive Corp. 342,300 57,977 275,384 SAVINGS & LOANS - 0.2% Astoria Financial Corp. 475,100 21,736 Washington Mutual, Inc. 1,142,875 43,644 65,380 TOTAL FINANCE 2,979,622 HEALTH - 7.8% DRUGS & PHARMACEUTICALS - 5.0% Allergan, Inc. 1,254,900 81,255 Alpharma, Inc. Class A 368,400 13,009 Amgen, Inc. (a) 860,300 89,955 Andrx Corp. (a) 8,600 441 Biogen, Inc. (a) 1,150,800 95,516 Chiron Corp. (a) 1,287,900 33,727 Forest Laboratories, Inc. (a) 1,692,100 89,999 Genentech, Inc. (special) (a) 733,800 58,475 Glaxo Wellcome PLC sponsored 429,400 29,843 ADR ICOS Corp. (a) 349,100 10,386 Immunex Corp. (a) 45,000 5,662 Lilly (Eli) & Co. 3,506,700 311,658 Merck & Co., Inc. 901,700 133,170 Pfizer, Inc. 1,711,100 214,636 Schering-Plough Corp. 6,503,700 359,329 Sepracor, Inc. (a) 328,800 28,976 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED Warner-Lambert Co. 5,460,800 $ 410,584 XOMA Corp. (a)(d) 1,098 3 1,966,624 MEDICAL EQUIPMENT & SUPPLIES - - 2.4% Allegiance Corp. 840,900 39,207 Arterial Vascular 85,800 4,505 Engineering, Inc. (a) Bard (C.R.), Inc. 1,946,100 96,332 Bausch & Lomb, Inc. 293,000 17,580 Baxter International, Inc. 147,500 9,486 Becton, Dickinson & Co. 3,660,100 156,241 Biomet, Inc. 577,200 23,232 Cardinal Health, Inc. 4,421,875 335,510 Guidant Corp. 881,100 97,141 Haemonetics Corp. (a) 725,700 16,510 Medtronic, Inc. 343,500 25,505 Sofamor/Danek Group, Inc. (a) 886,500 107,931 Steris Corp. (a) 92,800 2,639 Techne Corp. (a) 42,800 904 U.S. Surgical Corp. rights 171 - 6/30/00 (a) 932,723 MEDICAL FACILITIES MANAGEMENT - - 0.4% Hanger Orthopedic Group, Inc. 137,300 3,089 (a) Health Management Associates, 6,442,087 139,310 Inc. Class A (a) 142,399 TOTAL HEALTH 3,041,746 INDUSTRIAL MACHINERY & EQUIPMENT - 4.7% ELECTRICAL EQUIPMENT - 1.0% American Power Conversion 2,822,400 136,710 Corp. (a) Anixter International, Inc. 19,900 404 (a) General Instrument Corp. (a) 718,700 24,391 Loral Space & Communications 7,065,667 125,857 Ltd. (a) Philips Electronics NV (NY 897,700 60,763 shares) Rayovac Corp. (a)(c) 2,596,900 69,305 417,430 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED INDUSTRIAL MACHINERY & EQUIPMENT - 3.4% Kaydon Corp. 239,600 $ 9,599 Mannesmann AG 938,700 108,840 Mettler-Toledo International, 99,600 2,795 Inc. (a) Tyco International Ltd. 15,830,000 1,194,176 1,315,410 POLLUTION CONTROL - 0.3% Republic Services, Inc. Class 2,916,800 53,779 A (a) Waste Management, Inc. 1,387,501 64,692 118,471 TOTAL INDUSTRIAL MACHINERY & 1,851,311 EQUIPMENT MEDIA & LEISURE - 13.6% BROADCASTING - 8.6% Cablevision Systems Corp. 445,200 22,343 Class A (a) CBS Corp. 10,615,618 347,661 Chancellor Media Corp. (a) 442,000 21,161 Clear Channel Communications, 1,179,500 64,283 Inc. (a) Comcast Corp.: Class A (special) 4,559,400 267,580 Class A 3,262,600 187,396 Cox Communications, Inc. 1,216,400 84,084 Class A (a) MediaOne Group, Inc. 2,693,900 126,613 Metromedia Fiber Network, 944,800 31,651 Inc. Class A (a) SBS Broadcasting SA (a)(c) 985,700 26,614 TCA Cable TV, Inc. 971,200 34,660 Tele-Communications, Inc. 8,974,230 496,387 (TCI Group) Series A (a) Time Warner, Inc. 26,438,195 1,640,820 USA Networks, Inc. (a) 188,500 6,244 3,357,497 ENTERTAINMENT - 2.0% Premier Parks, Inc. (a)(c) 5,513,200 166,774 Tele-Communications, Inc.: (Liberty Media Group) Series 629,000 28,973 A (a) (TCI Ventures Group) Series A 3,920,340 92,373 (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED ENTERTAINMENT - CONTINUED Viacom, Inc.: Class A (a) 2,098,700 $ 154,386 Class B (non-vtg.) (a) 4,645,300 343,752 786,258 LEISURE DURABLES & TOYS - 0.2% Champion Enterprises, Inc. (a) 283,500 7,761 Harley-Davidson, Inc. 532,400 25,222 Mattel, Inc. 919,100 20,967 53,950 PUBLISHING - 0.2% Harte Hanks Communications, 790,900 22,541 Inc. McGraw-Hill Companies, Inc. 202,700 20,650 Reader's Digest Association, 1,830,900 46,116 Inc. Class A (non-vtg.) 89,307 RESTAURANTS - 2.6% Brinker International, Inc. 1,436,100 41,467 (a) Darden Restaurants, Inc. 3,369,400 60,649 McDonald's Corp. 9,091,800 696,659 Papa John's International, 1,295,500 57,164 Inc. (a) Pizzaexpress PLC 1,522,400 20,199 Ruby Tuesday, Inc. 397,600 8,449 Sodexho Marriott Services, 133,100 3,685 Inc. (a) Starbucks Corp. (a) 589,700 33,097 Tricon Global Restaurants, 1,792,700 89,859 Inc. (a) 1,011,228 TOTAL MEDIA & LEISURE 5,298,240 NONDURABLES - 2.0% AGRICULTURE - 0.0% Fresh Del Monte Produce Inc. 311,300 6,751 (a) BEVERAGES - 0.0% Coca-Cola Co. (The) 116,400 7,784 FOODS - 1.1% Earthgrains Co. 2,097,900 64,904 Flowers Industries, Inc. 1,784,700 42,721 Heinz (H.J.) Co. 1,552,300 87,899 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED FOODS - CONTINUED Keebler Foods Co. (a) 2,729,700 $ 102,705 Quaker Oats Co. 1,795,000 106,803 405,032 HOUSEHOLD PRODUCTS - 0.9% Avon Products, Inc. 259,100 11,465 Clorox Co. 365,200 42,660 Dial Corp. 1,766,900 51,019 First Brands Corp. 908,400 35,825 Gillette Co. 2,977,100 143,831 Rubbermaid, Inc. 2,339,400 73,545 358,345 TOTAL NONDURABLES 777,912 PRECIOUS METALS - 0.0% Franco Nevada Mining Corp. 460,200 8,825 Ltd. RETAIL & WHOLESALE - 9.8% APPAREL STORES - 1.5% Abercrombie & Fitch Co. Class 1,153,000 81,575 A (a) AnnTaylor Stores Corp. (a) 693,600 27,354 Charming Shoppes, Inc. (a)(c) 10,620,500 45,801 Gap, Inc. 5,584,000 314,100 TJX Companies, Inc. 3,944,300 114,385 Urban Outfitters, Inc. (a) 113,400 1,914 585,129 DRUG STORES - 3.0% CVS Corp. 19,414,166 1,067,779 Walgreen Co. 1,939,900 113,605 1,181,384 GENERAL MERCHANDISE STORES - 0.6% Costco Companies, Inc. (a) 1,346,300 97,186 Kohls Corp. (a) 620,100 38,097 Stein Mart, Inc. (a) 1,117,700 7,789 Wal-Mart Stores, Inc. 1,065,700 86,788 229,860 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED GROCERY STORES - 2.9% Albertson's, Inc. 1,836,000 $ 116,930 American Stores Co. 85,300 3,151 Fleming Companies, Inc. 1,062,500 11,023 Kroger Co. (a) 2,200,100 133,106 Loblaw Companies Ltd. 362,600 8,861 Meyer (Fred), Inc. (a) 4,149,950 250,034 Richfood Holdings, Inc. Class 1,263,350 26,215 A Safeway, Inc. (a) 9,265,100 564,592 U.S. Foodservice (a) 440,400 21,580 1,135,492 RETAIL & WHOLESALE, MISCELLANEOUS - 1.8% Bed Bath & Beyond, Inc. (a) 647,100 22,082 Circuit City Stores, Inc. - 433,200 21,633 Circuit City Group Home Depot, Inc. 6,716,300 410,954 InterTAN, Inc. (a)(c) 675,300 3,925 Office Depot, Inc. (a) 2,011,600 74,303 Staples, Inc. (a) 3,450,000 150,722 U.S. Office Products Co. 1,467,094 5,685 689,304 TOTAL RETAIL & WHOLESALE 3,821,169 SERVICES - 1.5% ADVERTISING - 1.3% CMGI, Inc. (a) 9,800 1,044 Interpublic Group of 1,489,450 118,784 Companies, Inc. Lamar Advertising Co. Class A 2,461,000 91,672 (a)(c) Omnicom Group, Inc. 154,600 8,967 Outdoor Systems, Inc. (a) 6,842,612 205,278 Young & Rubicam, Inc. (a) 2,227,200 72,106 497,851 SERVICES - 0.2% Abacus Direct Corp. (a) 73,000 3,322 ACNielsen Corp. (a) 912,800 25,787 APAC Teleservices, Inc. (a) 131,100 496 RCM Technologies, Inc. (a) 17,100 453 Robert Half International, 1,325,450 59,231 Inc. (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - CONTINUED SERVICES - CONTINUED Securitas AB Class B 300,400 $ 4,669 Telespectrum Worldwide, Inc. 753,100 7,390 (a) 101,348 TOTAL SERVICES 599,199 TECHNOLOGY - 24.6% COMMUNICATIONS EQUIPMENT - 4.1% 3Com Corp. (a) 838,300 37,566 ADC Telecommunications, Inc. 900,800 31,303 (a) Ascend Communications, Inc. 1,634,100 107,442 (a) Cisco Systems, Inc. (a) 6,357,375 590,044 InterVoice, Inc. (a) 668,800 23,074 Level One Communications, 1,205,300 42,788 Inc. (a) Lucent Technologies, Inc. 5,421,000 596,310 Newbridge Networks Corp. (a) 85,900 2,615 OY Nokia AB sponsored ADR 1,093,900 131,747 Plantronics, Inc. (a) 306,900 26,393 Tellabs, Inc. (a) 421,500 28,899 1,618,181 COMPUTER SERVICES & SOFTWARE - - 10.1% Acxiom Corp. (a) 446,500 13,842 America Online, Inc. 4,821,400 771,424 American Management Systems, 193,600 7,744 Inc. (a) Aspect Development, Inc. (a) 451,400 20,003 At Home Corp. Series A (a) 64,300 4,774 Automatic Data Processing, 3,044,300 244,115 Inc. Bisys Group, Inc. (The) (a) 282,800 14,600 BMC Software, Inc. 338,500 15,084 Cadence Design Systems, Inc. 514,900 15,318 (a) CBT Group PLC sponsored ADR 1,274,500 18,958 (a) Ceridian Corp. (a) 3,257,300 227,400 Citrix Systems, Inc. (a) 429,200 41,659 Clarify, Inc. (a) 523,300 12,788 Computer Sciences Corp. 257,200 16,573 Compuware Corp. (a) 1,764,400 137,844 Convergys Corp. (a) 181,700 4,066 Dendrite International, Inc. 117,300 2,929 (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - - CONTINUED DST Systems, Inc. (a) 504,100 $ 28,765 E Trade Group, Inc. (a) 42,800 2,002 ECI Telecom Ltd. 411,400 14,656 Electronics for Imaging, Inc. 759,400 30,376 (a) Engineering Animation, Inc. 32,500 1,755 (a) Equant NV (Reg.) (a) 204,600 13,874 Exodus Communications, Inc. 327,100 21,016 (a) Fiserv, Inc. (a) 183,400 9,434 Gerber Scientific, Inc. 120,400 2,867 IMR Global Corp. (a) 85,700 2,523 IMS Health, Inc. 3,865,300 291,589 Informix Corp. (a) 1,777,400 17,552 International Network 169,300 11,258 Services (a) Intuit, Inc. (a) 262,900 19,060 Iona Technologies PLC ADR (a) 21,400 813 Learning Co., Inc. (The) (a) 1,096,800 28,448 Legato Systems, Inc. (a) 583,000 38,442 Lycos, Inc. (a) 861,500 47,867 Microsoft Corp. (a) 8,755,000 1,214,209 National Computer Systems, 215,000 7,955 Inc. NCR Corp. (a) 612,000 25,551 Networks Associates, Inc. (a) 994,900 65,912 Novell, Inc. (a) 2,540,600 46,048 Oracle Corp. (a) 1,997,000 86,121 Paychex, Inc. 21,500 1,106 Policy Management Systems 85,800 4,333 Corp. (a) Polycom, Inc. (a) 800,900 17,820 Progress Software Corp. (a) 412,700 13,929 RealNetworks, Inc. (a) 351,200 12,599 Sabre Group Holdings, Inc. 975,250 43,399 Class A (a) Siebel Systems, Inc. (a) 742,200 25,188 SunGard Data Systems, Inc. (a) 21,400 849 Synopsys, Inc. (a) 1,114,100 60,440 Transaction Systems 140,600 7,030 Architects, Inc. Class A (a) VeriSign, Inc. (a) 483,800 28,605 Veritas Software Corp. (a) 21,500 1,289 Visual Networks, Inc. (a) 281,300 10,549 Wall Data, Inc. (a) 20,200 485 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - - CONTINUED Whittman-Hart, Inc. (a) 218,600 $ 6,039 Wind River Systems, Inc. (a) 132,400 6,223 Yahoo!, Inc. (a) 357,400 84,681 3,921,778 COMPUTERS & OFFICE EQUIPMENT - - 4.5% Apple Computer, Inc. (a) 980,000 40,119 Bell & Howell Co. (a) 1,900 72 CDW Computer Centers, Inc. (a) 78,500 7,531 Dell Computer Corp. (a) 3,797,200 277,908 EMC Corp. (a) 4,398,700 373,890 Fore Systems, Inc. (a) 557,400 10,207 International Business 698,700 129,085 Machines Corp. Lexmark International Group, 488,200 49,064 Inc. (a) Network Appliance, Inc. 834,900 37,571 Psion PLC 191,200 1,841 Seagate Technology, Inc. (a) 2,942,600 89,014 Silicon Graphics, Inc. (a) 825,500 10,628 Sun Microsystems, Inc. (a) 1,311,300 112,280 Symbol Technologies, Inc. 2,137,250 136,650 Unisys Corp. (a) 11,303,300 389,257 Xerox Corp. 805,800 95,084 1,760,201 ELECTRONIC INSTRUMENTS - 1.3% Applied Materials, Inc. (a) 2,050,700 87,539 Perkin-Elmer Corp. 1,171,100 114,255 Teradyne, Inc. (a) 1,043,900 44,235 Thermo Electron Corp. (a) 4,138,500 70,096 Thermo Instrument Systems, 979,075 14,747 Inc. (a) Varian Associates, Inc. 258,000 9,772 Waters Corp. (a)(c) 1,869,200 163,088 503,732 ELECTRONICS - 4.6% Altera Corp. (a) 462,800 28,173 AMP, Inc. 341,100 17,759 Analog Devices, Inc. (a) 379,300 11,901 Applied Micro Circuits Corp. 112,200 3,811 (a) C-Cube Microsystems, Inc. (a) 604,200 16,389 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED ELECTRONICS - CONTINUED Celestica, Inc. (sub-vtg.) (a) 615,800 $ 15,209 Genesis Microchip, Inc. (a) 88,700 2,151 Intel Corp. 5,740,700 680,632 International Rectifier Corp. 838,000 8,171 (a) Kent Electronics Corp. (a) 539,600 6,880 Linear Technology Corp. 890,900 79,791 Maxim Integrated Products, 911,800 39,834 Inc. (a) Micron Technology, Inc. (a) 60,500 3,059 Motorola, Inc. 1,976,100 120,666 NeoMagic Corp. (a) 299,800 6,633 PMC-Sierra, Inc. (a) 174,900 11,041 QLogic Corp. (a) 42,400 5,549 Rambus, Inc. (a) 624,500 60,108 Sanmina Corp. (a) 158,500 9,906 Solectron Corp. (a) 61,800 5,744 STMicroelectronics NV (a) 430,700 33,622 Texas Instruments, Inc. 4,400,000 376,475 Uniphase Corp. (a) 737,300 51,150 Vitesse Semiconductor Corp. 4,162,400 189,910 (a)(c) Xilinx, Inc. (a) 171,200 11,149 1,795,713 TOTAL TECHNOLOGY 9,599,605 TRANSPORTATION - 0.9% AIR TRANSPORTATION - 0.5% Southwest Airlines Co. 4,444,125 99,715 Viad Corp. 3,480,300 105,714 205,429 RAILROADS - 0.1% Burlington Northern Santa Fe 932,400 31,469 Corp. TRUCKING & FREIGHT - 0.3% C.H. Robinson Worldwide, Inc. 1,166,500 30,256 Swift Transportation Co., 2,367,700 66,370 Inc. (a)(c) 96,626 TOTAL TRANSPORTATION 333,524 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 14.0% CELLULAR - 1.3% AirTouch Communications, Inc. 4,604,200 $ 332,078 (a) SkyTel Communications, Inc. 2,902,270 64,213 (a) Vodafone Group PLC sponsored 608,700 98,077 ADR 494,368 ELECTRIC UTILITY - 0.5% CMS Energy Corp. 559,800 27,115 Entergy Corp. 1,488,400 46,326 IPALCO Enterprises, Inc. 605,000 33,540 PG&E Corp. 1,362,700 42,925 Unicom Corp. 1,350,500 52,079 201,985 TELEPHONE SERVICES - 12.2% ALLTEL Corp. 4,070,500 243,467 Ameritech Corp. 2,389,100 151,409 AT&T Corp. 8,462,200 636,781 Bell Atlantic Corp. 3,974,600 225,807 BellSouth Corp. 4,781,400 238,472 Esprit Telecom Group PLC 341,700 15,974 sponsored ADR Global Crossing Ltd. (a) 554,900 25,040 Global TeleSystems Group, 640,900 35,730 Inc. (a) GTE Corp. 3,393,700 228,863 MCI WorldCom, Inc. (a) 29,500,000 2,116,620 McLeodUSA, Inc. Class A (a) 868,900 27,153 NEXTLINK Communications, Inc. 276,600 7,849 Class A (a) Qwest Communications 6,611,158 330,558 International, Inc. (a) SBC Communications, Inc. 4,237,310 227,226 Sprint Corp. (FON Group) 2,026,400 170,471 Telefonica de Espana SA 124,500 5,535 Telefonica de Espana SA 124,500 111 rights 12/31/99 (a) U.S. WEST, Inc. 1,034,500 66,855 4,753,921 TOTAL UTILITIES 5,450,274 TOTAL COMMON STOCKS 35,309,975 (Cost $22,525,868)
U.S. TREASURY OBLIGATIONS - 2.4% MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S) U.S. Treasury Bond: 6.5% 11/15/26 Aaa $ 247,000 $ 287,214 6.75% 8/15/26 Aaa 229,600 275,054 6.875% 8/15/25 Aaa 239,500 290,281 7.625% 2/15/25 Aaa 63,610 83,627 TOTAL U.S. TREASURY OBLIGATIONS 936,176 (Cost $844,425)
CASH EQUIVALENTS - 7.1% SHARES Taxable Central Cash Fund (b) 2,330,156,380 2,330,156 MATURITY AMOUNT (000S) Investments in repurchase $ 455,442 455,203 agreements (U.S. Treasury obligations), in a joint trading account at 4.72%, dated 12/31/98 due 1/4/99 TOTAL CASH EQUIVALENTS 2,785,359 (Cost $2,785,359) TOTAL INVESTMENT IN $ 39,031,510 SECURITIES - 100% (Cost $26,155,652)
LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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). (d) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $3,000 or 0.0% of net assets. (e) 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) Grand Palais Management 7/24/96 - Co. LP INCOME TAX INFORMATION At December 31, 1998, the aggregate cost of investment securities for income tax purposes was $26,618,083,000. Net unrealized appreciation aggregated $12,413,427,000, of which $12,622,706,000 related to appreciated investment securities and $209,279,000 related to depreciated investment securities. The fund hereby designates approximately $3,163,919,000 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 AMOUNTS) DECEMBER 31, 1998 ASSETS Investment in securities, at $ 39,031,510 value (including repurchase agreements of $455,203) (cost $26,155,652) - See accompanying schedule Cash 1,078 Foreign currency held at 2,414 value (cost $2,411) Receivable for investments 95,834 sold Receivable for fund shares 52,664 sold Dividends receivable 19,495 Interest receivable 25,229 Other receivables 5,418 TOTAL ASSETS 39,233,642 LIABILITIES Payable for investments $ 103,932 purchased Payable for fund shares 211,684 redeemed Distributions payable 55,143 Accrued management fee 13,308 Other payables and accrued 5,976 expenses Collateral on securities 204,718 loaned, at value TOTAL LIABILITIES 594,761 NET ASSETS $ 38,638,881 Net Assets consist of: Paid in capital $ 25,298,121 Undistributed net investment 35,367 income Accumulated undistributed net 429,378 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 12,876,015 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 680,176 $ 38,638,881 shares outstanding NET ASSET VALUE and $56.81 redemption price per share ($38,638,881 (divided by) 680,176 shares) Maximum offering price per $58.57 share (100/97.00 of $56.81) STATEMENT OF OPERATIONS AMOUNTS IN THOUSANDS YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME $ 192,013 Dividends (including $257 received from affiliated issuers) Interest (including income on 244,682 securities loaned of $8,957) TOTAL INCOME 436,695 EXPENSES Management fee Basic fee $ 196,893 Performance adjustment (47,315) Transfer agent fees 63,797 Accounting and security 1,189 lending fees Non-interested trustees' 131 compensation Custodian fees and expenses 1,599 Registration fees 839 Audit 82 Legal 175 Interest 2 Reports to shareholders 724 Miscellaneous 232 Total expenses before 218,348 reductions Expense reductions (14,482) 203,866 NET INVESTMENT INCOME 232,829 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,209,474 (including realized loss of $(70,983) on sales of investments in affiliated issuers) Foreign currency transactions 898 Futures contracts (24,620) 3,185,752 Change in net unrealized appreciation (depreciation) on: Investment securities 5,951,561 Assets and liabilities in 271 5,951,832 foreign currencies NET GAIN (LOSS) 9,137,584 NET INCREASE (DECREASE) IN $ 9,370,413 NET ASSETS RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS AMOUNTS IN THOUSANDS YEAR ENDED DECEMBER 31, 1998 YEAR ENDED DECEMBER 31, 1997 INCREASE (DECREASE) IN NET ASSETS Operations Net investment $ 232,829 $ 254,060 income Net realized gain (loss) 3,185,752 2,589,111 Change in net unrealized 5,951,832 2,841,489 appreciation (depreciation) NET INCREASE (DECREASE) IN 9,370,413 5,684,660 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (190,451) (211,835) From net investment income From net realized gain (2,677,837) (2,742,867) TOTAL DISTRIBUTIONS (2,868,288) (2,954,702) Share transactions Net 6,953,917 8,043,743 proceeds from sales of shares Reinvestment of distributions 2,812,601 2,914,929 Cost of shares redeemed (8,368,858) (6,778,358) NET INCREASE (DECREASE) IN 1,397,660 4,180,314 NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) 7,899,785 6,910,272 IN NET ASSETS NET ASSETS Beginning of period 30,739,096 23,828,824 End of period (including $ 38,638,881 $ 30,739,096 undistributed net investment income of $35,367 and $38,086, respectively) OTHER INFORMATION Shares Sold 134,565 175,809 Issued in reinvestment of 49,673 65,437 distributions Redeemed (163,300) (147,380) Net increase (decrease) 20,938 93,866
FINANCIAL HIGHLIGHTS YEARS ENDED DECEMBER 31, 1998 1997 1996 1995 1994 SELECTED PER-SHARE DATA Net asset value, beginning $ 46.63 $ 42.15 $ 38.02 $ 30.28 $ 30.84 of period Income from Investment Operations Net investment income .36C .42 C .46 .03 .06 Net realized and 14.34 8.97 7.50 10.93 (.40) unrealized gain (loss) Total from investment 14.70 9.39 7.96 10.96 (.34) operations Less Distributions From net investment income (.30) (.35) (.38) (.09) - From net realized gain (4.22) (4.56) (3.45) (3.13) (.22) Total distributions (4.52) (4.91) (3.83) (3.22) (.22) Net asset value, end of period $ 56.81 $ 46.63 $ 42.15 $ 38.02 $ 30.28 TOTAL RETURN A, B 31.57% 23.00% 21.94% 36.28% (1.12)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 38,639 $ 30,739 $ 23,829 $ 14,858 $ 8,694 (in millions) Ratio of expenses to average .65% .70% .83% .98% 1.03% net assets Ratio of expenses to average .61% D .67% D .79% D .96% D 1.00% D net assets after expense reductions Ratio of net investment .70% .91% 1.28% .44% .59% income to average net assets Portfolio turnover rate 197% 144% 159% 223% 235%
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 TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D 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 December 31, 1998 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Contrafund (the fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company organized as a Massachusetts business trust and is authorized to issue an unlimited number of shares. Effective at the close of business on April 3, 1998, the fund was closed to new accounts. 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 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 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, futures transactions, foreign currency transactions, passive foreign investment companies (PFIC), market discount, partnerships, non-taxable dividends and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. 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 & 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED 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. FUTURES CONTRACTS. The fund may use futures contracts to manage its exposure to the stock market. Buying futures tends to increase the fund's exposure to the underlying instrument, while selling futures tends 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 or if the counterparties do not perform under the contracts' terms. Gains (losses) are realized upon the expiration or closing of the futures contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. 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 $0 or 0.0% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $60,722,455,000 and $61,719,108,000, respectively, of which U.S. government 3. PURCHASES AND SALES OF INVESTMENTS - CONTINUED and government agency obligations aggregated $2,530,651,000 and $3,166,918,000, respectively. The market value of futures contracts opened and closed during the period amounted to $431,718,000 and $407,098,000, 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 .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. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus).20% 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 .45% of average net assets after the performance adjustment. SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an affiliate of FMR and the general distributor of the fund, received sales charges of $4,729,000 on sales of shares of the fund of which $4,705,000 was retained. 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. 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 $9,834,000 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 5. SECURITY LENDING - CONTINUED 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 $223,680,000. The fund received cash collateral of $204,718,000. 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 balance during the period for which the loan was outstanding amounted to $11,693,000. The weighted average interest rate was 5.94%. 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 $13,024,000 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 $1,454,000, 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 APAC Teleservices, Inc. $ - $ 23,881 $ - $ - Advanced Fibre Communication, Inc. 54,123 57,041 - - American Italian Pasta Co. Series A 12,973 21,005 - - Anaren Microwave, Inc. - 2,248 - - Bally Total Fitness Holding Corp. - 1,844 - - Bedford Property Investors, Inc. - 173 - - Big Flower Holdings, Inc. - 11,691 - - Breed Technologies, Inc. 13,370 16,431 - -
8. TRANSACTIONS WITH AFFILIATED COMPANIES - CONTINUED SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES - CONTINUED AMOUNTS IN THOUSANDS
PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Charming Shoppes, Inc. $ 121 $ - $ - $ 45,801 Documentum, Inc. 24,022 28,784 - - Dominick's Supermarkets, Inc. 14,827 24,056 - - ENSCO International, Inc. 2,185 29,700 - - Engineering Animation, Inc. 1,056 3,054 - - Franco-Nevada Mining Corp. 1,876 1,517 - - Intermedia Communications, Inc. - 6,646 - - InterTAN, Inc. 260 - - 3,925 Kaydon Corp. 1,169 9,594 156 - Lamar Advertising Co. Class A - - - 91,672 Loral Space & Communications Ltd. 46,637 47,386 - - Lycos, Inc. 85,494 112,018 - - N2K, Inc. 12,085 24,173 - - NEXTLINK Communications, Inc. Class A 27,736 41,395 - - Orion Network Systems, Inc. 435 6,495 - - Premier Parks, Inc. 38,429 2,062 - 166,774 Quality Food Centers, Inc. - 22,008 - - Rayovac Corp. 7,714 3,202 - 69,305 REMEC, Inc. 19,984 27,742 - - Richfood Holdings, Inc. Class A - 2,176 101 - SPX Corp. 94,492 8,114 - 209,840 SBS Broadcasting SA 2,579 - - 26,614 SkyTel Communications, Inc. 20,255 20,915 - - Smith International, Inc. 28,522 59,639 - - Stein Mart, Inc. 4,829 12,252 - - Swift Transportation Co. Inc. 6,335 - - 66,370 Swisher International Group, Inc. Class A - 1,384 - - U.S. LEC Corp. Class A 642 3,611 - - U.S.A. Floral Products, Inc. - 6,805 - - Uniphase Corp. 14,092 20,205 - - U.S. Office Products Co. 648 5,585 - - Vans, Inc. 2,408 2,092 - 5,280 Virgin Express Holdings PLC sponsored ADR - - - - Vitesse Semiconductor Corp. 35,622 25,689 - 189,910 Waters Corp. 25,609 1,726 - 163,088 TOTALS $ 600,529 $ 694,339 $ 257 $ 1,038,579
REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Fidelity Contrafund: 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 Contrafund at December 31, 1998, 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 Contrafund'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 December 31, 1998 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts February 10, 1999 DISTRIBUTIONS The Board of Trustees of Fidelity Contrafund voted to pay on February 8, 1999, to shareholders of record at the opening of business on February 5, 1999, a distribution of $0.52 per share derived from capital gains realized from sales of portfolio securities. The fund hereby designates 100% of the long-term capital gain dividends distributed during the fiscal year as 20%-rate capital gain dividends. 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-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 Abigail Johnson, Vice President Will Danoff, 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 TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES CON-ANN-0299 70355 1.540009.101 CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Aggressive Growth Fund Blue Chip Growth Fund Capital Appreciation Fund ContrafundSM ContrafundSM II Disciplined Equity Fund Dividend Growth Fund Export and Multinational Fund Fidelity FiftySM Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium Fund(registered trademark) OTC Portfolio Retirement Growth Fund Small Cap Selector Small Cap Stock Fund Stock Selector Tax Managed Stock Fund TechnoQuantSM Growth Fund Trend Fund Value 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 -----END PRIVACY-ENHANCED MESSAGE-----