-----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, V6V+IK5ie2ou6gK8srkKZhuuPlFjJGVPw56zT2ebfXkMmBPXR84UiJXADc3TITZ/ 5z8gnxIye+VgzYgSYMDV1g== 0000028540-96-000061.txt : 19960916 0000028540-96-000061.hdr.sgml : 19960916 ACCESSION NUMBER: 0000028540-96-000061 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960913 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY SECURITIES FUND CENTRAL INDEX KEY: 0000754510 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04118 FILM NUMBER: 96629549 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174391706 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAILZONE ZH-2 CITY: BOSTON STATE: MA ZIP: 02109 N-30D 1 FIDELITY (REGISTERED TRADEMARK) DIVIDEND GROWTH FUND ANNUAL REPORT JULY 31, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 22 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 26 Notes to the financial statements. REPORT OF INDEPENDENT 30 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 31 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 DEAR SHAREHOLDER: Although stocks have managed to post solid returns through the first seven months of 1996, signs of strength in the economy have led to inflation fears, causing some uncertainty in both the stock and bond markets so far this year. In 1995, both stock and bond markets posted strong results, while the year before, stocks posted below-average returns and bonds had one of the worst years in history. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells investments that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1996 PAST 1 LIFE OF YEAR FUND Dividend Growth 15.44% 89.97% S&P 500(registered trademark) 16.57% 61.01% Growth Funds Average 9.72% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, or since the fund started on April 27, 1993. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's return to the performance of the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the growth funds average, which reflects the performance of 622 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past 12 months. Both benchmarks reflect reinvestment of dividends and capital gains, if any, but do not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1996 PAST 1 LIFE OF YEAR FUND Dividend Growth 15.44% 21.71% S&P 500 16.57% 15.70% Growth Funds Average 9.72% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960731 19960814 102534 S00000000000001 Dividend Growth SP Standard & Poor 500 00330 SP001 1993/04/27 10000.00 10000.00 1993/04/30 10150.00 10155.08 1993/05/31 10480.00 10427.23 1993/06/30 10700.00 10457.47 1993/07/31 10800.00 10415.64 1993/08/31 11550.00 10810.40 1993/09/30 11820.00 10727.16 1993/10/31 12080.00 10949.21 1993/11/30 11680.00 10845.19 1993/12/31 12171.52 10976.42 1994/01/31 12493.15 11349.62 1994/02/28 12302.18 11042.04 1994/03/31 11715.49 10560.61 1994/04/30 11786.37 10695.78 1994/05/31 11604.11 10871.20 1994/06/30 11310.46 10604.85 1994/07/31 11826.87 10952.69 1994/08/31 12616.68 11401.75 1994/09/30 12485.05 11122.41 1994/10/31 13041.96 11372.66 1994/11/30 12474.92 10958.47 1994/12/31 12691.18 11120.98 1995/01/31 12732.22 11409.35 1995/02/28 13142.60 11853.97 1995/03/31 13768.44 12203.78 1995/04/30 14404.54 12563.19 1995/05/31 14907.26 13065.34 1995/06/30 15728.03 13368.84 1995/07/31 16456.47 13812.15 1995/08/31 16528.28 13846.82 1995/09/30 16956.49 14431.16 1995/10/31 16359.88 14379.64 1995/11/30 17176.30 15010.91 1995/12/31 17454.52 15300.02 1996/01/31 17928.35 15820.83 1996/02/29 18479.31 15967.49 1996/03/31 18964.16 16121.25 1996/04/30 19845.70 16358.88 1996/05/31 20484.81 16780.78 1996/06/30 19933.85 16844.71 1996/07/31 18997.21 16100.51 IMATRL PRASUN SHR__CHT 19960731 19960814 102536 R00000000000043 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Dividend Growth Fund on April 27, 1993, when the fund started. As the chart shows, by July 31, 1996, the value of the investment would have grown to $18,997 - an 89.97% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $16,101 - a 61.01% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Although growing fears of lower corporate earnings dampened the stock market's momentum at the end of the period, the U.S. stock market posted solid gains over the 12 months ended July 31, 1996. While several corporate earnings disappointments made for a volatile stock market in May, June and July, the Standard & Poor's 500 Index finished the 12 months with a return of 16.57% - above its long-term historical annual average of about 12%. The stock market spent much of the past year breaking price and trading volume records as strong corporate earnings reports, large cash inflows into mutual funds and widespread optimism propelled equity share prices higher. In addition, the period was peppered with several high-profile merger announcements, especially in the media, telecommunications and technology sectors. Smaller-company stocks posted strong gains during the first few months of 1996, and high-tech firms involved in the networking and software fields benefited from strong earnings. Semiconductor stocks, however, suffered during the latter half of the period as a result of overcapacity. In March, better-than-expected employment figures spooked the bond market, pushing long-term interest rates over 7%. Because smaller companies tend to be more adversely affected by the higher borrowing costs brought on by higher rates, their stock prices trended downward in the spring. While larger, multinational firms recorded positive gains, their returns were hurt somewhat by the strengthening dollar. An interview with Steve Wymer, Portfolio Manager of Fidelity Dividend Growth Fund Q. HOW DID THE FUND PERFORM, STEVE? A. Overall, I think it turned in a fairly solid performance. For the one-year period ended July 31, 1996, the fund had a return of 15.44%. This topped the growth funds average, as monitored by Lipper Analytical Services, which had a 9.72% return over the same period. The Standard & Poor's 500 Index, on the other hand, slightly outperformed the fund as it posted a 16.57% return for the one-year period. Q. WERE THERE ANY UNDERLYING FACTORS WHICH CAUSED THE FUND TO PERFORM AS IT DID? A. A number of market factors combined to make it a very interesting year. Relative to the S&P 500, I was underweighted in the technology sector at the beginning of the 12-month period - a strategy which benefited the fund in the fourth quarter of 1995 as it became apparent that the honeymoon was over for technology stocks. At the same time, I focused more on finding investments within the small- and mid-cap stock arenas. As market opportunities narrowed toward the end of 1995, however, this strategy hurt the fund as large-cap stocks outperformed their smaller counterparts. If we flip ahead to the first six months of 1996, we see an altogether different story as market opportunities expanded and the fund's small- and mid-cap positions turned out to be strong performers. Q. SO THERE REALLY WASN'T ONE DOMINANT TREND THROUGHOUT THE PERIOD . . . A. That's true. The trends that I followed were extremely short-lived. No individual sector stood out in terms of performance, and this contributed to increased sector rotation. By that, I mean that sectors fell into and out of favor with investors throughout the period; there was no one sector which stood out above the rest. We also saw separate and distinct periods when it was advantageous to be invested in either small- and mid-cap stocks or large-cap stocks. Q. AMONG OTHER HOLDINGS, THE FUND HELD SIGNIFICANT POSITIONS IN TWO COMPANIES - TUPPERWARE AND EARTHGRAINS - AT THE END OF THE PERIOD. WHAT MADE THESE HOLDINGS ATTRACTIVE? A. Both Tupperware and Earthgrains have spun off from their respective "mother companies" - Tupperware from Premark International and Earthgrains from Anheuser-Busch. Tupperware is a growth story and Earthgrains is a turnaround story. Both should be more focused as stand-alone companies with incentives tied to their own results and without distractions from unrelated operations. Q. ARE THERE OTHER COMPANY-SPECIFIC FACTORS THAT MAY MAKE A STOCK MORE APPEALING TO YOU? A. I tend to favor companies that practice self-help. By this, I mean the company has engaged in some type of activity - be it an acquisition, a divestiture or a general restructuring move - designed solely to improve its growth prospects. In an unpredictable economy, companies are doing a little extra to try to distance themselves from their competition. An example is Tosco Corp. (oil refinery), one of the fund's top holdings, which acquired Circle K (convenience store/gas station chain) as well as British Petroleum's northeast refinery during the period. In doing so, Tosco made the decision to continue to make acquisitions and attempt to add shareholder value. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I think it's fruitless to spend a lot of time guessing what will happen with interest rates or gauging the ever-changing economy. Instead, I focus on solid companies that I think will benefit the fund and its shareholders. That being said, if the economy stays strong, I think companies will continue to feel a certain amount of pressure. Even though a company's operating or production costs may spiral upward, that company is going to find it very difficult to raise prices in a competitive environment. If the economy gets tougher, I think we'll see a lot more of the self-help stories that I mentioned. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of companies that have the potential to increase their current dividend or begin paying a dividend START DATE: April 27, 1993 SIZE: as of July 31, 1996, more than $1.2 billion MANAGER: Steve Wymer, since May 1995; assistant manager, Fidelity OTC Portfolio, January 1995-May 1995; manager, Fidelity Select Chemicals Portfolio, 1993-1994; assistant, Fidelity Magellan Fund, 1992- 1994; manager, Fidelity Select Automotive Portfolio, 1990- 1993; joined Fidelity in 1989 (checkmark) STEVE WYMER ON THE NATURE OF FIDELITY DIVIDEND GROWTH FUND: "The name of the fund - Dividend Growth - seems to cause confusion among investors. When people see the word "dividend," it's natural to equate that with yields. But it's important to remember that this isn't a yield fund. Rather, it's a growth fund which trains its sights on companies showing good potential to grow their dividends. This can mean either a company that can increase an existing dividend or one that plans to implement a dividend policy in the future. As a result, this fund won't concentrate on utility stocks, nor will it emphasize "concept stocks" like start-up biotechnology stocks or those with an Internet focus that are unlikely to pay a dividend. The only way a company can pay a cash dividend is from cash on the balance sheet or through future cash flow. In an uncertain economy, I'm looking for companies that are in typically good business environments or that have self-help programs in order to identify those with the best dividend growth prospects." INVESTMENT CHANGES TOP TEN STOCKS AS OF JULY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Philip Morris Companies, Inc. 3.5 2.8 Tupperware Corp. 3.3 0.0 Earthgrains Co. 2.8 0.0 Melville Corp. 1.7 0.0 PepsiCo, Inc. 1.6 1.5 Dial Corp. (The) 1.6 0.4 Nalco Chemical Co. 1.6 0.3 Federal National Mortgage 1.4 2.7 Association Tosco Corp. 1.4 0.4 Procter & Gamble Co. 1.4 0.4 TOP FIVE MARKET SECTORS AS OF JULY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Nondurables 13.4 10.2 Basic Industries 9.6 8.3 Energy 9.3 8.6 Finance 8.2 9.3 Retail & Wholesale 7.8 6.0 ASSET ALLOCATION AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 ** Row: 1, Col: 1, Value: 6.3 Row: 1, Col: 2, Value: 43.7 Row: 1, Col: 3, Value: 50.0 Row: 1, Col: 1, Value: 7.9 Row: 1, Col: 2, Value: 42.1 Row: 1, Col: 3, Value: 50.0 Stocks 93.7% Short-term investments 6.3% FOREIGN INVESTMENTS 4.3% Stocks 92.1% Short-term investments 7.9% FOREIGN INVESTMENTS 5.9% * ** INVESTMENTS JULY 31, 1996 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.7% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 1.7% AAR Corp. 45,500 $ 870 Aviall, Inc. 320,500 2,604 Boeing Co. 140,000 12,390 Northrop Grumman Corp. 35,000 2,406 Sundstrand Corp. 60,000 2,168 20,438 BASIC INDUSTRIES - 9.6% CHEMICALS & PLASTICS - 4.6% Air Products & Chemicals, Inc. 10,000 534 Betz Laboratories, Inc. 165,300 7,500 Cambrex Corp. 70,500 2,168 du Pont (E.I.) de Nemours & Co. 30,000 2,423 Monsanto Co. 50,000 1,563 Nalco Chemical Co. 640,000 19,200 Praxair, Inc. 20,000 768 Quaker State Corp. 265,200 3,945 Raychem Corp. 40,000 2,645 Union Carbide Corp. 253,500 10,646 Witco Corp. 141,800 4,112 55,504 IRON & STEEL - 0.2% Birmingham Steel Corp. 25,000 406 Inland Steel Industries, Inc. 102,800 1,786 2,192 METALS & MINING - 0.0% Oregon Metallurgical Corp. (a) 14,300 343 PACKAGING & CONTAINERS - 3.3% Tupperware Corp. 937,300 40,070 PAPER & FOREST PRODUCTS - 1.5% Boise Cascade Corp. 105,000 3,413 Chesapeake Corp. 45,000 1,058 Georgia-Pacific Corp. 30,000 2,243 International Paper Co. 285,500 10,812 Mosinee Paper Corp. 34,466 922 18,448 TOTAL BASIC INDUSTRIES 116,557 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONGLOMERATES - 1.8% AlliedSignal, Inc. 25,000 $ 1,469 Dial Corp. (The) 657,100 19,220 Lancaster Colony Corp. 25,000 894 21,583 CONSTRUCTION & REAL ESTATE - 2.1% BUILDING MATERIALS - 0.9% Fastenal Co. 30,000 1,290 Masco Corp. 229,900 6,408 Sherwin-Williams Co. 70,000 3,168 10,866 CONSTRUCTION - 0.4% McDermott (J. Ray) SA 210,600 5,212 ENGINEERING - 0.0% MasTec, Inc. (a) 18,800 456 REAL ESTATE - 0.5% Catellus Development Corp. (a) 337,100 2,950 Rouse Co. (The) 100,000 2,500 5,450 REAL ESTATE INVESTMENT TRUSTS - 0.3% Beacon Properties Corp. 50,000 1,313 Starwood Lodging Trust combined certificate (SBI) 50,300 1,710 3,023 TOTAL CONSTRUCTION & REAL ESTATE 25,007 DURABLES - 6.6% AUTOS, TIRES, & ACCESSORIES - 1.5% Daimler Benz AG sponsored ADR 50,000 2,700 Ford Motor Co. 313,600 10,192 SPX Corp. 234,000 5,821 18,713 CONSUMER DURABLES - 1.1% Minnesota Mining & Manufacturing Co. 207,200 13,468 CONSUMER ELECTRONICS - 1.2% Newell Co. 53,900 1,732 Sunbeam-Oster, Inc. 676,100 13,015 14,747 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED TEXTILES & APPAREL - 2.8% Adidas AG 125,000 $ 9,763 Fila Holding Spa sponsored ADR 55,000 4,434 Mossimo, Inc. (a) 70,500 2,670 NIKE, Inc. Class B 120,000 12,345 Reebok International Ltd. 40,000 1,400 Wolverine World Wide, Inc. 79,600 2,746 33,358 TOTAL DURABLES 80,286 ENERGY - 9.3% COAL - 0.2% MAPCO, Inc. 35,000 1,916 ENERGY SERVICES - 1.0% Baker Hughes, Inc. 83,000 2,438 Carbo Ceramics, Inc. 56,000 1,134 Dresser Industries, Inc. 94,000 2,538 Weatherford Enterra, Inc. (a) 74,500 1,835 Western Atlas, Inc. (a) 70,000 3,797 11,742 OIL & GAS - 8.1% Anadarko Petroleum Corp. 30,000 1,534 British Petroleum PLC ADR 20,919 2,298 Chevron Corp. 215,000 12,443 Cooper Cameron Corp. (a) 65,076 3,010 Enron Oil & Gas Co. 94,400 2,360 Flores & Rucks, Inc. (a) 70,000 2,415 Mobil Corp. 90,000 9,934 NGC Corp. 230,400 3,744 Pennzoil Co. 65,000 3,193 Pogo Producing Co. 60,000 2,003 Royal Dutch Petroleum Co. ADR 50,000 7,544 Sun Co., Inc. 85,100 2,202 Tosco Corp. 347,500 16,983 Ultramar Corp. 283,000 7,464 Union Pacific Resources Group, Inc. 519,200 13,694 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - CONTINUED Unocal Corp. 155,000 $ 5,057 Vintage Petroleum, Inc. 95,300 2,204 98,082 TOTAL ENERGY 111,740 FINANCE - 8.2% BANKS - 1.7% Banc One Corp. 215,790 7,471 Bank of New York Co., Inc. 35,000 1,803 Citicorp 80,000 6,550 U.S. Bancorp. 135,000 4,624 20,448 CREDIT & OTHER FINANCE - 1.6% Aames Financial Corp. 25,000 981 American Express Co. 298,092 13,041 Associates First Capital Corp. (a) 31,000 1,190 First Chicago NBD Corp. 70,000 2,695 United Companies Financial Corp. 25,000 825 18,732 FEDERAL SPONSORED CREDIT - 2.0% Federal National Mortgage Association 550,000 17,463 Student Loan Marketing Association 94,000 6,862 24,325 INSURANCE - 2.3% Aetna, Inc. 230,000 13,368 Allmerica Financial Corp. 141,800 4,201 Provident Companies, Inc. 20,000 730 Travelers/Aetna Property Casualty Corp. Class A 210,000 5,644 UNUM Corp. 35,100 2,141 US Facilities Corp. 135,000 2,211 28,295 SAVINGS & LOANS - 0.1% TCF Financial Corp. 44,900 1,549 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED SECURITIES INDUSTRY - 0.5% Franklin Resources, Inc. 40,500 $ 2,267 Lehman Brothers Holdings, Inc. 100,400 2,322 Schwab (Charles) Corp. 45,000 1,086 5,675 TOTAL FINANCE 99,024 HEALTH - 2.7% DRUGS & PHARMACEUTICALS - 1.4% Pharmacia & Upjohn, Inc. 285,500 11,777 Schering-Plough Corp. 50,000 2,756 SmithKline Beecham PLC ADR 50,000 2,688 17,221 MEDICAL EQUIPMENT & SUPPLIES - 1.0% Bard (C.R.), Inc. 31,600 964 Baxter International, Inc. 36,800 1,532 Beckman Instruments, Inc. 30,000 1,080 Becton, Dickinson & Co. 74,200 5,537 Johnson & Johnson 20,000 955 Medtronic, Inc. 30,000 1,421 Ventritex, Inc. (a) 40,000 500 11,989 MEDICAL FACILITIES MANAGEMENT - 0.3% Columbia/HCA Healthcare Corp. 40,000 2,050 Magellan Health Services, Inc. (a) 80,000 1,480 3,530 TOTAL HEALTH 32,740 INDUSTRIAL MACHINERY & EQUIPMENT - 5.3% ELECTRICAL EQUIPMENT - 1.5% Alcatel Alsthom sponsored ADR 131,510 2,137 California Amplifier, Inc. (a) 22,800 288 General Electric Co. 40,000 3,295 General Signal Corp. 254,600 9,961 Westinghouse Electric Corp. 140,000 2,345 18,026 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED INDUSTRIAL MACHINERY & EQUIPMENT - 3.8% BW/IP Holdings, Inc. Class A 903,900 $ 15,253 Deere & Co. 10,000 358 Ingersoll-Rand Co. 60,000 2,558 Stanley Works 561,200 15,994 Stewart & Stevenson Services, Inc. 451,800 9,770 Timken Co. 72,600 2,659 46,592 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 64,618 MEDIA & LEISURE - 4.6% ENTERTAINMENT - 0.2% Disney (Walt) Co. 50,000 2,781 LEISURE DURABLES & TOYS - 0.4% Arctco, Inc. 100,000 1,063 Callaway Golf Co. 43,100 1,292 Golden Bear Golf, Inc. 3,000 48 Mattel, Inc. 50,000 1,238 Sports and Recreation, Inc. (a) 128,500 867 4,508 LODGING & GAMING - 0.8% Doubletree Corp. (a) 8,100 265 Hilton Hotels Corp. 30,000 3,060 International Game Technology Corp. 50,000 875 Showboat, Inc. 94,700 1,941 Sun International Hotels Ltd. Ord. (a) 31,400 1,484 Wyndham Hotel Corp. (a) 70,000 1,409 9,034 PUBLISHING - 2.6% Dun & Bradstreet Corp. 234,400 13,478 Knight-Ridder, Inc. 138,200 4,526 New York Times Co. (The) Class A 302,700 8,816 Times Mirror Co. Class A 122,700 5,077 31,897 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED RESTAURANTS - 0.6% CKE Restaurants, Inc. 157,000 $ 3,219 Cracker Barrel Old Country Store, Inc. 27,900 593 Darden Restaurants, Inc. 74,600 587 Longhorn Steaks, Inc. (a) 50,000 775 Starbucks Corp. (a) 70,000 1,820 6,994 TOTAL MEDIA & LEISURE 55,214 NONDURABLES - 13.4% BEVERAGES - 1.6% PepsiCo, Inc. 620,000 19,608 FOODS - 5.5% Chiquita Brands International, Inc. 600,000 7,200 Dole Food, Inc. 80,000 3,210 Earthgrains Co. (c) 1,014,272 33,217 Flowers Industries, Inc. 485,600 8,316 General Mills, Inc. 80,000 4,340 Interstate Bakeries Corp. 399,000 10,574 66,857 HOUSEHOLD PRODUCTS - 2.0% Premark International, Inc. 385,000 6,930 Procter & Gamble Co. 190,000 16,981 23,911 TOBACCO - 4.3% Philip Morris Companies, Inc. 404,900 42,362 RJR Nabisco Holdings Corp. 253,840 7,806 Schweitzer-Mauduit International, Inc. 50,000 1,431 51,599 TOTAL NONDURABLES 161,975 PRECIOUS METALS - 1.6% Ashanti Goldfields Co. Ltd. GDR 100,000 1,788 Barrick Gold Corp. 185,000 5,147 Getchell Gold Corp. (a) 78,692 2,548 Newmont Mining Corp. 191,100 9,435 18,918 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - 7.8% APPAREL STORES - 3.6% Brown Group, Inc. 120,000 $ 1,635 Charming Shoppes, Inc. 335,200 2,158 Gap, Inc. 80,000 2,380 Melville Corp. 510,000 19,953 Payless ShoeSource, Inc. (a) 78,256 2,534 Ross Stores, Inc. 299,500 8,835 TJX Companies, Inc. 172,300 5,191 42,686 DRUG STORES - 0.1% General Nutrition Companies, Inc. (a) 3,300 47 Thrifty Payless Holdings, Inc. Class B (a) 110,000 1,540 1,587 GENERAL MERCHANDISE STORES - 2.6% Dillard Department Stores, Inc. Class A 120,000 3,765 Dollar General Corp. 156,000 4,037 Family Dollar Stores, Inc. 100,000 1,575 K mart Corp. 240,000 2,400 Sears, Roebuck & Co. 25,000 1,025 Wal-Mart Stores, Inc. 285,000 6,840 Woolworth Corp. (a) 625,100 12,033 31,675 GROCERY STORES - 0.9% Albertson's, Inc. 70,000 2,870 Food Lion, Inc. Class A 125,000 1,125 Smith's Food & Drug Center, Inc. 143,083 3,935 Supervalu, Inc. 110,000 3,066 10,996 RETAIL & WHOLESALE, MISCELLANEOUS - 0.6% Borders Group, Inc. (a) 115,000 3,680 Circuit City Stores, Inc. 37,100 1,169 Tiffany & Co., Inc. 70,000 2,301 7,150 TOTAL RETAIL & WHOLESALE 94,094 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - 2.2% PRINTING - 1.7% Alco Standard Corp. 72,000 $ 3,150 Deluxe Corp. 173,500 6,397 New England Business Service, Inc. 610,200 10,450 19,997 SERVICES - 0.5% Borg Warner Security Corp. (a) 716,900 6,273 TOTAL SERVICES 26,270 TECHNOLOGY - 6.7% COMPUTER SERVICES & SOFTWARE - 2.9% Automatic Data Processing, Inc. 40,000 1,585 Baan Co. NV 30,000 893 Broadway & Seymour, Inc. (a) 41,100 442 CompUSA, Inc. (a) 309,900 12,241 DST Systems, Inc. (a) 257,000 7,325 First Data Corp. 80,000 6,210 National Data Corp. 28,900 1,149 PC Docs Group International, Inc. (a) 250,000 3,782 Policy Management Systems Corp. (a) 52,500 1,949 35,576 COMPUTERS & OFFICE EQUIPMENT - 2.1% Digital Equipment Corp. (a) 25,000 884 Exabyte Corp. (a) 760,300 9,124 FileNet Corp. (a) 232,200 5,166 Pitney Bowes, Inc. 71,700 3,477 Wang Laboratories, Inc. (a) 361,700 6,465 25,116 ELECTRONICS - 1.2% Intel Corp. 120,000 9,014 Linear Technology Corp. 155,000 4,883 S-3, Inc. (a) 55,900 741 14,638 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED PHOTOGRAPHIC EQUIPMENT - 0.5% Imation Corp. 208,620 $ 4,746 Polaroid Corp. 25,700 1,086 5,832 TOTAL TECHNOLOGY 81,162 TRANSPORTATION - 6.4% AIR TRANSPORTATION - 1.1% Delta Air Lines, Inc. 129,600 9,056 SkyWest, Inc. 112,700 1,888 Southwest Airlines Co. 73,500 1,819 12,763 RAILROADS - 0.2% Canadian National Railway Co. 1st Installment Receipt (b) 100,000 1,822 Railtex, Inc. (a) 52,300 1,180 3,002 TRUCKING & FREIGHT - 5.1% Airborne Freight Corp. 183,000 3,912 Arkansas Best Corp. 10,000 61 Caliber System, Inc. 95,000 1,734 Celadon Group, Inc. (a) 200,000 1,400 Consolidated Freightways, Inc. 625,000 12,265 Expeditors International of Washington, Inc. 50,000 1,438 Heartland Express, Inc. (a) 30,000 780 Hunt (J.B.) Transport Services, Inc. 94,300 1,733 M.S. Carriers, Inc. (a) 182,000 3,822 Pittston Co. (Brinks Group) 236,000 6,726 Roadway Express, Inc. 631,590 9,236 Rollins Truck Leasing Corp. 10,000 108 U.S. Freightways Corp. 310,200 5,487 Werner Enterprises, Inc. 165,000 4,187 Yellow Corp. (a) 635,600 8,103 60,992 TOTAL TRANSPORTATION 76,757 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 3.7% ELECTRIC UTILITY - 0.4% CILCORP, Inc. 48,800 $ 2,037 Portland General Corp. 75,000 2,663 4,700 GAS - 0.8% Aquila Gas Pipeline Corp. 120,000 1,515 El Paso Natural Gas Co. 25,000 975 Enron Corp. 201,600 7,938 10,428 TELEPHONE SERVICES - 2.5% Ameritech Corp. 50,000 2,775 Lucent Technologies, Inc. 316,500 11,750 NYNEX Corp. 110,000 4,936 SBC Communications, Inc. 135,000 6,598 US West, Inc. (Media Group) (a) 230,000 3,968 30,027 TOTAL UTILITIES 45,155 TOTAL COMMON STOCKS (Cost $1,088,235) 1,131,538 REPURCHASE AGREEMENTS - 6.3% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.65%, dated 7/31/96 due 8/1/96 $ 76,138 76,126 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,164,361) $ 1,207,664 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. Purchased on an installment basis. Market value reflects only those payments made through July 31, 1996. The remaining installment aggregating CAD 1,075,000 is due November 26, 1996. 3. Affiliated company (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At July 31, 1996, the aggregate cost of investment securities for income tax purposes was $1,165,982,000. Net unrealized appre- ciation aggregated $41,682,000, of which $96,173,000 related to appreciated invest- ment securities and $54,491,000 related to depreciated investment securities. The fund hereby designates approximately $16,180,000 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) JULY 31, 1996 ASSETS Investment in securities, at value (including repurchase $ 1,207,664 agreements of $76,126) (cost $1,164,361) - See accompanying schedule Receivable for investments sold 6,549 Receivable for fund shares sold 20,733 Dividends receivable 1,262 TOTAL ASSETS 1,236,208 LIABILITIES Payable for investments purchased $ 11,479 Payable for fund shares redeemed 3,571 Accrued management fee 681 Other payables and accrued expenses 608 TOTAL LIABILITIES 16,339 NET ASSETS $ 1,219,869 Net Assets consist of: Paid in capital $ 1,130,867 Undistributed net investment income 4,406 Accumulated undistributed net realized gain (loss) on 41,293 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 43,303 investments and assets and liabilities in foreign currencies NET ASSETS, for 70,739 shares outstanding $ 1,219,869 NET ASSET VALUE, offering price and redemption price per $17.24 share ($1,219,869 (divided by) 70,739 shares) STATEMENT OF OPERATIONS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1996 INVESTMENT INCOME $ 11,016 Dividends Interest 2,637 TOTAL INCOME 13,653 EXPENSES Management fee $ 4,500 Basic fee Performance adjustment 408 Transfer agent fees 1,712 Accounting fees and expenses 374 Non-interested trustees' compensation 3 Custodian fees and expenses 51 Registration fees 452 Audit 32 Legal 3 Miscellaneous 4 Total expenses before reductions 7,539 Expense reductions (230) 7,309 NET INVESTMENT INCOME 6,344 REALIZED AND UNREALIZED GAIN (LOSS) 65,571 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on (14,621) investment securities NET GAIN (LOSS) 50,950 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 57,294 FROM OPERATIONS STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED JULY 31, JULY 31, 1996 1995 INCREASE (DECREASE) IN NET ASSETS Operations $ 6,344 $ 1,351 Net investment income Net realized gain (loss) 65,571 15,508 Change in net unrealized appreciation (depreciation) (14,621) 55,023 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 57,294 71,882 FROM OPERATIONS Distributions to shareholders (2,757) (74) From net investment income From net realized gain (32,750) (1,107) TOTAL DISTRIBUTIONS (35,507) (1,181) Share transactions 1,696,572 687,747 Net proceeds from sales of shares Reinvestment of distributions 34,964 1,159 Cost of shares redeemed (998,307) (367,109) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 733,229 321,797 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 755,016 392,498 NET ASSETS Beginning of period 464,853 72,355 End of period (including undistributed net investment $ 1,219,869 $ 464,853 income of $4,406 and $1,276, respectively) OTHER INFORMATION Shares Sold 97,237 49,213 Issued in reinvestment of distributions 2,199 96 Redeemed (57,679) (26,523) Net increase (decrease) 41,757 22,786
FINANCIAL HIGHLIGHTS YEARS ENDED JULY 31, APRIL 27,1993 (COMMENCEMEN T OF OPERATIONS) TO 1996 1995 1994 E JULY 31, 1993
SELECTED PER-SHARE DATA Net asset value, beginning of period $ 16.04 $ 11.68 $ 10.80 $ 10.00 Income from Investment Operations Net investment income (loss) .11 .05 .02 (.01) Net realized and unrealized 2.25 4.47 1.01 .81 gain (loss) Total from investment operations 2.36 4.52 1.03 .80 Less Distributions From net investment income (.09) (.01) (.01) - From net realized gain (1.07) (.15) - - In excess of net realized gain - - (.14) - Total distributions (1.16) (.16) (.15) - Net asset value, end of period $ 17.24 $ 16.04 $ 11.68 $ 10.80 TOTAL RETURN B, C 15.44% 39.14% 9.51% 8.00% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 1,220 $ 465 $ 72 $ 18 Ratio of expenses to average net 1.02% 1.21% 1.43% 2.50% A, assets D Ratio of expenses to average net .99% F 1.19% 1.40% F 2.50% A assets after expense reductions F Ratio of net investment income (loss) .86% .78% .13% (.73)% A to average net assets Portfolio turnover rate 129% 162% 291% 90% A
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. E EFFECTIVE AUGUST 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1996 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Dividend Growth Fund (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for 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 and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $1,558,848,000 and $911,402,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .30%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) 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 .66% of average net assets after the performance adjustment. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .23% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $623,000 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 $211,000 under this arrangement. In addition, the fund has entered into arrangements with its custodian and transfer agent whereby interest earned on uninvested cash balances was used to offset a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $4,000 and $15,000, respectively, under these arrangements. 6. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES DOLLAR AMOUNTS IN THOUSANDS PURCHASES SALES DIVIDEND VALUE AFFILIATES COST COST INCOME Earthgrains Co. $ 16,564 $ - $ - $ 33,217 REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Dividend Growth Fund: We have audited the accompanying statement of assets and liabilities of Fidelity Securities Fund: Fidelity Dividend Growth Fund, including the schedule of portfolio investments, as of July 31, 1996, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the three years in the period then ended and for the period April 27, 1993 (commencement of operations) to July 31, 1993. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 1996 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Securities Fund: Fidelity Dividend Growth Fund as of July 31, 1996, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and for the period April 27, 1993 (commencement of operations) to July 31, 1993, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts September 6, 1996 DISTRIBUTIONS The Board of Trustees of Fidelity Dividend Growth Fund voted to pay on September 9, 1996, to shareholders of record at the opening of business on September 6, 1996, a distribution of $.37 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.04 per share from net investment income. A total of 14% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders. The fund will notify shareholders in January 1997 of the applicable percentage for use in preparing 1996 income tax returns. INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Robert H. Morrison, Manager, Security Transactions John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Richard J. Flynn * Phyllis Burke Davis * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * ADVISORY BOARD William O. McCoy GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Export Fund Fidelity Fifty Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (REGISTERED TRADEMARK) BLUE CHIP GROWTH FUND ANNUAL REPORT JULY 31, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 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 21 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 25 Notes to the financial statements. REPORT OF INDEPENDENT 30 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 31 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 DEAR SHAREHOLDER: Although stocks have managed to post solid returns through the first seven months of 1996, signs of strength in the economy have led to inflation fears, causing some uncertainty in both the stock and bond markets so far this year. In 1995, both stock and bond markets posted strong results, while the year before, stocks posted below-average returns and bonds had one of the worst years in history. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Blue Chip Growth 2.19% 119.79% 330.81% Blue Chip Growth (incl. 3% sales -0.88% 113.20% 317.89% charge) S&P 500(registered trademark) 16.57% 89.62% 236.37% Growth Funds Average 9.72% 79.19% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 31, 1987. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's return to the performance of the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the growth funds average, which reflects the performance of 622 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past 12 months. Both benchmarks reflect reinvestment of dividends and capital gains, if any, but do not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Blue Chip Growth 2.19% 17.06% 18.53% Blue Chip Growth (incl. 3% sales charge) -0.88% 16.35% 18.11% S&P 500 16.57% 13.65% 15.16% Growth Funds Average 9.72% 12.12% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960731 19960812 164628 S00000000000001 Blue Chip Growth SP Standard & Poor 500 00312 SP001 1987/12/31 9700.00 10000.00 1988/01/31 9767.90 10389.22 1988/02/29 10185.00 10873.35 1988/03/31 9816.40 10537.37 1988/04/30 9797.00 10654.33 1988/05/31 9797.00 10747.03 1988/06/30 10359.60 11240.31 1988/07/31 10155.90 11197.60 1988/08/31 9729.10 10816.88 1988/09/30 10165.60 11277.68 1988/10/31 10146.20 11591.20 1988/11/30 9961.90 11425.45 1988/12/31 10272.95 11625.39 1989/01/31 11031.75 12476.37 1989/02/28 10700.99 12165.71 1989/03/31 10953.92 12449.17 1989/04/30 11702.99 13095.28 1989/05/31 12461.79 13625.64 1989/06/30 12024.02 13547.98 1989/07/31 13191.40 14771.36 1989/08/31 13512.43 15060.88 1989/09/30 13846.77 14999.13 1989/10/31 13640.69 14651.15 1989/11/30 13876.21 14950.03 1989/12/31 13995.40 15308.83 1990/01/31 12823.32 14281.61 1990/02/28 13170.98 14465.84 1990/03/31 13826.54 14849.19 1990/04/30 13697.42 14477.96 1990/05/31 15246.94 15889.56 1990/06/30 15594.59 15781.51 1990/07/31 15227.08 15731.01 1990/08/31 13915.94 14308.92 1990/09/30 13258.58 13612.08 1990/10/31 13178.88 13553.55 1990/11/30 14015.64 14429.11 1990/12/31 14485.44 14831.68 1991/01/31 15619.78 15478.34 1991/02/28 16824.39 16585.04 1991/03/31 17667.62 16986.40 1991/04/30 17476.89 17027.17 1991/05/31 18400.43 17762.74 1991/06/30 17476.89 16949.21 1991/07/31 19012.77 17739.04 1991/08/31 19845.96 18159.45 1991/09/30 19534.98 17856.19 1991/10/31 19926.88 18095.46 1991/11/30 19504.83 17366.22 1991/12/31 22424.76 19352.91 1992/01/31 21719.26 18992.95 1992/02/29 21820.04 19239.86 1992/03/31 21225.41 18864.68 1992/04/30 21507.61 19419.30 1992/05/31 21951.06 19514.46 1992/06/30 21316.12 19223.69 1992/07/31 22192.95 20009.94 1992/08/31 21961.14 19599.74 1992/09/30 22252.76 19831.01 1992/10/31 22561.69 19900.42 1992/11/30 23745.89 20579.03 1992/12/31 23808.73 20832.15 1993/01/31 23860.87 21007.14 1993/02/28 23704.44 21292.83 1993/03/31 24851.60 21742.11 1993/04/30 25247.89 21215.95 1993/05/31 26572.33 21784.54 1993/06/30 26822.62 21847.72 1993/07/31 26822.62 21760.33 1993/08/31 28491.21 22585.04 1993/09/30 29084.11 22411.14 1993/10/31 29409.21 22875.05 1993/11/30 28515.20 22657.74 1993/12/31 29642.54 22931.89 1994/01/31 30819.90 23711.58 1994/02/28 30844.43 23068.99 1994/03/31 29875.56 22063.19 1994/04/30 30758.58 22345.60 1994/05/31 31151.04 22712.06 1994/06/30 30071.79 22155.62 1994/07/31 30832.17 22882.32 1994/08/31 32500.10 23820.50 1994/09/30 32403.56 23236.89 1994/10/31 33899.49 23759.73 1994/11/30 32131.58 22894.40 1994/12/31 32562.32 23233.92 1995/01/31 31746.69 23836.38 1995/02/28 32800.73 24765.28 1995/03/31 34181.02 25496.10 1995/04/30 35448.38 26246.96 1995/05/31 36238.91 27296.05 1995/06/30 38246.61 27930.14 1995/07/31 40894.26 28856.30 1995/08/31 41320.89 28928.73 1995/09/30 41775.91 30149.53 1995/10/31 40723.95 30041.89 1995/11/30 42130.94 31360.73 1995/12/31 41802.28 31964.74 1996/01/31 42372.87 33052.82 1996/02/29 42033.23 33359.22 1996/03/31 42549.48 33680.47 1996/04/30 42780.43 34176.92 1996/05/31 43649.89 35058.34 1996/06/30 43785.75 35191.91 1996/07/31 41788.69 33637.13 IMATRL PRASUN SHR__CHT 19960731 19960812 164632 R00000000000106 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Blue Chip Growth Fund on December 31, 1987, and the maximum 3% sales charge was paid. As the chart shows, by July 31, 1996, the value of the investment would have grown to $41,789 - a 317.89% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $33,637 - a 236.37% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Although growing fears of lower corporate earnings dampened the stock market's momentum at the end of the period, the U.S. stock market posted solid gains over the 12 months ended July 31, 1996. While several corporate earnings disappointments made for a volatile stock market in May, June and July, the Standard & Poor's 500 Index finished the 12 months with a return of 16.57% - above its long-term historical annual average of about 12%. The stock market spent much of the past year breaking price and trading volume records as strong corporate earnings reports, large cash inflows into mutual funds and widespread optimism propelled equity share prices higher. In addition, the period was peppered with several high-profile merger announcements, especially in the media, telecommunications and technology sectors. Smaller-company stocks posted strong gains during the first few months of 1996, and high-tech firms involved in the networking and software fields benefited from strong earnings. Semiconductor stocks, however, suffered during the latter half of the period as a result of overcapacity. In March, better-than-expected employment figures spooked the bond market, pushing long-term interest rates over 7%. Because smaller companies tend to be more adversely affected by the higher borrowing costs brought on by higher rates, their stock prices trended downward in the spring. While larger, multinational firms recorded positive gains, their returns were hurt somewhat by the strengthening dollar. NOTE TO SHAREHOLDERS: John McDowell became manager of Fidelity Blue Chip Growth Fund on March 26, 1996. Q. HOW DID THE FUND PERFORM, JOHN? A. For the year ended July 31, 1996, the fund had a total return of 2.19%. For the same period, the Standard & Poor's 500 Index returned 16.57%. Additionally, the growth funds average, according to Lipper Analytical Services, was 9.72% for the past year. Q. WHY DO YOU THINK THE FUND UNDERPERFORMED SO GREATLY? A. Prior to my taking over the fund in March, there were two key factors that hurt performance. First, as described by the previous manager in the fund's semiannual report, its large position in technology companies - particularly semiconductor firms - hurt its return in the first half of the fiscal year. Then, later in the fiscal year, the fund had substantial positions in bonds and short-term investments (cash) that caused it to miss out on some of the gain of the S&P 500 and hurt its performance relative to its peers. Q. SINCE TAKING OVER THE FUND, YOU'VE MADE SOME SUBSTANTIAL CHANGES TO ITS HOLDINGS . . . A. Basically, I took the fund's bond position - and a portion of its cash position - and reallocated it into equities. The bulk of this reallocation was devoted to the technology, health care and consumer nondurable sectors. Additionally, I changed the fund's market sector weightings to be more modestly positioned relative to the S&P 500. Q. WHY HAVE YOU RAISED THE FUND'S TECHNOLOGY POSITION WHEN YOU JUST SAID THAT TECHNOLOGY HURT THE FUND IN THE FIRST HALF OF THE FISCAL YEAR? A. Let me explain. The fund's technology position is invested among firms that are considered to be leaders in their respective industries. In my view, the fund's current technology position is diversified. Obviously, diversification offers no guarantees; however, many of the technology companies in the fund are not dependent on the price performance of a particular technological commodity - such as semiconductors. Q. WHAT WERE SOME OF THESE TECHNOLOGY-RELATED INDUSTRIES AND COMPANIES YOU FAVORED DURING THE PERIOD? A. Networking, systems integration, systems consulting and software were all attractive areas of the technology market during the period. Some of the fund's holdings in these areas included Cisco Systems, IBM, Electronic Data Systems, Compaq Computer and Microsoft. Additionally, while demand for personal computers has slowed recently, I believe in the long run there will be opportunities for growth in this part of the market. Q. WHAT ABOUT HEALTH CARE? A. The fund's health care exposure was primarily in drug companies. The fund's investment approach emphasized companies that were producing attractive relative-earnings growth and a number of drug companies fit the bill. Also, substantial research and development spending has brought about many new and exciting drugs, which should allow continued earnings growth in many drug companies. Some drug companies I favored were Merck, Pharmacia & Upjohn and SmithKline Beecham. Q. WHILE DRUG STOCKS DID FAIRLY WELL, HMOS LAGGED SOMEWHAT . . . A. The flip side to the performance of the drug stocks was the underperformance of HMOs. While surging consumption of medicine is good for drug companies, it raised costs for HMOs. Therefore, companies like United HealthCare underperformed during the period. Q. YOU ALSO MENTIONED CONSUMER STOCKS . . . A. Yes, the fund benefited from the decision to add holdings in consumer nondurable companies such as Avon Products, Coca-Cola, Gillette and Procter & Gamble. That said, because the valuations of these companies are at historically high levels, I am cautious on overweighting the sector versus the benchmark. My two key steps in stock selection are a company's short-term relative earnings growth and long-term valuation - which compares the stock's price-to-earnings ratio to its expected long-term earnings growth. Judging by the first step - short-term earnings growth - many consumer products companies looked reasonable, but judging by the second step - long-term valuation - they were not particularly attractive. Q. THE STRONG PERFORMANCE OF ENERGY AND OIL-SERVICE STOCKS HAS BEEN THOROUGHLY CHRONICLED IN THE FINANCIAL MEDIA. DID THE FUND OWN ANY OF THESE STOCKS? A. Yes. Energy companies in oil and the oil service industry benefited from firming oil prices and solid earnings growth. Some companies I favored during the period included Schlumberger, Royal Dutch Petroleum, Halliburton and British Petroleum. Q. JOHN, IT SEEMS YOUR EXPERIENCE AS A PORTFOLIO MANAGER WOULD LEND ITSELF WELL TO MANAGING A FUND THAT EMPHASIZES BLUE CHIP AND LARGE-CAPITALIZATION STOCKS . . . A. In my 11 years at Fidelity - serving as an institutional portfolio manager, a manager of Fidelity Large Cap Stock Fund and leader of Fidelity's Growth Funds Group - I've followed blue chip and large-capitalization stocks extensively. I've found that many of these companies are in the forefront of their respective industries and offer an investor the potential for good long-term earnings growth. Q. WHAT'S YOUR OUTLOOK? A. I'm a firm believer that in the long term, the performance of an individual company's stock price is driven by earnings growth. Just as it's important to study a company's earnings outlook in order to understand its potential as an investment opportunity, I think the same holds true for the overall market. Since the last economic downturn in 1990-91, earnings of S&P 500 companies have more than doubled and corporate profitability has grown to a historically high level. With interest rates increasing sharply in the past six months and sluggish economic performance in key foreign countries, it seems most likely that S&P 500 earnings growth will slow through the end of the year. This, in turn, leads me to be cautious on the stock market. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of companies that have the potential to increase their current dividend or begin paying a dividend START DATE: April 27, 1993 SIZE: as of July 31, 1996, more than $1.2 billion MANAGER: Steve Wymer, since May 1995; assistant manager, Fidelity OTC Portfolio, January 1995-May 1995; manager, Fidelity Select Chemicals Portfolio, 1993-1994; assistant, Fidelity Magellan Fund, 1992- 1994; manager, Fidelity Select Automotive Portfolio, 1990- 1993; joined Fidelity in 1989 (checkmark) STEVE WYMER ON THE NATURE OF FIDELITY DIVIDEND GROWTH FUND: "The name of the fund - Dividend Growth - seems to cause confusion among investors. When people see the word "dividend," it's natural to equate that with yields. But it's important to remember that this isn't a yield fund. Rather, it's a growth fund which trains its sights on companies showing good potential to grow their dividends. This can mean either a company that can increase an existing dividend or one that plans to implement a dividend policy in the future. As a result, this fund won't concentrate on utility stocks, nor will it emphasize "concept stocks" like start-up biotechnology stocks or those with an Internet focus that are unlikely to pay a dividend. The only way a company can pay a cash dividend is from cash on the balance sheet or through future cash flow. In an uncertain economy, I'm looking for companies that are in typically good business environments or that have self-help programs in order to identify those with the best dividend growth prospects." INVESTMENT CHANGES TOP TEN STOCKS AS OF JULY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Philip Morris Companies, Inc. 2.6 1.7 General Electric Co. 2.6 0.5 International Business Machines Corp. 1.5 0.0 Federal National Mortgage Association 1.5 0.6 Merck & Co., Inc. 1.4 0.0 Citicorp 1.2 0.0 PepsiCo, Inc. 1.2 0.0 Cisco Systems, Inc. 1.1 0.0 Ameritech Corp. 1.1 0.0 AT&T Corp. 1.1 0.0 TOP FIVE MARKET SECTORS AS OF JULY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Technology 14.6 6.6 Health 13.8 2.9 Finance 11.5 17.0 Nondurables 9.6 3.2 Energy 7.8 8.0 ASSET ALLOCATION AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 ** Row: 1, Col: 1, Value: 8.5 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 45.0 Row: 1, Col: 4, Value: 46.6 Row: 1, Col: 1, Value: 12.0 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 9.699999999999999 Row: 1, Col: 4, Value: 36.3 Row: 1, Col: 5, Value: 40.0 Stocks 91.6% Bonds 0.0% Other 0.0% Short-term investments 8.4% FOREIGN INVESTMENTS 2.9% Stocks 77.9% Bonds 9.7% Other 0.4% Short-term investments 12.0% FOREIGN INVESTMENTS 10.0% * * * INVESTMENTS JULY 31, 1996 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.6% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 1.2% Boeing Co. 284,500 $ 25,177 Lockheed Martin Corp. 431,900 35,794 Precision Castparts Corp. 661,800 28,706 Rohr Industries, Inc. (a) 372,800 8,202 97,879 BASIC INDUSTRIES - 3.5% CHEMICALS & PLASTICS - 3.4% Air Products & Chemicals, Inc. 504,200 26,912 du Pont (E.I.) de Nemours & Co. 593,800 47,949 Hanna (M.A.) Co. 1,048,700 19,925 Monsanto Co. 2,132,300 66,634 Praxair, Inc. 1,147,000 44,016 Rohm & Haas Co. 624,100 37,134 Sealed Air Corp. (a) 391,700 13,612 Union Carbide Corp. 516,900 21,710 277,892 PACKAGING & CONTAINERS - 0.1% Owens-Illinois, Inc. (a) 617,000 9,641 TOTAL BASIC INDUSTRIES 287,533 CONGLOMERATES - 0.9% AlliedSignal, Inc. 1,048,300 61,588 Tyco International Ltd. 249,300 10,221 71,809 CONSTRUCTION & REAL ESTATE - 0.8% BUILDING MATERIALS - 0.4% Sherwin-Williams Co. 659,100 29,824 CONSTRUCTION - 0.1% Lennar Corp. 451,100 10,093 ENGINEERING - 0.3% Fluor Corp. 388,600 23,413 TOTAL CONSTRUCTION & REAL ESTATE 63,330 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - 3.8% AUTOS, TIRES, & ACCESSORIES - 1.8% AutoZone, Inc. (a) 998,500 $ 28,832 Echlin, Inc. 488,800 16,314 General Motors Corp. 1,236,067 60,258 Lear Corp. (a) 710,000 24,140 Snap-on Tools Corp. 463,500 20,567 150,111 CONSUMER ELECTRONICS - 0.8% Black & Decker Corp. 856,200 31,466 Newell Co. 1,056,100 33,927 65,393 HOME FURNISHINGS - 0.5% Leggett & Platt, Inc. 1,513,900 39,361 TEXTILES & APPAREL - 0.7% NIKE, Inc. Class B 339,300 34,905 Nine West Group, Inc. (a) 516,100 24,967 59,872 TOTAL DURABLES 314,737 ENERGY - 7.8% ENERGY SERVICES - 1.7% Baker Hughes, Inc. 377,600 11,092 ENSCO International, Inc. (a) 668,700 18,055 Halliburton Co. 969,400 50,530 Schlumberger Ltd. 728,900 58,312 137,989 OIL & GAS - 6.1% Amerada Hess Corp. 140,300 6,822 Amoco Corp. 487,000 32,568 Anadarko Petroleum Corp. 713,000 36,452 Atlantic Richfield Co. 393,700 45,669 British Petroleum PLC: Ord. 3,206,728 29,041 ADR 440,183 48,365 Burlington Resources, Inc. 1,103,800 47,187 Enron Oil & Gas Co. 1,529,200 38,230 Occidental Petroleum Corp. 860,100 19,245 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - CONTINUED Phillips Petroleum Co. 930,800 $ 36,767 Royal Dutch Petroleum Co.: Ord. 345,200 51,900 ADR 299,400 45,172 Union Pacific Resources Group, Inc. 854,900 22,548 Unocal Corp. 1,150,281 37,528 497,494 TOTAL ENERGY 635,483 FINANCE - 11.5% BANKS - 2.1% Bank of New York Co., Inc. 245,800 12,659 Bank of Tokyo-Mitsubishi Ltd. 450 9 Citicorp 1,200,000 98,250 NationsBank Corp. 669,100 57,459 168,377 CREDIT & OTHER FINANCE - 1.5% American Express Co. 1,836,243 80,336 Household International, Inc. 584,808 43,568 123,904 FEDERAL SPONSORED CREDIT - 3.1% Federal Home Loan Mortgage Corporation 905,300 76,272 Federal National Mortgage Association 3,769,300 119,675 Student Loan Marketing Association 749,600 54,721 250,668 INSURANCE - 4.4% Aetna, Inc. 972,150 56,506 Allstate Corp. 1,717,300 76,849 American International Group, Inc. 568,600 53,519 General Re Corp. 244,900 35,939 MGIC Investment Corp. 1,136,400 68,184 Old Republic International Corp. 886,300 18,613 Provident Companies, Inc. 599,700 21,889 UNUM Corp. 538,700 32,861 364,360 SECURITIES INDUSTRY - 0.4% Merrill Lynch & Co., Inc. 528,100 31,884 TOTAL FINANCE 939,193 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - 13.8% DRUGS & PHARMACEUTICALS - 7.8% Allergan, Inc. 152,900 $ 6,231 American Home Products Corp. 1,308,000 74,229 Amgen, Inc. (a) 452,900 24,740 Bristol-Myers Squibb Co. 978,600 84,771 Genentech, Inc. special (a) 493,000 25,944 Lilly (Eli) & Co. 763,600 42,762 Merck & Co., Inc. 1,835,300 117,918 Pharmacia & Upjohn, Inc. 1,699,500 70,104 Pfizer, Inc. 963,800 67,346 Schering-Plough Corp. 841,500 46,387 SmithKline Beecham PLC ADR 886,500 47,649 Warner-Lambert Co. 570,200 31,076 639,157 MEDICAL EQUIPMENT & SUPPLIES - 3.6% Baxter International, Inc. 989,800 41,200 Becton, Dickinson & Co. 658,800 49,163 Bergen Brunswig Corp. Class A 405,200 10,535 Cardinal Health, Inc. 473,700 32,922 Johnson & Johnson 1,475,800 70,469 McKesson Corp. 96,200 4,185 Medtronic, Inc. 608,800 28,842 Pall Corp. 1,364,200 32,911 St. Jude Medical, Inc. (a) 701,400 23,586 293,813 MEDICAL FACILITIES MANAGEMENT - 2.4% Columbia/HCA Healthcare Corp. 1,450,400 74,333 Health Management Associates, Inc. Class A (a) 1,055,600 21,244 Health Care & Retirement Corp. 991,050 23,537 Oxford Health Plans, Inc. (a) 673,400 23,232 Tenet Healthcare Corp. (a) 1,154,800 22,374 United HealthCare Corp. 357,000 12,049 Vencor, Inc. (a) 820,700 22,467 199,236 TOTAL HEALTH 1,132,206 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - 5.4% ELECTRICAL EQUIPMENT - 3.0% Emerson Electric Co. 420,000 $ 35,438 General Electric Co. 2,543,300 209,504 Omron Corp. 72,000 1,321 246,263 INDUSTRIAL MACHINERY & EQUIPMENT - 2.4% Case Corp. 520,500 23,032 Caterpillar, Inc. 1,279,350 84,277 Ingersoll-Rand Co. 542,300 23,116 Stanley Works 1,830,400 52,166 Timken Co. 341,011 12,490 195,081 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 441,344 MEDIA & LEISURE - 4.3% BROADCASTING - 0.0% Time Warner, Inc. 1 - ENTERTAINMENT - 0.3% Disney (Walt) Co. 442,000 24,586 LODGING & GAMING - 2.6% HFS, Inc. (a) 849,590 50,975 Hilton Hotels Corp. 239,800 24,460 ITT Corp. 1,200,500 68,128 Marriott International, Inc. 658,830 33,847 Mirage Resorts, Inc. (a) 1,765,600 39,727 217,137 PUBLISHING - 1.1% Knight-Ridder, Inc. 1,189,800 38,966 New York Times Co. (The) Class A 749,000 21,815 Times Mirror Co. Class A 651,900 26,972 87,753 RESTAURANTS - 0.3% McDonald's Corp. 560,100 25,975 TOTAL MEDIA & LEISURE 355,451 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - 9.6% AGRICULTURE - 0.4% Pioneer Hi-Bred International, Inc. 579,000 $ 31,121 BEVERAGES - 2.0% Coca-Cola Co. (The) 1,416,400 66,394 PepsiCo, Inc. 3,030,200 95,830 162,224 FOODS - 1.9% CPC International, Inc. 202,000 13,508 General Mills, Inc. 680,320 36,907 Kellogg Co. 322,300 24,092 Ralston Purina Co. 691,200 43,373 Sysco Corp. 1,059,100 30,714 Tyson Foods, Inc. 484,500 11,931 160,525 HOUSEHOLD PRODUCTS - 2.2% Avon Products, Inc. 580,200 25,529 Clorox Co. 414,400 37,659 First Brands Corp. 736,300 17,579 Gillette Co. 588,800 37,462 Procter & Gamble Co. 691,700 61,821 180,050 TOBACCO - 3.1% Philip Morris Companies, Inc. 2,059,400 215,465 RJR Nabisco Holdings Corp. 1,308,741 40,244 255,709 TOTAL NONDURABLES 789,629 PRECIOUS METALS - 0.3% Newmont Mining Corp. 452,400 22,337 RETAIL & WHOLESALE - 6.4% APPAREL STORES - 0.1% Gymboree Corp. (a) 511,700 11,897 DRUG STORES - 1.1% Eckerd Corp. (a) 1,592,300 35,429 General Nutrition Companies, Inc. (a) 1,179,160 16,803 Rite Aid Corp. 1,142,100 33,977 86,209 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED GENERAL MERCHANDISE STORES - 2.8% Dillard Department Stores, Inc. Class A 736,900 $ 23,120 Dollar General Corp. 1,114,750 28,844 May Department Stores Co. (The) 527,700 23,681 Sears, Roebuck & Co. 1,597,400 65,493 Wal-Mart Stores, Inc. 3,581,400 85,954 227,092 RETAIL & WHOLESALE, MISCELLANEOUS - 2.4% Circuit City Stores, Inc. 614,110 19,344 Home Depot, Inc. (The) 857,800 43,319 Lowe's Companies, Inc. 1,419,700 46,318 PETsMART, Inc. (a) 1,395,516 32,097 Toys "R" Us, Inc. 2,268,400 59,829 200,907 TOTAL RETAIL & WHOLESALE 526,105 SERVICES - 1.6% ADVERTISING - 0.5% Omnicom Group, Inc. 1,083,900 43,898 SERVICES - 1.1% Block (H&R), Inc. 673,500 17,595 Manpower, Inc. 912,400 31,022 Service Corp. International 754,200 41,575 90,192 TOTAL SERVICES 134,090 TECHNOLOGY - 14.6% COMMUNICATIONS EQUIPMENT - 1.6% Cisco Systems, Inc. (a) 1,815,000 93,926 Network General Corp. (a) 756,600 13,335 3Com Corp. (a) 592,100 23,314 130,575 COMPUTER SERVICES & SOFTWARE - 5.4% America Online, Inc. (a) 820,300 25,019 Ascend Communications, Inc. (a) 714,300 34,644 Automatic Data Processing, Inc. 954,990 37,841 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED CUC International, Inc. (a) 980,500 $ 34,072 Ceridian Corp. (a) 732,841 31,879 Computer Sciences Corp. (a) 667,460 45,387 DST Systems, Inc. (a) 653,300 18,619 Electronic Data Systems Corp. 1,616,100 85,451 First Data Corp. 484,200 37,586 Microsoft Corp. (a) 458,800 54,081 Oracle Systems Corp. (a) 959,600 37,545 Platinum Software Corp. (a) 14 - 442,124 COMPUTERS & OFFICE EQUIPMENT - 4.9% Adaptec, Inc. (a) 507,400 21,057 Bay Networks, Inc. (a) 739,700 17,013 Compaq Computer Corp. (a) 1,366,900 74,838 Hewlett-Packard Co. 707,000 31,108 International Business Machines Corp. 1,133,000 122,222 Pitney Bowes, Inc. 1,236,000 59,946 Sun Microsystems, Inc. (a) 641,900 35,064 Xerox Corp. 782,100 39,398 400,646 ELECTRONICS - 2.2% AMP, Inc. 502,400 19,405 Intel Corp. 1,085,430 81,543 Linear Technology Corp. 1,842,890 58,051 Maxim Integrated Products, Inc. (a) 769,500 21,931 Samsung Electronics Co. Ltd. (bonus issue 3/96) (a) 838 70 181,000 PHOTOGRAPHIC EQUIPMENT - 0.5% Eastman Kodak Co. 507,400 37,865 Polaroid Corp. 24,300 1,027 38,892 TOTAL TECHNOLOGY 1,193,237 TRANSPORTATION - 0.2% RAILROADS - 0.2% CSX Corp. 408,000 19,686 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 5.9% CELLULAR - 1.0% AirTouch Communications, Inc. (a) 1,073,800 $ 29,530 36O Degrees Communications Co. (a) 1,392,900 32,211 Vodafone Group PLC sponsored ADR 506,200 18,096 79,837 TELEPHONE SERVICES - 4.9% AT&T Corp. 1,676,160 87,370 Ameritech Corp. 1,598,200 88,700 Frontier Corp. 1,430,600 40,236 LCI International, Inc. (a) 586,900 17,754 MCI Communications Corp. 328,800 8,097 NYNEX Corp. 1,096,400 49,201 SBC Communications, Inc. 1,560,400 76,265 WorldCom, Inc. (a) 1,379,300 35,688 403,311 TOTAL UTILITIES 483,148 TOTAL COMMON STOCKS (Cost $7,363,139) 7,507,197 NONCONVERTIBLE PREFERRED STOCKS - 0.0% ENERGY - 0.0% OIL & GAS - 0.0% Gulf Canada Resources Ltd. (b) (Cost $6) 2,315 7 REPURCHASE AGREEMENTS - 8.4% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.65%, dated 7/31/96 due 8/1/96 $ 689,892 689,784 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $8,052,929) $ 8,196,988 LEGEND 1. Non-income producing 2. Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Gulf Canada Resources Ltd. 10/15/93 $ 6,000 INCOME TAX INFORMATION At July 31, 1996, the aggregate cost of investment securities for income tax purposes was $8,074,217,000. Net unrealized appreciation aggregated $122,771,000 of which $437,253,000 related to appreciated investment securities and $314,482,000 related to depreciated investment securities. The fund hereby designates approximately $153,451,000 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) JULY 31, 1996 ASSETS Investment in securities, at value (including repurchase $ 8,196,988 agreements of $689,784) (cost $8,052,929) - See accompanying schedule Receivable for investments sold 9,008 Receivable for fund shares sold 13,785 Dividends receivable 10,516 Other receivables 168 TOTAL ASSETS 8,230,465 LIABILITIES Payable for investments purchased $ 26,530 Payable for fund shares redeemed 16,553 Accrued management fee 4,355 Other payables and accrued expenses 3,717 TOTAL LIABILITIES 51,155 NET ASSETS $ 8,179,310 Net Assets consist of: Paid in capital $ 7,253,537 Undistributed net investment income 62,593 Accumulated undistributed net realized gain (loss) on 719,123 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 144,057 investments and assets and liabilities in foreign currencies NET ASSETS, for 265,888 shares outstanding $ 8,179,310 NET ASSET VALUE and redemption price per share $30.76 ($8,179,310 (divided by) 265,888 shares) Maximum offering price per share (100/97.00 of $30.76) $31.71
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1996 INVESTMENT INCOME $ 97,690 Dividends (including $774 received from affiliated issuers) Interest 61,983 TOTAL INCOME 159,673 EXPENSES Management fee $ 47,371 Basic fee Performance adjustment 4,936 Transfer agent fees 21,425 Accounting fees and expenses 791 Non-interested trustees' compensation 31 Custodian fees and expenses 518 Registration fees 1,256 Audit 64 Legal 44 Interest 6 Miscellaneous 16 Total expenses before reductions 76,458 Expense reductions (2,344) 74,114 NET INVESTMENT INCOME 85,559 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain of $6,172 948,010 on sales of investments in affiliated issuers) Foreign currency transactions 11,622 Futures contracts 5,049 964,681 Change in net unrealized appreciation (depreciation) on: Investment securities (898,753) Assets and liabilities in foreign currencies (2,030) (900,783) NET GAIN (LOSS) 63,898 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 149,457 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED JULY 31, JULY 31, 1996 1995 INCREASE (DECREASE) IN NET ASSETS Operations $ 85,559 $ 9,564 Net investment income Net realized gain (loss) 964,681 348,645 Change in net unrealized appreciation (depreciation) (900,783) 936,474 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 149,457 1,294,683 FROM OPERATIONS Distributions to shareholders (28,183) - From net investment income From net realized gain (542,584) (64,196) TOTAL DISTRIBUTIONS (570,767) (64,196) Share transactions 4,526,720 4,429,317 Net proceeds from sales of shares Reinvestment of distributions 555,579 62,248 Cost of shares redeemed (2,903,085) (1,529,164) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,179,214 2,962,401 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 1,757,904 4,192,888 NET ASSETS Beginning of period 6,421,406 2,228,518 End of period (including undistributed net investment $ 8,179,310 $ 6,421,406 income of $62,593 and $3,300, respectively) OTHER INFORMATION Shares Sold 143,962 162,136 Issued in reinvestment of distributions 17,421 2,477 Redeemed (92,535) (56,233) Net increase (decrease) 68,848 108,380
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1996 1995 1994 C 1993 1992 SELECTED PER-SHARE DATA Net asset value, $ 32.59 $ 25.14 $ 25.72 $ 22.02 $ 18.94 beginning of period Income from Investment Operations Net investment income .34 .07 D .12 .10 .09 Net realized and unrealized .42 7.96 3.43 4.36 3.07 gain (loss) Total from investment .76 8.03 3.55 4.46 3.16 operations Less Distributions From net investment income (.12) - (.01) (.14) (.08) From net realized gain (2.47) (.58) (4.12) (.62) - Total distributions (2.59) (.58) (4.13) (.76) (.08) Net asset value, $ 30.76 $ 32.59 $ 25.14 $ 25.72 $ 22.02 end of period TOTAL RETURN G, B 2.19% 32.64% 14.95% 20.86% 16.73% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 8,179 $ 6,421 $ 2,229 $ 788 $ 476 (in millions) Ratio of expenses to average .98% 1.05% 1.27% 1.25% 1.27% net assets Ratio of expenses to average .95% 1.02% 1.22% 1.25% 1.27% net assets after expense E E E reductions Ratio of net investment 1.10% .25% .21% .46% .55% income to average net assets Portfolio turnover rate 206% 182% 271% 319% 71%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C EFFECTIVE AUGUST 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1996 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Blue Chip Growth Fund (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts and foreign currency options, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income, which includes accretion of original issue discount, is accrued as earned. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, futures and options transactions, foreign currency transactions, passive foreign investment companies (PFIC), partnerships and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the stock and bond markets and to fluctuations in interest rates and currency values. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 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 $7,000 or 0% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $15,654,905,000 and $14,461,280,000, respectively, of which U.S. government and government agency obligations aggregated $1,125,744,000 and $1,056,156,000, respectively. The market value of futures contracts opened and closed during the period amounted to $809,210,000 and $814,259,000 respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .30%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) 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 .67% of average net assets after the performance adjustment. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of the fund. FDC is paid a 3% sales charge on sales of shares of the fund. Prior to October 12, 1990, FDC was paid a 2% sales charge and a 1% deferred sales charge. Shares purchased before October 12, 1990 are subject to a 1% deferred sales charge upon redemption. For the period, FDC received sales charges and deferred sales charges of $9,154,000 and $18,000, respectively, on sales of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .28% 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 $5,165,000 for the period. 5. 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 $11,120,000. The weighted average interest rate was 5.9%. 6. EXPENSE REDUCTIONS. FMR has directed certain portfolio trades to brokers who paid a portion of the fund's expenses. For the period, the fund's expenses were reduced by $1,840,000 under this arrangement. In addition, the fund has entered into arrangements with its custodian and transfer agent whereby interest earned on uninvested cash balances was used to offset a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $6,000 and $498,000 under these arrangements. 7. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Accent Software International $ 1,624 $ 1,762 $ - $ - American Business Information, Inc. 7,317 19,978 - - Blue Range Resource Corp. Class A - 1,984 - - CMAC Investments 138 17,403 93 - Continuum Co., Inc. 9,365 18,977 - - GMIS, Inc. 276 9,486 - - Global Industries Ltd. - 3,436 - - Medicus Systems Corp. - 403 10 - Money Store, Inc. 8,586 12,990 120 - North American Mortgage Co. 179 17,736 150 - Ply-Gem Industries, Inc. - 14,045 36 - Shared Medical Systems Corp. - 24,230 144 - Titan Wheel International, Inc. 2,609 19,269 34 - Trinzic Corp. - - - - Webb (Del E.) Corp. 5,570 20,441 187 - Wonderware Corp. 2,970 9,782 - - TOTALS $ 38,634 $ 191,922 $ 774 $ - REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Blue Chip Growth Fund: We have audited the accompanying statement of assets and liabilities of Fidelity Securities Fund: Fidelity Blue Chip Growth Fund, including the schedule of portfolio investments, as of July 31, 1996, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 1996 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Securities Fund: Fidelity Blue Chip Growth Fund as of July 31, 1996, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts September 6, 1996 DISTRIBUTIONS The Board of Trustees of Fidelity Blue Chip Growth Fund voted to pay on September 9, 1996, to shareholders of record at the opening of business on September 6, 1996, a distribution of $2.24 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.19 per share from net investment income. A total of 1.18% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax. A total of 11% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders. The fund will notify shareholders in January 1997 of these percentages for use in preparing 1996 income tax returns. INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Robert H. Morrison, Manager, Security Transactions John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * ADVISORY BOARD William O. McCoy GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Export Fund Fidelity Fifty Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (registered trademark) OTC PORTFOLIO ANNUAL REPORT JULY 31, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 24 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 28 Notes to the financial statements. REPORT OF INDEPENDENT 33 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 34 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 THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although stocks have managed to post solid returns through the first seven months of 1996, signs of strength in the economy have led to inflation fears, causing some uncertainty in both the stock and bond markets so far this year. In 1995, both stock and bond markets posted strong results, while the year before, stocks posted below-average returns and bonds had one of the worst years in history. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells securities that have grown in value). CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS OTC 6.43% 96.22% 281.07% OTC (incl. 3% sales charge) 3.23% 90.34% 269.64% NASDAQ(registered trademark) Composite Index 8.80% 127.23% 231.99% Mid-Cap Funds Average 7.99% 91.01% 239.17%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the NASDAQ Composite Index - an unmanaged index of the National Market System which includes over 5,000 stocks traded only over-the-counter and not on an exchange. To measure how the fund's performance stacked up against its peers, you can compare it to the mid-cap funds average, which reflects the performance of 136 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past 12 months. Unlike most other funds in this category, this fund invests in large companies as well as small ones. Both benchmarks reflect reinvestment of dividends and capital gains, if any, but do not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS OTC 6.43% 14.43% 14.31% OTC (incl. 3% sales charge) 3.23% 13.74% 13.97% NASDAQ Composite Index 8.80% 17.84% 12.75% Mid-Cap Funds Average 7.99% 13.65% 12.60% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking the arithmetic average. This may produce a slightly different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960731 19960822 164628 S00000000000001 OTC Portfolio NASDAQ 00312 F0091 1986/07/31 9700.00 10000.00 1986/08/31 10181.08 10322.00 1986/09/30 9140.49 9467.34 1986/10/31 9589.08 9752.31 1986/11/30 9442.59 9693.79 1986/12/31 9279.21 9454.36 1987/01/31 10422.91 10638.04 1987/02/28 11538.44 11543.34 1987/03/31 11510.27 11693.40 1987/04/30 11380.69 11373.00 1987/05/31 11482.10 11351.39 1987/06/30 11713.10 11585.23 1987/07/31 12276.50 11878.34 1987/08/31 12851.17 12439.00 1987/09/30 12772.29 12160.36 1987/10/31 8924.26 8862.47 1987/11/30 8383.40 8378.58 1987/12/31 9427.36 9086.57 1988/01/31 9762.21 9490.02 1988/02/29 10412.60 10117.30 1988/03/31 10650.86 10342.92 1988/04/30 10972.83 10483.58 1988/05/31 10876.24 10251.90 1988/06/30 11597.46 10938.77 1988/07/31 11558.82 10749.53 1988/08/31 11281.92 10463.60 1988/09/30 11713.37 10787.97 1988/10/31 11706.93 10655.28 1988/11/30 11327.00 10362.26 1988/12/31 11581.93 10653.43 1989/01/31 12328.72 11224.46 1989/02/28 12295.97 11195.27 1989/03/31 12833.14 11406.87 1989/04/30 13462.02 12005.73 1989/05/31 14064.70 12543.58 1989/06/30 14031.95 12252.57 1989/07/31 14647.73 12790.46 1989/08/31 15302.82 13243.24 1989/09/30 15390.19 13359.78 1989/10/31 14871.27 12888.18 1989/11/30 15007.83 12917.82 1989/12/31 15101.96 12898.45 1990/01/31 14029.67 11808.53 1990/02/28 14419.59 12109.65 1990/03/31 14966.98 12402.70 1990/04/30 14532.07 11979.77 1990/05/31 15484.38 13105.87 1990/06/30 15514.37 13217.27 1990/07/31 15311.91 12547.15 1990/08/31 13992.18 10931.08 1990/09/30 13222.13 9894.81 1990/10/31 12943.28 9490.11 1990/11/30 13841.79 10347.07 1990/12/31 14384.44 10789.93 1991/01/31 15517.19 11971.42 1991/02/28 16719.77 13111.10 1991/03/31 17658.56 13973.81 1991/04/30 17627.53 14060.45 1991/05/31 18488.73 14697.39 1991/06/30 17596.49 13837.59 1991/07/31 18837.87 14613.88 1991/08/31 19830.97 15318.27 1991/09/30 19656.70 15370.35 1991/10/31 20511.34 15856.05 1991/11/30 19541.65 15315.36 1991/12/31 21455.75 17157.80 1992/01/31 22382.20 18166.68 1992/02/29 22425.50 18571.80 1992/03/31 21706.84 17717.49 1992/04/30 21066.11 16998.16 1992/05/31 21369.16 17210.64 1992/06/30 20901.60 16589.34 1992/07/31 21343.18 17113.56 1992/08/31 20815.02 16608.71 1992/09/30 21457.47 17219.91 1992/10/31 22257.06 17884.60 1992/11/30 23828.04 19308.21 1992/12/31 24661.18 20041.92 1993/01/31 24824.63 20635.17 1993/02/28 23853.57 19896.43 1993/03/31 24680.41 20489.34 1993/04/30 23959.32 19655.42 1993/05/31 24603.50 20836.72 1993/06/30 24632.34 20957.57 1993/07/31 24901.55 20999.48 1993/08/31 25363.04 22156.55 1993/09/30 26060.09 22772.51 1993/10/31 26403.81 23284.89 1993/11/30 25705.96 22563.06 1993/12/31 26716.32 23253.49 1994/01/31 27435.69 23983.65 1994/02/28 27147.94 23765.39 1994/03/31 26063.35 22315.71 1994/04/30 25343.98 22047.92 1994/05/31 25211.17 22109.65 1994/06/30 24281.52 21251.80 1994/07/31 24812.75 21759.71 1994/08/31 26052.28 23091.41 1994/09/30 26118.69 23072.94 1994/10/31 26716.32 23495.17 1994/11/30 25842.01 22696.34 1994/12/31 25996.21 22768.96 1995/01/31 25940.35 22891.92 1995/02/28 27303.28 24084.58 1995/03/31 28219.35 24821.57 1995/04/30 29403.53 25658.06 1995/05/31 30241.40 26309.77 1995/06/30 32587.42 28430.34 1995/07/31 34732.36 30519.97 1995/08/31 35179.22 31121.22 1995/09/30 35686.92 31861.90 1995/10/31 35493.40 31657.98 1995/11/30 36130.87 32389.28 1995/12/31 35933.37 32194.95 1996/01/31 35850.43 32452.51 1996/02/29 37129.96 33708.42 1996/03/31 37201.05 33772.47 1996/04/30 39535.00 36528.30 1996/05/31 40980.39 38172.07 1996/06/30 39546.84 36397.07 1996/07/31 36964.10 33199.00 IML PRASUN SHR__CHT 19960731 19960822 164632 R00000000000106 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity OTC Portfolio on July 31, 1986 and the maximum 3% sales charge was paid. As the chart shows, by July 31, 1996, the value of the investment would have grown to $36,964 - a 269.64% increase on the initial investment. For comparison, look at how the NASDAQ Composite Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $33,199 - a 231.99% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Although growing fears of lower corporate earnings dampened the stock market's momentum at the end of the period, the U.S. stock market posted solid gains over the 12 months ended July 31, 1996. While several corporate earnings disappointments made for a volatile stock market in May, June and July, the Standard & Poor's 500 Index finished the 12 months with a return of 16.57% - above its long-term historical annual average of about 12%. The stock market spent much of the past year breaking price and trading volume records as strong corporate earnings reports, large cash inflows into mutual funds and widespread optimism propelled equity share prices higher. In addition, the period was peppered with several high-profile merger announcements, especially in the media, telecommunications and technology sectors. Smaller-company stocks posted strong gains during the first few months of 1996, and high-tech firms involved in the networking and software fields benefited from strong earnings. Semiconductor stocks, however, suffered during the latter half of the period as a result of overcapacity. In March, better-than-expected employment figures spooked the bond market, pushing long-term interest rates over 7%. Because smaller companies tend to be more adversely affected by the higher borrowing costs brought on by higher rates, their stock prices trended downward in the spring. While larger, multinational firms recorded positive gains, their returns were hurt somewhat by the strengthening dollar. NOTE TO SHAREHOLDERS: On June 3, 1996, Charles Mangum became Portfolio Manager of Fidelity OTC Portfolio. Q. CHARLES, HOW DID THE FUND PERFORM? A. For the 12 months ended July 31, 1996, the fund had a total return of 6.43%, compared to 8.80% for the NASDAQ Composite Index. According to Lipper Analytical Services, the mid-cap funds average returned 7.99% for the 12-month period ended July 31, 1996. Q. HOW WOULD YOU EXPLAIN THE DIFFERENCE BETWEEN THE FUND'S PERFORMANCE AND THE INDEX IN THE 12-MONTH PERIOD? A. Well, for much of the past year, in my opinion the fund had been positioned fairly conservatively, with a higher percentage of the fund's investments in short-term instruments, for example. In the early part of this year, when the over-the-counter market rallied quite strongly, the fund's performance significantly lagged that of the index. But when the overall stock market dropped late in the period, taking the OTC market with it, the fund made a considerable comeback. By that time, I had started to reposition the portfolio in what I considered to be a somewhat more aggressive manner. So the OTC market's extreme volatility in June and July worked both ways for the fund - it was hit less than the market in the drop and, as OTC stocks recovered, many of the fund's positions performed very well. Q. LET'S DISCUSS HOW YOU'VE RESTRUCTURED THE FUND SINCE YOU TOOK OVER IN JUNE. A. Actually, the previous manager, Abby Johnson, had already begun to structure the fund in what I would call a more aggressive position at the end of her tenure. I accelerated that process when I began managing it at the beginning of June, based on the fact that many share prices of the stocks I liked in the OTC market were down anywhere from 20% to upwards of 50% over approximately a four-week period. It was during that time that I was able to buy stocks I felt had good fundamentals, at prices that were now much more reasonable than they had been. Q. THE MAJOR SECTOR CHANGE WAS A SIZABLE INCREASE IN TECHNOLOGY STOCKS . . . A. That's right - but that's more a function of how I want to manage the fund going forward. The way I see it, tech stocks represent about 50% of the OTC market capitalization, and a handful of names, including Microsoft, Oracle, Cisco and Sun Microsystems, by themselves are around 20% of the whole market. So technology is too big an area not to be well-represented in the fund, and it will likely continue to be a big theme in the portfolio. I've spent a great deal of time looking at the technology sector, with special attention to those companies I just mentioned. Q. DOES THAT IMPLY THAT YOU'LL USE THE SECTOR WEIGHTINGS OF THE OTC MARKET AS A TARGET FOR THE FUND? A. Not really. I'd say that the sector weightings of the index, while not irrelevant, won't be much more than a very loose target. My background is in analysis of areas such as health care and finance, and I'm fortunate in that those areas are also well represented in the OTC market. I concentrate on finding good growth stocks regardless of sector. Q. CAN YOU GIVE SOME EXAMPLES? A. One of the additions to the top 10 holdings was Nellcor, for instance. It's a medical company that specializes in respiratory therapy and products and, even though its stock price was depressed, I viewed it as a leader in its field and capable of solid earnings growth. Another key investment was Scholastic Corp., best known for the Goosebumps series of books by R. L. Stine. That's only a small part of its business, and I believe its other lines of business, including book fairs and teachers' manuals, could help it dominate several distribution channels in education. Finally, Washington Mutual is a savings and loan that recently announced a merger with American Savings Bank. That merger could help take what's already a well-run institution and create synergies and cost-cutting opportunities; I thought it was a very attractive buy at only around 10 times current earnings. Q. WHAT ABOUT STOCKS THAT WERE DISAPPOINTMENTS OVER THE PERIOD? A. There are always a few. In this case, I'd point to one. U.S. Robotics was a poor performer for the fund. The stock performed well in the past, and the fund owned it at the end of the period, but the company's business slowed over the past six months, which hurt its share price. Q. WHAT'S YOUR OUTLOOK? A. I really don't spend time developing outlooks for the market. I focus on what I can control, which is finding good companies that can grow over time. The market's recent volatility has perhaps taken some of the froth out of it, and many OTC stocks are priced quite a bit lower than they have been. I think that could help me find some good values out there. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of companies that have the potential to increase their current dividend or begin paying a dividend START DATE: April 27, 1993 SIZE: as of July 31, 1996, more than $1.2 billion MANAGER: Steve Wymer, since May 1995; assistant manager, Fidelity OTC Portfolio, January 1995-May 1995; manager, Fidelity Select Chemicals Portfolio, 1993-1994; assistant, Fidelity Magellan Fund, 1992- 1994; manager, Fidelity Select Automotive Portfolio, 1990- 1993; joined Fidelity in 1989 (checkmark) STEVE WYMER ON THE NATURE OF FIDELITY DIVIDEND GROWTH FUND: "The name of the fund - Dividend Growth - seems to cause confusion among investors. When people see the word "dividend," it's natural to equate that with yields. But it's important to remember that this isn't a yield fund. Rather, it's a growth fund which trains its sights on companies showing good potential to grow their dividends. This can mean either a company that can increase an existing dividend or one that plans to implement a dividend policy in the future. As a result, this fund won't concentrate on utility stocks, nor will it emphasize "concept stocks" like start-up biotechnology stocks or those with an Internet focus that are unlikely to pay a dividend. The only way a company can pay a cash dividend is from cash on the balance sheet or through future cash flow. In an uncertain economy, I'm looking for companies that are in typically good business environments or that have self-help programs in order to identify those with the best dividend growth prospects." INVESTMENT CHANGES TOP TEN STOCKS AS OF JULY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Intel Corp. 4.0 3.6 Oracle Systems Corp. 3.3 1.4 Cisco Systems, Inc. 3.2 1.1 Microsoft Corp. 2.3 1.8 Dell Computer Corp. 1.5 0.4 Nellcor, Inc. 1.5 0.1 Scholastic Corp. 1.2 0.0 TCI Group Class A 1.1 0.8 Washington Mutual, Inc., Series D, 1.1 0.0 $6.00 3Com Corp. 1.0 0.4 TOP FIVE MARKET SECTORS AS OF JULY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Technology 38.2 28.0 Health 10.7 10.1 Finance 10.0 11.2 Retail & Wholesale 8.4 4.3 Media & Leisure 6.0 4.3 ASSET ALLOCATION AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 ** Row: 1, Col: 1, Value: 8.0 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 33.2 Row: 1, Col: 4, Value: 50.0 Stocks 81.1% Bonds 2.9% Short-term investments 16.0% FOREIGN INVESTMENTS 5.3% Stocks 93.2% Bonds 0.6% Short-term investments 6.2% FOREIGN INVESTMENTS 2.6% Row: 1, Col: 1, Value: 16.0 Row: 1, Col: 2, Value: 3.5 Row: 1, Col: 3, Value: 30.5 Row: 1, Col: 4, Value: 50.0 ** * INVESTMENTS JULY 31, 1996 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.1% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 0.2% Wyman-Gordon Co. (a) 331,400 $ 5,779 BASIC INDUSTRIES - 2.4% CHEMICALS & PLASTICS - 0.5% Fuller (H.B.) Co. 231,209 8,035 OM Group, Inc. 173,100 6,037 14,072 IRON & STEEL - 0.7% TriMas Corp. 865,200 17,953 PAPER & FOREST PRODUCTS - 1.2% American Pad & Paper Co. (a) 767,900 11,614 Fort Howard Corp. (a) 190,000 4,346 Pentair, Inc. 343,800 9,283 Willamette Industries, Inc. 100,000 5,875 31,118 TOTAL BASIC INDUSTRIES 63,143 CONGLOMERATES - 0.1% Lancaster Colony Corp. 79,000 2,824 CONSTRUCTION & REAL ESTATE - 1.1% BUILDING MATERIALS - 0.2% RPM, Inc. 431,900 6,425 CONSTRUCTION - 0.2% Redman Industries, Inc. (a) 277,600 5,760 ENGINEERING - 0.3% MasTec, Inc. (a) 345,300 8,374 REAL ESTATE INVESTMENT TRUSTS - 0.4% Equity Inns, Inc. 300,000 3,488 Felcor Suite Hotels, Inc. 91,600 2,565 RFS Hotel Investors, Inc. 205,000 3,280 9,333 TOTAL CONSTRUCTION & REAL ESTATE 29,892 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - 1.8% AUTOS, TIRES, & ACCESSORIES - 1.0% Intermet Corp. (a) 143,300 $ 1,836 O'Reilly Automotive, Inc. (a) 100,000 3,500 PACCAR, Inc. 187,900 8,549 Tower Automotive, Inc. (a) 125,000 3,063 Volvo AB Class B 361,300 7,835 Volvo AB Class B ADR 25,000 538 25,321 HOME FURNISHINGS - 0.1% HON Industries, Inc. 100,000 3,000 TEXTILES & APPAREL - 0.7% Justin Industries, Inc. 299,500 3,332 Westpoint Stevens, Inc. Class A (a) 623,000 14,718 18,050 TOTAL DURABLES 46,371 ENERGY - 2.1% ENERGY SERVICES - 0.4% Dreco Energy Services Ltd. Class A (a) 68,900 1,550 Global Industries Ltd. (a) 194,800 5,601 Lone Star Technologies, Inc. 194,700 2,823 9,974 OIL & GAS - 1.7% Belco Oil & Gas Corp. (a) 103,000 2,961 Belden & Blake Corp. (a) 187,800 4,038 Benton Oil & Gas Co. (a) 250,000 4,938 Cairn Energy USA, Inc. (a) 265,900 2,626 Chesapeake Energy Corp. (a) 172,500 8,560 Flores & Rucks, Inc. (a) 320,200 11,047 Forcenergy Gas Exploration, Inc. (a) 540,900 10,412 44,582 TOTAL ENERGY 54,556 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - 8.9% BANKS - 5.8% BankAmerica Corp. 239,300 $ 19,084 BanPonce Corp. 488,622 11,544 Boatmen's Bancshares, Inc. 120,000 4,800 CCB Financial Corp. 52,800 2,732 Dauphin Deposit Corp. 99,900 2,797 Fifth Third Bancorp 220,450 11,408 First American Corp. 78,333 3,261 First Commerce Bancshares, Inc. 115,600 3,410 First Commerce Bancshares, Inc. Class B 445,900 6,577 First Commerce Corp. 104,700 3,638 First Security Corp. 187,500 4,781 First Tennessee National Corp. 180,000 5,310 Liberty Bancorp, Inc. 69,700 2,422 Marshall & Ilsley Corp. 164,400 4,316 Northern Trust Corp. 440,850 26,065 Peoples Heritage Financial Group, Inc. 370,000 7,308 Regions Financial Corp. 128,200 5,593 SouthTrust Corp. 150,000 4,163 UnionBanCal Corp. 81,700 3,881 U.S. Bancorp. 427,900 14,656 Zions Bancorp. 83,300 6,487 154,233 CREDIT & OTHER FINANCE - 0.2% IMC Mortgage Co. (a) 100,000 2,400 Triad Guaranty, Inc. (a) 154,200 3,585 5,985 INSURANCE - 1.8% American National Insurance Co. 16,000 1,028 Amerin Corp. (a) 39,400 877 Berkley (W.R.) Corp. 137,360 5,597 Cincinnati Financial Corp. 136,500 7,610 Delphi Financial Group, Inc. Class A (a) 102,600 2,783 Life USA Holding, Inc. (a) 506,500 3,989 Mercury General Corp. 118,600 5,070 Ohio Casualty Corp. 222,700 7,071 SAFECO Corp. 159,700 5,500 Trenwick Group, Inc. 108,300 5,280 US Facilities Corp. 94,000 1,539 46,344 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED SAVINGS & LOANS - 1.1% Astoria Financial Corp. 156,200 $ 4,178 Charter One Financial Corp. 297,900 11,022 Collective Bancorp., Inc. 182,800 4,330 First Financial Corp. of Wisconsin 100,000 2,200 Long Island Bancorp., Inc. 180,000 5,096 Washington Federal, Inc. 152,000 3,230 30,056 TOTAL FINANCE 236,618 HEALTH - 10.3% DRUGS & PHARMACEUTICALS - 2.9% Alkermes, Inc. (a) 150,000 1,855 Amgen, Inc. (a) 358,400 19,577 Andrx Corp. (a) 67,000 887 Anesta Corp. 5,600 68 Biogen, Inc. (a) 129,800 7,933 COR Therapeutics, Inc. (a) 127,800 973 Cell Genesys, Inc. (a) 345,100 2,242 Copley Pharmaceutical, Inc. (a) 334,500 3,888 Genzyme Corp. (a) 220,000 5,472 Guilford Pharmaceuticals, Inc. (a) 221,600 4,791 Idexx Laboratories 150,000 5,812 Inhale Therapeutic Systems (a) 81,900 1,289 Magainin Pharmaceuticals, Inc. (a) 497,300 4,040 Nature's Sunshine Products, Inc. 165,000 3,629 Protein Design Labs, Inc. (a) 180,600 3,216 Sepracor, Inc. (a) 237,900 3,210 Sigma Aldrich Corp. 140,000 7,349 Watson Pharmaceuticals, Inc. (a) 30,000 1,169 77,400 MEDICAL EQUIPMENT & SUPPLIES - 3.4% BEC Group, Inc. (a) 50,000 263 Biomet, Inc. (a) 1,245,800 19,154 Conmed Corp. (a) 369,900 6,381 Cygnus, Inc. (a) 214,800 3,034 Datascope Corp. (a) 385,450 6,649 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - CONTINUED Nellcor, Inc. (a) 1,648,000 $ 38,934 St. Jude Medical, Inc. (a) 301,150 10,126 Stryker Corp. 220,000 5,407 89,948 MEDICAL FACILITIES MANAGEMENT - 4.0% FHP International Corp. (a) 120,000 3,135 Integramed America, Inc. (a) 200,000 469 Lincare Holdings, Inc. (a) 632,240 24,657 Oxford Health Plans, Inc. (a) 547,100 18,875 PacifiCare Health Systems, Inc. 20,700 1,392 PacifiCare Health Systems, Inc. Class B 105,000 7,101 PhyMatrix Corp. (a) 417,300 9,024 Physician Corp. of America (a) 515,600 5,285 TheraTx, Inc. (a)(c) 1,502,700 25,734 Vencor, Inc. (a) 366,600 10,036 105,708 TOTAL HEALTH 273,056 HOLDING COMPANIES - 0.1% Nolato AB Class B Free shares 261,700 2,143 INDUSTRIAL MACHINERY & EQUIPMENT - 2.1% ELECTRICAL EQUIPMENT - 0.3% California Microwave Corp. (a) 73,000 885 Glenayre Technologies, Inc. (a) 78,150 2,882 Omron Corp. 75,000 1,376 Roper Industries, Inc. 97,100 3,593 8,736 INDUSTRIAL MACHINERY & EQUIPMENT - 1.7% BW/IP Holdings, Inc. Class A 677,200 11,428 Duriron Co., Inc. 390,000 8,970 Greenfield Industries, Inc. 240,200 6,936 MTS Systems Corp. 100,000 1,975 Park Ohio Industries, Inc. (a) 361,063 6,048 Stewart & Stevenson Services, Inc. 490,000 10,596 45,953 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED POLLUTION CONTROL - 0.1% WMX Technologies, Inc. 78,000 $ 2,311 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 57,000 MEDIA & LEISURE - 5.8% BROADCASTING - 2.5% American Telecasting, Inc. (a) 248,700 2,674 Comcast Corp. Class A special 24,200 342 Evergreen Media Corp. Class A (a) 155,000 6,781 Heartland Wireless Communications, Inc. (a) 357,500 7,865 PanAmSat Corp. (a) 268,900 7,126 People's Choice TV Corp. (a) 136,700 1,845 Sinclair Broadcast Group, Inc. Class A (a) 274,800 11,129 TCI Group Class A 2,035,900 29,012 66,774 ENTERTAINMENT - 0.3% All American Communications, Inc. 100,000 925 Ameristar Casinos, Inc. (a) 148,000 1,110 Scientific Games Holdings Corp. 300,000 6,075 8,110 LEISURE DURABLES & TOYS - 0.1% Arctco, Inc. 158,350 1,682 LODGING & GAMING - 0.7% Anchor Gaming (a) 250,600 14,660 Doubletree Corp. (a) 11,900 390 Penn National Gaming, Inc. (a) 171,300 3,426 18,476 PUBLISHING - 1.2% Scholastic Corp. (a) 493,800 32,220 RESTAURANTS - 1.0% Applebee's International, Inc. 100,000 2,513 IHOP Corp. (a) 125,300 2,882 Lone Star Steakhouse Saloon (a) 486,800 15,213 Longhorn Steaks, Inc. (a) 162,600 2,520 Outback Steakhouse, Inc. (a) 151,800 3,909 27,037 TOTAL MEDIA & LEISURE 154,299 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - 1.1% FOODS - 0.2% Tyson Foods, Inc. 208,200 $ 5,127 HOUSEHOLD PRODUCTS - 0.9% Alberto-Culver Co. Class A 350,000 12,819 Brady (W.H.) Co. Class A 217,000 4,720 Inbrand Corp. (a) 14,900 350 Safeskin Corp. 130,500 4,763 22,652 TOTAL NONDURABLES 27,779 PRECIOUS METALS - 0.3% Stillwater Mining Co. (a) 134,900 2,900 Stillwater Mining Co. (a)(b) 200,000 4,300 7,200 RETAIL & WHOLESALE - 8.4% APPAREL STORES - 0.8% Gymboree Corp. (a) 372,550 8,662 Just for Feet, Inc. 218,100 8,560 Loehmanns, Inc. (a) 153,500 3,166 Ross Stores, Inc. 41,000 1,210 21,598 DRUG STORES - 0.2% General Nutrition Companies, Inc. (a) 308,800 4,400 GENERAL MERCHANDISE STORES - 2.8% Casey's General Stores, Inc. 130,000 2,194 Dollar Tree Stores (a) 508,500 14,747 Freds, Inc. Class A 300,000 2,888 Michaels Stores, Inc. (a) 458,500 4,986 Nordstrom, Inc. 190,000 7,885 Price/Costco, Inc. (a) 726,400 14,891 Proffitts, Inc. (a) 733,700 25,863 73,454 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED GROCERY STORES - 0.8% Central Garden & Pet Co. 300,000 $ 6,300 Food Lion, Inc. Class B 115,000 970 Richfood Holdings, Inc. Class A 434,800 14,729 21,999 RETAIL & WHOLESALE, MISCELLANEOUS - 3.8% Bed Bath & Beyond, Inc. (a) 201,200 4,426 Books-A-Million, Inc. (a) 85,600 556 CDW Computer Centers, Inc. (a) 85,000 4,686 Cameron Ashley, Inc. (a) 28,000 280 Corporate Express, Inc. (a) 177,000 6,615 Gadzooks, Inc. (a) 160,500 3,892 Gulf South Medical Supply, Inc. 80,000 1,400 Micro Warehouse, Inc. (a) 44,000 979 PETsMART, Inc. (a) 558,000 12,834 Sodak Gaming, Inc. (a) 199,200 7,719 Spiegel, Inc. Class A 76,200 705 Staples, Inc. (a) 829,000 13,782 Sunglass Hut International, Inc. (a) 416,400 4,945 U.S. Office Products Co. (a) 778,900 22,199 Viking Office Products, Inc. (a) 440,000 12,980 Wilmar Industries, Inc. (a) 92,500 1,653 99,651 TOTAL RETAIL & WHOLESALE 221,102 SERVICES - 1.0% ADVERTISING - 0.3% Interpublic Group of Companies, Inc. 183,300 8,088 Universal Outdoor Holdings, Inc. 21,000 441 8,529 SERVICES - 0.7% Borg Warner Security Corp. (a) 50,000 438 Cintas Corp. 37,500 1,913 Employee Solutions, Inc. 83,000 1,432 HCIA, Inc. (a) 94,900 5,433 ICTS Holland Production BV 36,500 370 Medaphis Corp. (a) 150,000 5,569 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - CONTINUED SERVICES - CONTINUED Premier Technologies, Inc. (a) 105,200 $ 2,314 Sterling Healthcare Group, Inc. (a) 21,500 417 Zebra Technologies Corp. Class A (a) 35,000 608 18,494 TOTAL SERVICES 27,023 TECHNOLOGY - 38.2% COMMUNICATIONS EQUIPMENT - 7.5% ADC Telecommunications, Inc. (a) 118,500 5,007 Aspect Telecommunications Corp. (a) 195,600 9,438 Brite Voice Systems, Inc. (a) 270,600 4,228 Cisco Systems, Inc. (a) 1,642,800 85,015 DSC Communications Corp. (a) 762,100 22,863 Dialogic Corp. (a) 132,700 3,483 Dynatech Corp. (a) 110,100 3,661 InterVoice, Inc. (a) 220,000 3,190 Network General Corp. (a) 100,000 1,763 Tellabs, Inc. (a) 123,300 7,367 3Com Corp. (a) 694,600 27,350 U.S. Robotics Corp. (a) 450,000 24,188 197,553 COMPUTER SERVICES & SOFTWARE - 17.0% Advent Software, Inc. (a) 90,500 2,149 American Business Information, Inc. (a) 387,500 5,280 American Management Systems, Inc. (a) 285,000 6,341 Ascend Communications, Inc. (a) 546,200 26,491 BDM International, Inc. (a) 80,200 4,190 BMC Software, Inc. (a) 265,000 16,960 Bisys Group, Inc. (The) (a) 98,575 3,007 Black Box Corp. (a) 172,100 4,238 Boole & Babbage, Inc. (a) 135,450 3,285 Broderbund Software, Inc. (a) 521,300 17,138 CSG Systems International, Inc. (a) 41,000 851 Casino Data Systems (a) 1,900 27 Citrix Systems, Inc. (a) 602,300 22,737 Compuware Corp. (a) 293,300 12,355 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED Data Broadcasting Corp. (a) 46,800 $ 357 ECI Telecom Ltd. 234,800 4,080 Electronic Arts, Inc. (a) 325,000 9,750 Electronics for Imaging, Inc. 100,000 5,825 Fiserv, Inc. (a) 372,300 12,472 HBO & Co. 200,000 12,250 Macromedia, Inc. (a) 593,300 9,567 Maxis, Inc. (a) 406,400 5,588 McAfee Associates, Inc. (a) 270,325 13,584 Microsoft Corp. (a) 503,900 59,397 Netscape Communications Corp. (a) 370,000 14,615 Oracle Systems Corp. (a) 2,246,825 87,907 PC Docs Group International, Inc. (a) 100,000 1,513 Parametric Technology Corp. (a) 305,060 12,698 Paychex, Inc. 151,200 6,917 PeopleSoft, Inc. (a) 99,200 6,702 Physician Support Systems, Inc. (a) 69,700 1,063 Quickresponse Services, Inc. (a) 100,000 2,800 Saville Systems Ireland PLC sponsored ADR (a) 801,900 20,749 Softkey International, Inc. (a) 278,700 5,156 Softdesk, Inc. (a) 121,700 730 SunGard Data Systems, Inc. (a) 364,200 14,887 Sybase, Inc. (a) 96,700 1,789 Synopsys, Inc. 32,400 1,207 Technology Solutions, Inc. (a) 311,250 7,003 Wind River Systems, Inc. (a) 150,250 5,071 448,726 COMPUTERS & OFFICE EQUIPMENT - 4.8% Adaptec, Inc. (a) 383,800 15,928 Canon, Inc. 311,000 5,881 Cornerstone Imaging (a) 53,100 292 Dell Computer Corp. (a) 733,600 40,715 Encad, Inc. (a) 245,000 5,911 FileNet Corp. (a) 281,000 6,252 Gateway 2000, Inc. (a) 456,100 18,301 Sun Microsystems, Inc. (a) 5,100 279 Tech Data Corp. (a) 737,600 16,319 Trident International, Inc. (a) 32,500 561 Wang Laboratories, Inc. (a) 910,700 16,279 126,718 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED ELECTRONIC INSTRUMENTS - 0.1% ADE Corp. (a) 154,100 $ 1,425 Analogic Corp. 15,000 428 1,853 ELECTRONICS - 8.4% Altera Corp. (a) 274,100 11,238 Cascade Communications Corp. (a) 130,000 7,995 DH Technology, Inc. (a) 308,100 7,279 DII Group, Inc. (a) 119,400 2,836 Intel Corp. 1,395,200 104,814 Linear Technology Corp. 839,600 26,447 Maxim Integrated Products, Inc. (a) 499,500 14,236 Molex, Inc. 458,937 13,539 Sanmina Corp. (a) 184,300 5,852 Xilinx, Inc. (a) 835,000 27,033 221,269 PHOTOGRAPHIC EQUIPMENT - 0.4% Fuji Photo Film Co. Ltd. 383,000 11,437 TOTAL TECHNOLOGY 1,007,556 TRANSPORTATION - 4.4% AIR TRANSPORTATION - 0.8% Atlantic Southeast Airlines, Inc. 100,000 2,363 Northwest Airlines Corp. Class A (a) 498,600 18,324 20,687 RAILROADS - 0.6% Wisconsin Central Transportation Corp. (a) 467,800 14,619 TRUCKING & FREIGHT - 3.0% Air Express International Corp. 577,900 15,170 American Freightways Corp. (a) 250,000 2,594 Consolidated Freightways, Inc. 356,800 7,002 Covenant Transport, Inc. Class A (a) 159,100 2,983 Expeditors International of Washington, Inc. 228,000 6,555 Harper Group, Inc. 201,000 3,769 Heartland Express, Inc. (a) 100,000 2,600 Hunt (J.B.) Transport Services, Inc. 560,600 10,301 Knight Transportation, Inc. (a) 75,000 1,388 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - CONTINUED TRUCKING & FREIGHT - CONTINUED Landair Services, Inc. (a) 219,100 $ 2,739 Landstar System, Inc. (a) 150,300 3,870 M.S. Carriers, Inc. (a) 324,500 6,815 Roadway Express, Inc. 180,600 2,641 USFreightways Corp. 249,300 4,410 Werner Enterprises, Inc. 112,200 2,847 Yellow Corp. (a) 350,500 4,469 80,153 TOTAL TRANSPORTATION 115,459 UTILITIES - 3.8% CELLULAR - 1.6% Arch Communications Group, Inc. (a) 654,500 9,408 Boston Communications Group, Inc. (a) 53,000 742 Nextel Communications, Inc. Class A (a) 460,000 6,958 Pagemart Wireless, Inc. Class A (a) 865,000 9,083 Palmer Wireless, Inc. (a) 203,900 3,543 36O Degrees Communications Co. (a) 456,600 10,559 Vanguard Cellular Systems, Inc. Class A (a) 128,800 2,335 42,628 ELECTRIC UTILITY - 0.4% Veba AG Ord. 200,000 10,181 TELEPHONE SERVICES - 1.8% Intermedia Communications of Florida, Inc. (a) 76,900 1,942 MCI Communications Corp. 509,600 12,549 MFS Communications, Inc. (a) 702,400 22,126 Transaction Network Services, Inc. (a) 105,900 1,509 WorldCom, Inc. (a) 380,774 9,853 47,979 TOTAL UTILITIES 100,788 TOTAL COMMON STOCKS (Cost $2,158,916) 2,432,588 CONVERTIBLE PREFERRED STOCKS - 1.1% SHARES VALUE (NOTE 1) (000S) FINANCE - 1.1% SAVINGS & LOANS - 1.1% Washington Mutual, Inc., Series D, $6.00 (Cost $24,860) 201,000 $ 28,241 CONVERTIBLE BONDS - 0.6% MOODY'S RATINGS PRINCIPAL (UNAUDITED) AMOUNT (000S) HEALTH - 0.4% MEDICAL FACILITIES MANAGEMENT - 0.4% US Diagnostic Labs, Inc. 9%, 3/31/03 (b) - $ 7,000 9,100 MEDIA & LEISURE - 0.2% ENTERTAINMENT - 0.2% All American Communications, Inc. 6 1/2%, 10/1/03 (a)(b) - 6,900 5,762 TOTAL CONVERTIBLE BONDS (Cost $17,205) 14,862 REPURCHASE AGREEMENTS - 6.2% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.65%, dated 7/31/96 due 8/1/96 $ 164,012 163,986 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $2,364,967) $ 2,639,677 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $19,162,000 or 0.7% of net assets. 3. Affiliated company (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At July 31,1996, the aggregate cost of investment securities for income tax purposes was $2,375,300,000. Net unrealized appreciation aggregated $264,377,000, of which $418,303,000 related to appreciated investment securities and $153,926,000 related to depreciated investment securities. The fund hereby designates approximately $69,274,000 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) JULY 31, 1996 ASSETS Investment in securities, at value (including repurchase $ 2,639,677 agreements of $163,986) (cost $2,364,967) - See accompanying schedule Cash 1,268 Receivable for investments sold 62,123 Receivable for fund shares sold 19,349 Dividends receivable 825 Interest receivable 353 Other receivables 1,032 TOTAL ASSETS 2,724,627 LIABILITIES Payable for investments purchased $ 75,821 Payable for fund shares redeemed 11,449 Accrued management fee 1,156 Other payables and accrued expenses 1,058 TOTAL LIABILITIES 89,484 NET ASSETS $ 2,635,143 Net Assets consist of: Paid in capital $ 2,061,278 Undistributed net investment income 8,871 Accumulated undistributed net realized gain (loss) on 290,283 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 274,711 investments and assets and liabilities in foreign currencies NET ASSETS, for 84,466 shares outstanding $ 2,635,143 NET ASSET VALUE and redemption price per share $31.20 ($2,635,143 (divided by) 84,466 shares) Maximum offering price per share (100/97.00 of $31.20) $32.16
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1996 INVESTMENT INCOME $ 12,890 Dividends (including $34 received from affiliated issuers) Interest 17,505 TOTAL INCOME 30,395 EXPENSES Management fee $ 16,143 Basic fee Performance adjustment (3,099) Transfer agent fees 6,067 Accounting fees and expenses 780 Non-interested trustees' compensation 12 Custodian fees and expenses 114 Registration fees 194 Audit 49 Legal 24 Total expenses before reductions 20,284 Expense reductions (259) 20,025 NET INVESTMENT INCOME 10,370 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized loss of $1,345 381,159 on sale of investments in affiliated issuers) Foreign currency transactions (167) 380,992 Change in net unrealized appreciation (depreciation) on: Investment securities (255,945) Assets and liabilities in foreign currencies 2 (255,943) NET GAIN (LOSS) 125,049 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 135,419 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED JULY 31, JULY 31, 1996 1995 INCREASE (DECREASE) IN NET ASSETS Operations $ 10,370 $ 5,210 Net investment income Net realized gain (loss) 380,992 60,211 Change in net unrealized appreciation (depreciation) (255,943) 493,273 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 135,419 558,694 FROM OPERATIONS Distributions to shareholders (1,479) (5,090) From net investment income From net realized gain (130,433) (6,456) TOTAL DISTRIBUTIONS (131,912) (11,546) Share transactions 2,256,968 1,283,245 Net proceeds from sales of shares Reinvestment of distributions 129,010 11,034 Cost of shares redeemed (1,864,420) (961,208) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 521,558 333,071 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 525,065 880,219 NET ASSETS Beginning of period 2,110,078 1,229,859 End of period (including undistributed net investment $ 2,635,143 $ 2,110,078 income of $8,871 and $0, respectively) OTHER INFORMATION Shares Sold 70,969 50,478 Issued in reinvestment of distributions 4,239 495 Redeemed (58,605) (37,963) Net increase (decrease) 16,603 13,010
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1996 1995 1994 C 1993 1992 SELECTED PER-SHARE DATA Net asset value, beginning $ 31.09 $ 22.42 $ 25.90 $ 24.65 $ 24.28 of period Income from Investment Operations Net investment income .13 .09 .12 .06 .08 Net realized and 1.80 8.79 (.08) 3.68 2.92 unrealized gain (loss) Total from 1.93 8.88 .04 3.74 3.00 investment operations Less Distributions From net investment (.02) (.09) (.12) (.25) (.12) income From net realized gain (1.80) (.12) (3.40) (2.24) (2.51) Total distributions (1.82) (.21) (3.52) (2.49) (2.63) Net asset value, end $ 31.20 $ 31.09 $ 22.42 $ 25.90 $ 24.65 of period TOTAL RETURN A, B 6.43% 39.98% (.36)% 16.67% 13.30% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 2,635 $ 2,110 $ 1,230 $ 1,327 $ 1,037 (in millions) Ratio of expenses to .83% .82% .89% 1.08% 1.17% average net assets Ratio of expenses to .82% D .81% .88% 1.08% 1.17% average net assets after D D expense reductions Ratio of net investment .42% .35% .48% .53% .59% income to average net assets Portfolio turnover rate 133% 62% 222% 213% 245%
F 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). G TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. H EFFECTIVE AUGUST 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. I 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). NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1996 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity OTC Portfolio (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts and foreign currency options, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED as the fund is informed of the ex-dividend date. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, foreign currency transactions and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the stock and bond markets and to fluctuations in interest rates and currency values. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $3,371,920,000 and $2,927,742,000, respectively, of which U.S. government and government agency obligations aggregated $109,469,000 and $103,033,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. - CONTINUED MANAGEMENT FEE - CONTINUED implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .35%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) 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 .53% 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 $887,000 on sales of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .25% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $257,000 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 $130,000 under this arrangement. In addition, the fund has entered into arrangements with its custodian and transfer agent whereby interest earned on uninvested cash balances was used to offset a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $8,000 and $121,000, respectively, under these arrangements. 6. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Robinson Nugent, Inc. $ - $ 2,339 $ 34 $ - Telor Ophthalmic Pharmaceuticals, Inc. - 918 - - TheraTx, Inc. 7,229 - - 25,734 TOTALS $ 7,229 $ 3,257 $ 34 $ 25,734 REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity OTC Portfolio: We have audited the accompanying statement of assets and liabilities of Fidelity Securities Fund: Fidelity OTC Portfolio, including the schedule of portfolio investments, as of July 31, 1996, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 1996, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Securities Fund: Fidelity OTC Portfolio as of July 31, 1996, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts September 6, 1996 DISTRIBUTIONS The Board of Trustees of Fidelity OTC Portfolio voted to pay on September 9, 1996, to shareholders of record at the opening of business on September 6, 1996, a distribution of $2.77 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.08 per share from net investment income. A total of 1.16% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax. A total of 12% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders. The fund will notify shareholders in January 1997 of these percentages for use in preparing 1996 income tax returns. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * 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 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 950 Northgate Drive San Rafael, CA 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT 29 South Main Street West Hartford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29155 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI TO WRITE FIDELITY 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)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Robert H. Morrison, Manager, Security Transactions John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * ADVISORY BOARD William O. McCoy GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Export Fund Fidelity Fifty Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (REGISTERED TRADEMARK) GROWTH & INCOME PORTFOLIO ANNUAL REPORT JULY 31, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 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 Notes to the financial statements. REPORT OF INDEPENDENT 36 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 37 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 DEAR SHAREHOLDER: Although stocks have managed to post solid returns through the first seven months of 1996, signs of strength in the economy have led to inflation fears, causing some uncertainty in both the stock and bond markets so far this year. In 1995, both stock and bond markets posted strong results, while the year before, stocks posted below-average returns and bonds had one of the worst years in history. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells securities that have grown in value). Effective October 20, 1995, the fund's 3% sales charge was eliminated. If this sales charge had been taken into account, total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS Growth & Income 18.39% 107.60% 339.40% S&P 500(registered trademark) 16.57% 89.62% 269.48% Growth & Income Funds Average 13.09% 79.71% 207.87% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's return to the performance of the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the growth & income funds average, which reflects the performance of 490 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past 12 months. Both benchmarks reflect reinvestment of dividends and capital gains, if any, but do not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS Growth & Income 18.39% 15.73% 15.95% S&P 500 16.57% 13.65% 13.94% Growth & Income Funds Average 13.09% 12.33% 11.78% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960731 19960814 145431 S00000000000001 Growth & Income SP Standard & Poor 500 00027 SP001 1986/07/31 10000.00 10000.00 1986/08/31 10537.47 10742.00 1986/09/30 9863.74 9853.64 1986/10/31 10341.92 10422.19 1986/11/30 10372.31 10675.45 1986/12/31 10174.54 10403.23 1987/01/31 11403.42 11804.54 1987/02/28 11945.35 12270.82 1987/03/31 12304.09 12625.45 1987/04/30 12289.30 12513.08 1987/05/31 12335.36 12621.94 1987/06/30 12788.24 13259.35 1987/07/31 13497.28 13931.60 1987/08/31 13768.16 14451.25 1987/09/30 13659.81 14134.77 1987/10/31 10813.63 11090.14 1987/11/30 10235.67 10176.31 1987/12/31 10762.05 10950.73 1988/01/31 11436.82 11411.75 1988/02/29 12043.25 11943.54 1988/03/31 11784.61 11574.49 1988/04/30 11974.40 11702.96 1988/05/31 12129.69 11804.78 1988/06/30 12690.37 12346.62 1988/07/31 12681.66 12299.70 1988/08/31 12533.59 11881.51 1988/09/30 12987.51 12387.66 1988/10/31 13242.51 12732.04 1988/11/30 13049.06 12549.97 1988/12/31 13234.91 12769.60 1989/01/31 14063.76 13704.33 1989/02/28 13912.25 13363.09 1989/03/31 14342.19 13674.45 1989/04/30 14953.65 14384.16 1989/05/31 15655.02 14966.72 1989/06/30 15762.63 14881.41 1989/07/31 16823.14 16225.20 1989/08/31 17185.71 16543.21 1989/09/30 17093.43 16475.38 1989/10/31 16553.33 16093.16 1989/11/30 16828.12 16421.46 1989/12/31 17152.64 16815.57 1990/01/31 16253.55 15687.25 1990/02/28 16503.30 15889.61 1990/03/31 16793.17 16310.69 1990/04/30 16359.99 15902.92 1990/05/31 17568.86 17453.45 1990/06/30 17487.21 17334.77 1990/07/31 17365.35 17279.30 1990/08/31 15882.69 15717.25 1990/09/30 14966.86 14951.82 1990/10/31 14935.68 14887.53 1990/11/30 15673.63 15849.26 1990/12/31 15986.87 16291.46 1991/01/31 17446.91 17001.76 1991/02/28 18917.45 18217.39 1991/03/31 19959.50 18658.25 1991/04/30 20234.37 18703.03 1991/05/31 21397.26 19511.00 1991/06/30 19943.99 18617.40 1991/07/31 21165.92 19484.97 1991/08/31 21782.20 19946.76 1991/09/30 21590.07 19613.65 1991/10/31 21976.20 19876.47 1991/11/30 20828.85 19075.45 1991/12/31 22676.05 21257.68 1992/01/31 23218.33 20862.29 1992/02/29 23727.40 21133.50 1992/03/31 23240.04 20721.40 1992/04/30 23762.66 21330.61 1992/05/31 23851.62 21435.13 1992/06/30 23382.89 21115.74 1992/07/31 23863.75 21979.38 1992/08/31 23617.73 21528.80 1992/09/30 23859.64 21782.84 1992/10/31 24048.60 21859.08 1992/11/30 24791.85 22604.47 1992/12/31 25292.07 22882.51 1993/01/31 25997.84 23074.72 1993/02/28 26292.97 23388.54 1993/03/31 27257.98 23882.04 1993/04/30 27219.26 23304.09 1993/05/31 27787.13 23928.64 1993/06/30 28214.99 23998.03 1993/07/31 28422.64 23902.04 1993/08/31 29538.78 24807.93 1993/09/30 29699.58 24616.91 1993/10/31 30031.93 25126.48 1993/11/30 29353.92 24887.78 1993/12/31 30231.43 25188.92 1994/01/31 31374.30 26045.34 1994/02/28 30775.66 25339.51 1994/03/31 29421.81 24234.71 1994/04/30 30009.43 24544.92 1994/05/31 30105.09 24947.45 1994/06/30 29582.58 24336.24 1994/07/31 30433.68 25134.47 1994/08/31 31600.51 26164.98 1994/09/30 31233.62 25523.94 1994/10/31 31605.79 26098.23 1994/11/30 30432.02 25147.73 1994/12/31 30916.82 25520.67 1995/01/31 31283.31 26182.42 1995/02/28 32206.85 27202.75 1995/03/31 33220.40 28005.50 1995/04/30 34148.10 28830.27 1995/05/31 35119.97 29982.61 1995/06/30 35753.83 30679.11 1995/07/31 37114.20 31696.43 1995/08/31 37395.14 31775.99 1995/09/30 38898.77 33116.93 1995/10/31 38716.57 32998.70 1995/11/30 40538.53 34447.35 1995/12/31 41855.89 35110.80 1996/01/31 43248.50 36305.98 1996/02/29 43728.18 36642.53 1996/03/31 44100.20 36995.40 1996/04/30 44550.52 37540.71 1996/05/31 45404.58 38508.89 1996/06/30 45684.83 38655.61 1996/07/31 43939.71 36947.80 IMATRL PRASUN SHR__CHT 19960731 19960814 145436 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Growth & Income Portfolio on July 31, 1986. As the chart shows, by July 31, 1996, the value of the investment would have grown to $43,940 - a 339.40% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $36,948 - a 269.48% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks or bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Although growing fears of lower corporate earnings dampened the stock market's momentum at the end of the period, the U.S. stock market posted solid gains over the 12 months ended July 31, 1996. While several corporate earnings disappointments made for a volatile stock market in May, June and July, the Standard & Poor's 500 Index finished the 12 months with a return of 16.57% - above its long-term historical annual average of about 12%. The stock market spent much of the past year breaking price and trading volume records as strong corporate earnings reports, large cash inflows into mutual funds and widespread optimism propelled equity share prices higher. In addition, the period was peppered with several high-profile merger announcements, especially in the media, telecommunications and technology sectors. Smaller-company stocks posted strong gains during the first few months of 1996, and high-tech firms involved in the networking and software fields benefited from strong earnings. Semiconductor stocks, however, suffered during the latter half of the period as a result of overcapacity. In March, better-than-expected employment figures spooked the bond market, pushing long-term interest rates over 7%. Because smaller companies tend to be more adversely affected by the higher borrowing costs brought on by higher rates, their stock prices trended downward in the spring. While larger, multinational firms recorded positive gains, their returns were hurt somewhat by the strengthening dollar. An interview with Steven Kaye, Portfolio Manager of Fidelity Growth & Income Portfolio Q. HOW HAS THE FUND PERFORMED, STEVE? A. It has done well over the past 12 months. During that period, the fund posted a total return of 18.39%, while the growth & income funds average tracked by Lipper Analytical Services returned 13.09%. For the 12 months ended July 31, 1996, the Standard & Poor's 500 Index had a total return of 16.57%. Q. WHAT HELPED THE FUND DO SO WELL COMPARED TO THE LIPPER AVERAGE AND THE S&P 500? A. While the fund's investments in certain sectors helped performance, I believe the fund did so well due to individual stock selection. I don't spend a lot of time trying to position the fund to take advantage of economic or sector-oriented trends. Rather, I'm a bottom-up stock picker, choosing stocks of companies with solid business prospects selling at prices that are inexpensive relative to their historical range. During the period I found such companies across a number of sectors. If I believe a company's management is doing a good job, I tend to buy its stock and hold on to it for a long time. Shareholders will notice that the fund's top 10 investments at the end of the period contain seven of the stocks that made up that group six months ago, and that sector weightings have been steady as well. That's because I try to buy stocks with a multiple-year time horizon. I don't make a lot of changes if the business prospects of the fund's holdings remain positive. I sell a stock if business prospects change or if I find its valuation has become high relative to historical levels. Q. EVEN THOUGH YOU PICK INVESTMENTS STOCK-BY-STOCK, THERE MUST HAVE BEEN SOME SECTORS THAT PERFORMED WELL, IN GENERAL AND FOR THE FUND. A. Certainly. Aerospace and defense was one. This is a sector that has experienced a great deal of consolidation recently. Mergers and acquisitions have reduced competition and created opportunities for cost savings. The fund benefited when a stock it owned, Loral, was purchased by Lockheed Martin, another of the fund's investments. The fund also owns Northrop Grumman, General Dynamics, Raytheon, Litton Industries and McDonnell Douglas. These companies generally have been able to generate strong free cash flow that has enabled them to buy back stock or acquire other companies. Two other factors have made stocks in the sector attractive. First, they have been inexpensive for the most part. Second, it appears that we're at or near a bottom in government-related defense expenditures. Any increase in this spending should help these companies quite a bit. Q. HOW ABOUT CONSUMER NONDURABLE STOCKS? THEY'VE DONE FAIRLY WELL OVER THE PAST 12 MONTHS, HAVEN'T THEY? A. Yes, they have, because investors were attracted to the steady earnings growth they tend to provide regardless of the economic backdrop. There has been a fair amount of uncertainty over the direction of the economy during the past 12 months, so this sector has attracted a fair amount of interest. The fund has had less invested in nondurables than the S&P 500, but two of its better performers and largest investments at the end of the period came from this sector. Philip Morris and PepsiCo delivered strong earnings growth and solid dividends, and they have both bought back stock. Q. LET'S TALK ABOUT TWO MORE OF THE FUND'S TOP FIVE SECTORS, ENERGY AND HEALTH . . . A. Energy stocks have done very well in 1996. That's because natural gas prices went up due to a cold winter and oil prices have risen more than expected around the world, so demand for drilling activity has increased. In addition, the oil field service industry has seen a fair amount of consolidation over the past few years. As a result of decreased competition, the remaining companies tend to make more money when demand increases. Among the stocks that helped the fund were Royal Dutch Petroleum, Schlumberger, Baker Hughes and Dresser. In the health sector, pharmaceutical stocks such as Bristol-Myers Squibb, American Home Products, Pfizer and Lilly did well, mainly for the same reason consumer nondurables did - solid earnings growth in an uncertain economic environment. However, health maintenance organization (HMO) stocks such as United Health Care struggled because medical costs grew faster than price increases. As a result, profit margins were squeezed and earnings fell short of expectations. Q. WERE THERE ANY OTHER AREAS THAT PROVED TO BE DISAPPOINTING? A. Fortunately, those stocks that performed poorly tended to be very small positions in the fund. Among those were Browning-Ferris Industries and WMX Technologies. These pollution control companies posted worse-than-expected earnings because of a collapse in recycled product prices. Q. INTEREST RATES HAVE RISEN SINCE THE BEGINNING OF THE YEAR. THAT INCREASE MUST HAVE HAD A NEGATIVE EFFECT ON THE FUND'S INVESTMENTS IN THE FINANCE SECTOR. A. It's true that rising interest rates generally have a negative effect on these stocks. Nevertheless, many of the fund's finance stocks, including its large stakes in Federal National Mortgage Association - Fannie Mae - and American Express, performed fairly well. I believe that's because these companies have continued to experience positive earnings growth, and because they generally have been immune from the issues related to deteriorating credit quality problems that have hurt some companies in the sector. Q. RETAIL AND WHOLESALE STOCKS HAVE INCREASED AS A PERCENTAGE OF THE FUND WHILE UTILITY STOCKS HAVE DECREASED OVER THE PAST SIX MONTHS. WHAT WERE THE STORIES BEHIND THOSE MOVES? A. Retail was attractive for some time because valuations in the sector had been beaten down to historically low levels, largely because of overcapacity - too many stores and too much square footage. Fortunately, my investments in this area posted solid results due to increases in sales over the first six months of 1996. Consumers started to spend more on durable items than they had previously. Stocks rebounded from their depressed levels to reflect more of their fair value. Wal-Mart, May Department Stores, Federated Department Stores, The Gap, The Limited, TJ Maxx (TJX Companies) and Carson Pirie Scott were among the stocks that did well, although I've cut back on some of these positions to take advantage of their share price increases. Grocery store chains such as Safeway and Kroger also helped. In the utilities sector, I made a conscious decision not to add to local telephone companies such as SBC Communications and Ameritech, which were among the fund's largest investments six months ago. I was concerned about the competitive outlook for these stocks because of the new telecommunications law that passed early in the year, and their stock prices had reached rich - or expensive - levels relative to historical levels. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. It's always difficult to predict the direction of the economy, and I don't intend to do so. Meanwhile, the stock market has been quite volatile over the past few months. I think that's healthy, because valuations in the market appear to be expensive to me. I'll probably gravitate toward more defensive names - companies with histories of steady earnings growth, or those that are considered recession-proof - because I think profit margins and valuations are above normal. Any economic slowdown would affect both corporate earnings and stock valuations. That's why you might see more of the fund invested in consumer nondurables, health care or in a stock such as Fannie Mae that does well in a recession because people tend to continue paying their mortgages. FUND FACTS GOAL: seeks a high total return through a combination of high current income and capital appreciation START DATE: December 30, 1985 SIZE: as of July 31, 1996, more than $19.2 billion MANAGER: Steven Kaye, since 1993; also manager, Fidelity Blue Chip Growth Fund, 1990- 1992; Fidelity Select Energy Services, Biotechnology, and Health Care Portfolios, 1986- 1990; joined Fidelity in 1985 (checkmark) STEVE KAYE ON INVESTING AND STOCK MARKET VOLATILITY: "We've seen some volatility in the stock market over the past few months, with the Dow Jones Industrial Average occasionally dropping sharply and unable to develop much of a consistent move upward. Some declines we've seen in the NASDAQ index have been what I would call breathtaking. At times like these, it's important for investors in equity mutual funds to focus on the fact that over the long term the market has gone up. Almost no one is a good enough investor to time the market, getting in at the low and out at the peak. As a result, an investor should aim to maintain consistency in staying in the market. It's important to ride out the tough periods, to have the resolve to hang in there and not lose confidence. Unless investors have a short-term investment horizon, they're probably better off staying invested in the stock market and enduring whatever downturns they may confront. History has shown that, over time, investors have benefited from investing in stocks - and stock mutual funds - more than any other class of assets." 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. INVESTMENT CHANGES TOP TEN STOCKS AS OF JULY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Philip Morris Companies, Inc. 3.9 4.2 General Electric Co. 3.1 3.1 Royal Dutch Petroleum Co. ADR 2.0 0.6 Federal National Mortgage Association 1.8 2.3 British Petroleum PLC ADR 1.7 1.6 American Express Co. 1.7 1.9 Electronic Data Systems Corp. 1.4 1.0 (formerly General Motors Corp. Class E) PepsiCo, Inc. 1.4 1.4 Lockheed Martin Corp. 1.2 1.1 Bristol-Myers Squibb Co. 1.2 0.7 TOP FIVE MARKET SECTORS AS OF JULY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Health 15.3 15.4 Finance 11.0 11.5 Nondurables 10.6 12.0 Energy 7.4 5.8 Retail & Wholesale 6.9 5.5 ASSET ALLOCATION AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 ** Row: 1, Col: 1, Value: 8.6 Row: 1, Col: 2, Value: 1.8 Row: 1, Col: 3, Value: 1.3 Row: 1, Col: 4, Value: 40.0 Row: 1, Col: 5, Value: 48.3 Stocks 88.7% Bonds 0.4% Convertibles 0.6% Short-term investments 10.3% FOREIGN INVESTMENTS 5.9% Stocks 90.2% Bonds 0.4% Convertibles 0.8% Short-term investments 8.6% FOREIGN INVESTMENTS 7.7% Row: 1, Col: 1, Value: 10.3 Row: 1, Col: 2, Value: 1.6 Row: 1, Col: 3, Value: 1.4 Row: 1, Col: 4, Value: 46.7 Row: 1, Col: 5, Value: 40.0 * ** INVESTMENTS JULY 31, 1996 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.2% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 4.4% AEROSPACE & DEFENSE - 2.9% British Aerospace PLC 2,456,939 $ 35,499 Flightsafety International, Inc. 578,300 26,602 Lockheed Martin Corp. 2,819,305 233,650 McDonnell Douglas Corp. 2,444,200 109,378 Northrop Grumman Corp. 1,724,900 118,587 Rockwell International Corp. 640,700 33,637 557,353 DEFENSE ELECTRONICS - 0.8% Litton Industries, Inc. (a) 2,155,100 92,669 Raytheon Co. 1,251,400 60,693 153,362 SHIP BUILDING & REPAIR - 0.7% General Dynamics Corp. 2,184,600 139,814 TOTAL AEROSPACE & DEFENSE 850,529 BASIC INDUSTRIES - 5.1% CHEMICALS & PLASTICS - 4.1% Air Products & Chemicals, Inc. 862,100 46,015 Carlisle Plastics, Inc. Class A (a)(c) 1,041,100 7,288 Cytec Industries, Inc. (a) 900,000 27,000 Dow Chemical Co. 251,600 18,713 du Pont (E.I.) de Nemours & Co. 1,154,600 93,234 Ethyl Corp. 2,988,900 26,900 Ferro Corp. (c) 1,583,600 42,559 Grace (W.R.) & Co. 1,027,200 65,484 Great Lakes Chemical Corp. 1,421,000 81,885 Hercules, Inc. 530,400 26,586 IMC Fertilizer Group, Inc. 1,250,300 49,387 Monsanto Co. 300,000 9,375 NL Industries, Inc. 501,000 5,073 Praxair, Inc. 3,388,900 130,048 Raychem Corp. 568,900 37,619 Schulman (A.), Inc. 1,275,500 28,699 Union Carbide Corp. 2,065,600 86,755 782,620 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - CONTINUED IRON & STEEL - 0.1% Nucor Corp. 334,900 $ 15,698 METALS & MINING - 0.1% Aluminum Co. of America 263,600 15,289 PACKAGING & CONTAINERS - 0.8% Corning, Inc. 1,752,800 64,635 Crown Cork & Seal Co., Inc. 936,200 41,661 Tupperware Corp. 1,337,600 57,182 163,478 PAPER & FOREST PRODUCTS - 0.0% James River Corp. of Virginia 178,900 4,517 TOTAL BASIC INDUSTRIES 981,602 CONGLOMERATES - 2.6% AlliedSignal, Inc. 1,602,000 94,118 American Standard Companies, Inc. (a) 1,318,500 42,357 Dial Corp. (The) 513,300 15,014 Tyco International Ltd. 5,137,348 210,630 United Technologies Corp. 480,200 54,083 Whitman Corp. 4,089,200 91,496 507,698 CONSTRUCTION & REAL ESTATE - 1.9% BUILDING MATERIALS - 0.3% Sherwin-Williams Co. 1,300,200 58,834 REAL ESTATE - 0.1% Rouse Co. (The) 871,200 21,780 REAL ESTATE INVESTMENT TRUSTS - 1.5% Bay Apartment Communities, Inc. 411,900 10,452 Beacon Properties Corp. 997,700 26,190 CBL & Associates Properties, Inc. (c) 1,756,200 37,978 Cali Realty Corp. 333,900 7,721 Carr Realty Corp. 185,100 4,442 Crescent Real Estate Equities, Inc. 323,000 12,032 Duke Realty Investors, Inc. 350,500 10,427 Equity Residential Properties Trust (SBI) 1,903,685 64,249 Highwoods Properties, Inc. 480,500 13,274 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - CONTINUED REAL ESTATE INVESTMENT TRUSTS - CONTINUED Irvine Apartment Communities, Inc. 191,400 $ 4,019 Liberty Property Trust (SBI) 628,200 12,485 Macerich Co. 647,600 13,519 Manufactured Home Communities, Inc. 526,100 9,601 Public Storage, Inc. 1,685,500 36,028 Speiker Properties, Inc. 421,500 12,013 Urban Shopping Centers, Inc. 644,900 14,833 289,263 TOTAL CONSTRUCTION & REAL ESTATE 369,877 DURABLES - 3.7% AUTOS, TIRES, & ACCESSORIES - 1.5% Chrysler Corp. 648,600 18,404 Eaton Corp. 726,400 40,497 Ford Motor Co. 150,900 4,904 General Motors Corp. 2,289,438 111,610 Scania AB: Class A 293,500 7,856 Class B 893,500 23,916 Volvo AB Class B 3,800,000 82,409 289,596 CONSUMER DURABLES - 0.7% Minnesota Mining & Manufacturing Co. 1,953,300 126,965 Swedish Match Co. 2,900,000 8,576 135,541 CONSUMER ELECTRONICS - 0.5% Matsushita Electric Industrial Co. Ltd. 500,000 8,706 Newell Co. 1,842,800 59,200 Whirlpool Corp. 607,600 29,924 97,830 TEXTILES & APPAREL - 1.0% Fruit of the Loom, Inc. Class A (a)(c) 4,429,300 111,840 Intimate Brands, Inc. Class A 888,300 18,210 Unifi, Inc. 2,070,600 57,200 187,250 TOTAL DURABLES 710,217 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - 7.4% ENERGY SERVICES - 1.5% Baker Hughes, Inc. 835,100 $ 24,531 Dresser Industries, Inc. 1,000,300 27,008 Schlumberger Ltd. 2,085,700 166,856 Western Atlas, Inc. (a) 1,189,400 64,525 282,920 OIL & GAS - 5.9% Amerada Hess Corp. 962,100 46,782 Amoco Corp. 468,200 31,311 Anadarko Petroleum Corp. 73,900 3,778 Atlantic Richfield Co. 100,000 11,600 British Petroleum PLC: ADR 3,018,941 331,705 Ord. 4,090,460 37,044 Burlington Resources, Inc. 426,000 18,212 Chevron Corp. 650,400 37,642 Kerr-McGee Corp. 489,900 27,924 Mobil Corp. 485,800 53,620 Occidental Petroleum Corp. 2,319,400 51,897 Royal Dutch Petroleum Co. ADR 2,515,200 379,481 Total SA: Class B 140,000 10,060 sponsored ADR 1,022,477 36,554 USX-Marathon Group 836,000 17,138 Unocal Corp. 1,258,932 41,073 1,135,821 TOTAL ENERGY 1,418,741 FINANCE - 10.7% BANKS - 1.4% Banc One Corp. 113,140 3,917 Bank of New York Co., Inc. 1,758,800 90,578 Citicorp 1,220,000 99,888 Fleet Financial Group, Inc. 1,509,599 61,139 National City Corp. 100,000 3,463 Norwest Corp. 439,400 15,599 274,584 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED CREDIT & OTHER FINANCE - 2.4% American Express Co. 7,469,630 $ 326,796 Associates First Capital Corp. (a) 207,000 7,944 Beneficial Corp. 870,600 47,012 First Chicago NBD Corp. 343,600 13,229 Household International, Inc. 815,582 60,761 455,742 FEDERAL SPONSORED CREDIT - 3.5% Federal Home Loan Mortgage Corporation 1,530,800 128,970 Federal National Mortgage Association 10,984,000 348,742 Student Loan Marketing Association 2,712,800 198,034 675,746 INSURANCE - 3.1% Allmerica Financial Corp. 1,042,800 30,893 Allstate Corp. 2,373,010 106,192 General Re Corp. 767,300 112,601 ITT Hartford Group, Inc. 3,663,500 193,708 MBIA, Inc. 1,195,100 90,379 PMI Group, Inc. 312,300 14,834 Travelers, Inc. (The) 864,499 36,525 UNUM Corp. 115,700 7,058 592,190 SECURITIES INDUSTRY - 0.3% Lehman Brothers Holdings, Inc. 1,966,520 45,475 Nomura Securities Co. Ltd. 409,000 7,160 52,635 TOTAL FINANCE 2,050,897 HEALTH - 15.0% DRUGS & PHARMACEUTICALS - 8.8% Allergan, Inc. 2,918,000 118,909 American Home Products Corp. 3,265,000 185,289 Astra AB: Class A Free shares 1,450,000 61,022 Class B Free shares 148,720 6,146 Bristol-Myers Squibb Co. 2,690,400 233,056 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED COR Therapeutics, Inc. (a) 517,000 $ 3,942 Genentech, Inc. special (a) 2,144,800 112,870 Lilly (Eli) & Co. 2,878,866 161,216 Merck & Co., Inc. 1,400,000 89,950 Pharmacia & Upjohn, Inc. 4,068,350 167,819 Pfizer, Inc. 2,215,400 154,801 Schering-Plough Corp. 2,073,800 114,318 SmithKline Beecham PLC ADR 2,786,100 149,753 Warner-Lambert Co. 2,300,160 125,359 1,684,450 MEDICAL EQUIPMENT & SUPPLIES - 4.8% Bard (C.R.), Inc. 2,027,300 61,833 Bausch & Lomb, Inc. (c) 3,124,200 110,909 Baxter International, Inc. 3,342,100 139,115 Beckman Instruments, Inc. 669,300 24,095 Becton, Dickinson & Co. 643,800 48,044 Biomet, Inc. (a) 2,793,700 42,953 Boston Scientific Corp. (a) 335,895 16,039 Guidant Corp. 498,825 25,315 Johnson & Johnson 2,430,600 116,061 McKesson Corp. 338,900 14,742 Medtronic, Inc. 711,200 33,693 Nellcor, Inc. (a) 645,300 15,245 Pall Corp. 4,281,000 103,279 St. Jude Medical, Inc. (a) 3,429,850 115,329 Stryker Corp. 2,354,000 57,857 924,509 MEDICAL FACILITIES MANAGEMENT - 1.4% Columbia/HCA Healthcare Corp. 711,177 36,447 FHP International Corp. (a) 742,500 19,398 Health Systems International, Inc. (a) 439,900 8,688 Tenet Healthcare Corp. (a) 5,738,200 111,178 United HealthCare Corp. 2,777,100 93,727 269,438 TOTAL HEALTH 2,878,397 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HOLDING COMPANIES - 0.2% U.S. Industries, Inc. (a) 2,040,760 $ 45,917 INDUSTRIAL MACHINERY & EQUIPMENT - 5.2% ELECTRICAL EQUIPMENT - 4.3% Alcatel Alsthom Compagnie Generale d'Electricite SA 713,576 58,417 American Superconductor Corp. (a) 304,750 3,543 Duracell International, Inc. 575,000 25,947 Emerson Electric Co. 842,600 71,094 General Electric Co. 7,229,000 595,489 Loral Space & Communications Ltd. (a) 79,900 1,129 Oak Industries, Inc. (a)(c) 1,119,700 32,191 Omron Corp. 239,000 4,385 Scientific-Atlanta, Inc. 541,000 7,236 Sensormatic Electronics Corp. 1,696,200 25,867 825,298 INDUSTRIAL MACHINERY & EQUIPMENT - 0.3% Caterpillar, Inc. 4,800 316 Cooper Industries, Inc. 920,776 36,256 Stanley Works 427,100 12,172 48,744 POLLUTION CONTROL - 0.6% Browning-Ferris Industries, Inc. 728,600 16,303 WMX Technologies, Inc. 3,022,700 89,547 105,850 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 979,892 MEDIA & LEISURE - 3.3% BROADCASTING - 0.5% Comcast Corp. Class A special 1,831,300 25,867 Home Shopping Network, Inc. (a) 1,249,000 12,646 Infinity Broadcasting Corp. Class A 697,084 19,170 Jacor Communications, Inc. Class A (a) 805,000 24,553 TCI Group Class A 900,000 12,825 95,061 ENTERTAINMENT - 0.1% Disney (Walt) Co. 320,300 17,817 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED LODGING & GAMING - 1.5% Aztar Corp. (a) 1,379,900 $ 13,626 Hilton Hotels Corp. 245,600 25,051 ITT Corp. 3,537,400 200,747 Mirage Resorts, Inc. (a) 2,136,400 48,069 Trump Hotels & Casino Resorts, Inc. (a) 131,800 3,460 290,953 PUBLISHING - 0.9% Dun & Bradstreet Corp. 1,774,800 102,051 Times Mirror Co. Class A 1,895,400 78,422 180,473 RESTAURANTS - 0.3% Brinker International, Inc. (a) 782,600 10,272 Darden Restaurants, Inc. 4,422,700 34,829 Starbucks Corp. (a) 615,900 16,013 61,114 TOTAL MEDIA & LEISURE 645,418 NONDURABLES - 10.5% AGRICULTURE - 0.1% Pioneer Hi-Bred International, Inc. 363,100 19,517 BEVERAGES - 1.9% Anheuser-Busch Companies, Inc. 1,320,000 98,670 PepsiCo, Inc. 8,444,000 267,042 365,712 FOODS - 2.0% General Mills, Inc. 1,128,100 61,199 Kellogg Co. 878,000 65,631 Nestle SA (Reg.) 20,000 22,826 Quaker Oats Co. 332,100 10,627 RalCorp Holdings, Inc. (a) 661,766 14,311 Ralston Purina Group 1,413,507 88,697 Sysco Corp. 2,692,900 78,094 Tyson Foods, Inc. 1,035,200 25,492 Universal Foods Corp. 482,500 14,415 381,292 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED HOUSEHOLD PRODUCTS - 1.7% Avon Products, Inc. 811,400 $ 35,702 Premark International, Inc. 1,780,900 32,056 Procter & Gamble Co. 1,125,000 100,547 Rubbermaid, Inc. 2,548,100 73,258 Tambrands, Inc. 1,092,100 44,503 Unilever NV ADR 308,000 43,813 329,879 TOBACCO - 4.8% Philip Morris Companies, Inc. 7,221,200 755,517 RJR Nabisco Holdings Corp. 2,679,546 82,396 UST, Inc. 2,479,300 82,437 920,350 TOTAL NONDURABLES 2,016,750 PRECIOUS METALS - 0.2% Newmont Mining Corp. 469,500 23,182 Santa Fe Pacific Gold Corp. 761,640 10,186 33,368 RETAIL & WHOLESALE - 6.8% APPAREL STORES - 1.0% Baby Superstore, Inc. (a) 350,700 4,559 Gap, Inc. 156,000 4,641 Limited, Inc. (The) 3,511,000 67,587 Melville Corp. 1,478,800 57,858 Payless ShoeSource, Inc. (a) 1,113,668 36,055 TJX Companies, Inc. 829,200 24,980 195,680 DRUG STORES - 1.0% Revco (D.S.), Inc. (a) 2,415,093 54,943 Rite Aid Corp. 1,845,400 54,901 Walgreen Co. 2,351,500 74,660 184,504 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED GENERAL MERCHANDISE STORES - 2.5% Carson Pirie Scott & Co. (a)(c) 1,644,874 $ 36,598 Dayton Hudson Corp. 589,600 17,835 Federated Department Stores, Inc. (a) 1,778,430 53,798 May Department Stores Co. (The) 1,044,700 46,881 Price/Costco, Inc. (a) 2,694,600 55,239 Sears, Roebuck & Co. 1,160,500 47,581 Wal-Mart Stores, Inc. 9,607,700 230,585 488,517 GROCERY STORES - 0.6% Ahold NV 200,000 10,160 Kroger Co. (The) (a) 1,259,326 47,540 Safeway, Inc. (a) 1,820,200 65,527 123,227 RETAIL & WHOLESALE, MISCELLANEOUS - 1.7% Home Depot, Inc., (The) 4,131,700 208,651 Tandy Corp. 688,400 29,085 Toys "R" Us, Inc. 3,036,900 80,098 317,834 TOTAL RETAIL & WHOLESALE 1,309,762 SERVICES - 1.5% PRINTING - 0.3% Deluxe Corp. 265,900 9,805 Valassis Communications, Inc. (a)(c) 2,372,400 42,407 52,212 SERVICES - 1.2% ADT Ltd. (a) 3,520,500 66,449 Block (H & R), Inc. 1,987,900 51,934 Jostens, Inc. (c) 2,878,700 55,055 Loewen Group, Inc. 962,500 25,798 Service Corp. International 543,600 29,966 229,202 TOTAL SERVICES 281,414 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - 6.1% COMMUNICATIONS EQUIPMENT - 0.5% Cisco Systems, Inc. (a) 1,634,000 $ 84,560 General Instrument Corp. (a) 588,700 14,791 99,351 COMPUTER SERVICES & SOFTWARE - 3.0% Automatic Data Processing, Inc. 1,975,100 78,263 CUC International, Inc. (a) 949,200 32,984 Ceridian Corp. (a) 1,700,600 73,976 DST Systems, Inc. (a) 1,136,300 32,385 Electronic Data Systems Corp. 5,145,600 272,074 First Data Corp. 800,000 62,100 Information Resources, Inc. (a) 1,317,778 15,978 567,760 COMPUTERS & OFFICE EQUIPMENT - 1.5% Canon, Inc. 409,000 7,734 Diebold, Inc. 163,450 8,949 International Business Machines Corp. 1,028,000 110,896 Pitney Bowes, Inc. 2,703,900 131,139 Silicon Graphics, Inc. (a) 1,224,300 28,771 Wang Laboratories, Inc. (a) 237,900 4,252 291,741 ELECTRONIC INSTRUMENTS - 0.3% Perkin-Elmer Corp. 1,061,200 55,448 Tektronix, Inc. 144,300 5,519 60,967 ELECTRONICS - 0.3% AMP, Inc. 528,100 20,398 Intel Corp. 550,000 41,319 61,717 PHOTOGRAPHIC EQUIPMENT - 0.5% Imation Corp. 187,830 4,273 Polaroid Corp. 2,132,000 90,077 94,350 TOTAL TECHNOLOGY 1,175,886 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - 1.3% AIR TRANSPORTATION - 0.2% AMR Corp. 168,400 $ 13,282 Southwest Airlines Co. 1,016,200 25,151 38,433 RAILROADS - 1.1% Burlington Northern Santa Fe Corp. 1,207,519 95,243 CSX Corp. 1,225,800 59,145 Union Pacific Corp. 699,300 47,902 202,290 TOTAL TRANSPORTATION 240,723 UTILITIES - 4.3% CELLULAR - 0.2% AirTouch Communications, Inc. (a) 295,800 8,134 360 Degrees Communications Co. (a) 1,300,000 30,063 38,197 ELECTRIC UTILITY - 0.5% Allegheny Power System, Inc. 257,800 7,541 American Electric Power Co., Inc. 180,800 7,503 Duke Power Co. 100,000 4,787 Entergy Corp. 1,774,300 45,245 Texas Utilities Co. 167,400 7,031 Veba AG Ord. 600,000 30,543 102,650 GAS - 0.1% Consolidated Natural Gas Co. 234,200 11,798 TELEPHONE SERVICES - 3.5% AT&T Corp. 503,000 26,218 Ameritech Corp. 2,890,100 160,401 BCE, Inc. 306,000 12,219 Bell Atlantic Corp. 920,400 54,419 BellSouth Corp. 679,300 27,851 Frontier Corp. 1,067,400 30,021 GTE Corp. 1,181,100 48,720 NYNEX Corp. 2,222,300 99,726 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - CONTINUED Pacific Telesis Group 500,000 $ 16,813 SBC Communications, Inc. 3,464,700 169,336 WorldCom, Inc. (a) 820,200 21,223 666,947 TOTAL UTILITIES 819,592 TOTAL COMMON STOCKS (Cost $14,120,322) 17,316,680 CONVERTIBLE PREFERRED STOCKS - 0.2% BASIC INDUSTRIES - 0.0% PAPER & FOREST PRODUCTS - 0.0% International Paper $2.625 (d) 150,000 6,675 FINANCE - 0.0% INSURANCE - 0.0% Allstate Corp. exchangeable $2.30 90,000 3,836 NONDURABLES - 0.1% TOBACCO - 0.1% RJR Nabisco Holdings Corp. depositary shares representing 1/10 pfd., Series C 1,825,500 11,181 RETAIL & WHOLESALE - 0.1% APPAREL STORES - 0.1% TJX Companies, Inc., Series E, $7.00 72,000 11,880 GENERAL MERCHANDISE STORES - 0.0% K mart Financing I $3.875 130,800 6,360 TOTAL RETAIL & WHOLESALE 18,240 TECHNOLOGY - 0.0% COMPUTERS & OFFICE EQUIPMENT - 0.0% Wang Labs, Inc. $3.25 (d) 69,700 3,067 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $45,524) 42,999 CORPORATE BONDS - 1.0% MOODY'S RATINGS PRINCIPAL (UNAUDITED) AMOUNT (000S) CONVERTIBLE BONDS - 0.6% CONSTRUCTION & REAL ESTATE - 0.0% REAL ESTATE INVESTMENT TRUSTS - 0.0% Liberty Property exchangeable 8%, 7/1/01 B1 $ 1,591 $ 1,595 FINANCE - 0.2% BANKS - 0.2% Bank of New York Co., Inc. 7 1/2%, 8/15/01 A2 14,872 39,225 HEALTH - 0.2% DRUGS & PHARMACEUTICALS - 0.2% Roche Holdings, Inc. liquid yield option notes 0%, 4/20/10 (d) - 72,400 30,227 MEDIA & LEISURE - 0.0% BROADCASTING - 0.0% Home Shopping Network, Inc. 5 7/8%, 3/1/06 (d) B- 4,321 4,364 Jacor Communications, Inc. liquid yield option notes 0%, 6/12/11 B3 3,848 1,785 6,149 RETAIL & WHOLESALE - 0.0% GROCERY STORES - 0.0% Food Lion, Inc. 5%, 6/1/03 (d) A3 6,700 7,955 TECHNOLOGY - 0.2% COMPUTERS & OFFICE EQUIPMENT - 0.1% Unisys Corp. 8 1/4%, 3/15/06 B3 10,470 11,308 ELECTRONICS - 0.1% National Semiconductor Corp. 6 1/2%, 10/1/02 (d) Ba2 23,600 20,296 TOTAL TECHNOLOGY 31,604 TOTAL CONVERTIBLE BONDS 116,755 CORPORATE BONDS - CONTINUED MOODY'S RATINGS PRINCIPAL (UNAUDITED) AMOUNT (000S) NONCONVERTIBLE BONDS - 0.4% DURABLES - 0.1% TEXTILES & APPAREL - 0.1% Westpoint Stevens, Inc. 8 3/4%, 12/15/01 Ba3 $ 16,910 $ 16,741 FINANCE - 0.1% ASSET-BACKED SECURITIES - 0.1% Airplanes Pass Thru Trust Class D 10 7/8%, 3/15/19 Ba2 14,530 15,148 HEALTH - 0.1% MEDICAL FACILITIES MANAGEMENT - 0.1% Tenet Healthcare Corp. 10 1/8%, 3/1/05 Ba3 23,000 24,495 MEDIA & LEISURE - 0.1% BROADCASTING - 0.1% Citicasters, Inc. 9 3/4%, 2/15/04 B2 6,250 6,407 SCI Television, Inc. secured 11%, 6/30/05 B2 7,250 7,748 14,155 TOTAL NONCONVERTIBLE BONDS 70,539 TOTAL CORPORATE BONDS (Cost $168,043) 187,294 U.S. TREASURY OBLIGATIONS - 0.0% 8 1/8%, 8/15/19 (Cost $10,259) Aaa 10,000 11,142 REPURCHASE AGREEMENTS - 8.6% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.65%, dated 7/31/96 due 8/1/96 $ 1,647,526 1,647,267 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $15,991,415) $ 19,205,382 LEGEND 1. Non-income producing 2. Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 3. Affiliated company (see Note 7 of Notes to Financial Statements). 4. 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 $72,584,000 or 0.4% of net assets. INCOME TAX INFORMATION At July 31, 1996, the aggregate cost of investment securities for income tax purposes was $16,000,638,000. Net unrealized appre- ciation aggregated $3,204,744,000, of which $3,561,754,000 related to appreciated invest- ment securities and $357,010,000 related to depreciated investment securities. The fund hereby designates approximately $59,736,000 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) JULY 31, 1996 ASSETS Investment in securities, at value (including repurchase $ 19,205,382 agreements of $1,647,267) (cost $15,991,415) - See accompanying schedule Cash 56 Receivable for investments sold 107,777 Receivable for fund shares sold 46,788 Dividends receivable 24,319 Interest receivable 3,661 Other receivables 786 TOTAL ASSETS 19,388,769 LIABILITIES Payable for investments purchased $ 123,567 Payable for fund shares redeemed 20,266 Accrued management fee 8,089 Other payables and accrued expenses 7,501 Collateral on securities loaned, at value 23,700 TOTAL LIABILITIES 183,123 NET ASSETS $ 19,205,646 Net Assets consist of: Paid in capital $ 15,195,572 Undistributed net investment income 46,747 Accumulated undistributed net realized gain (loss) on 749,332 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 3,213,995 investments and assets and liabilities in foreign currencies NET ASSETS, for 680,978 shares outstanding $ 19,205,646 NET ASSET VALUE, offering price and redemption price per $28.20 share ($19,205,646 (divided by) 680,978 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1996 INVESTMENT INCOME $ 319,767 Dividends (including $3,720 received from affiliated issuers) Interest (including income on securities loaned of $343) 85,298 TOTAL INCOME 405,065 EXPENSES Management fee $ 80,483 Transfer agent fees 34,944 Accounting fees and expenses 822 Non-interested trustees' compensation 82 Custodian fees and expenses 424 Registration fees 2,230 Audit 155 Legal 96 Miscellaneous 88 Total expenses before reductions 119,324 Expense reductions (2,460) 116,864 NET INVESTMENT INCOME 288,201 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain of $2,495 931,663 on sales of investments in affiliated issuers) Foreign currency transactions 4,891 936,554 Change in net unrealized appreciation (depreciation) on: Investment securities 1,118,178 Assets and liabilities in foreign currencies 86 1,118,264 NET GAIN (LOSS) 2,054,818 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 2,343,019 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED JULY 31, JULY 31, 1996 1995 INCREASE (DECREASE) IN NET ASSETS Operations $ 288,201 $ 220,509 Net investment income Net realized gain (loss) 936,554 462,592 Change in net unrealized appreciation (depreciation) 1,118,264 1,412,882 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,343,019 2,095,983 FROM OPERATIONS Distributions to shareholders (271,415) (175,942) From net investment income From net realized gain (453,173) (508,140) TOTAL DISTRIBUTIONS (724,588) (684,082) Share transactions 8,197,294 3,118,020 Net proceeds from sales of shares Reinvestment of distributions 707,541 667,970 Cost of shares redeemed (3,423,684) (1,849,027) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 5,481,151 1,936,963 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 7,099,582 3,348,864 NET ASSETS Beginning of period 12,106,064 8,757,200 End of period (including undistributed net investment $ 19,205,646 $ 12,106,064 income of $46,747 and $27,390, respectively) OTHER INFORMATION Shares Sold 295,617 136,992 Issued in reinvestment of distributions 27,008 30,753 Redeemed (123,924) (80,408) Net increase (decrease) 198,701 87,337
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1996 1995 1994 C 1993 1992 SELECTED PER-SHARE DATA Net asset value, $ 25.10 $ 22.17 $ 21.90 $ 21.34 $ 19.92 beginning of period Income from Investment Operations Net investment income .49 .43 .45 .53 .50 Net realized and unrealized 3.99 4.14 1.07 3.02 1.94 gain (loss) Total from investment 4.48 4.57 1.52 3.55 2.44 operations Less Distributions From net investment income (.48) (.40) (.48) (.59) (.38) From net realized gain (.90) (1.24) (.77) (2.40) (.64) Total distributions (1.38) (1.64) (1.25) (2.99) (1.02) Net asset value, end of period $ 28.20 $ 25.10 $ 22.17 $ 21.90 $ 21.34 TOTAL RETURN A, B 18.39% 21.95% 7.08% 19.10% 12.75% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 19,206 $ 12,106 $ 8,757 $ 6,646 $ 4,199 (in millions) Ratio of expenses to average .75% .78% .83% .83% .86% net assets Ratio of expenses to average .74% .77% .82% .83% .86% net assets after expense D D D reductions Ratio of net investment income 1.82% 2.21% 2.09% 2.67% 2.49% to average net assets Portfolio turnover rate 41% 67% 92% 87% 221%
J THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). K TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE (SEE NOTE 4 OF NOTES TO FINANCIAL STATEMENTS). L EFFECTIVE AUGUST 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. M FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1996 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Growth & Income Portfolio (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, foreign currency transactions, 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 and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED mature in 60 days or less from the date of purchase for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $10,195,992,000 and $6,014,491,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .20%. For the period, the management fee was equivalent to an annual rate of .51% of average net assets. SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an affiliate of FMR and the general distributor of the fund, received sales charges of $980,000 on sales of shares of the fund. Effective October 20, 1995, the fund's 3% sales charge was eliminated. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .22% of average net assets. ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $4,326,000 for the period. 5. SECURITY LENDING. The fund loaned securities to certain brokers who paid the fund negotiated lenders' fees. These fees are included in interest income. The fund receives U.S. Treasury obligations and/or cash as collateral against the loaned securities, in an amount at least equal to 102% of the market value of the loaned securities at the inception of each loan. This collateral must be maintained at not less than 100% of the market value of the loaned securities during the period of the loan. At period end, the value of the securities loaned and the value of collateral amounted to $23,124,000 and $23,700,000, respectively. 6. EXPENSE REDUCTIONS. FMR has directed certain portfolio trades to brokers who paid a portion of the fund's expenses. For the period, the fund's expenses were reduced by $1,434,000 under this arrangement. In addition, the fund has entered into arrangements with its custodian and transfer agent whereby interest earned on uninvested cash balances was used to offset a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $5,000 and $1,021,000, respectively, under these arrangements. 7. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES DOLLAR AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Allergan, Inc. $ 14,910 $ 16,352 $ 823 $ - Aztar Corp. 8,442 12,216 - - Bausch & Lomb, Inc. 1,001 - 812 110,909 CBL & Associates Properties, Inc. 11,333 - 738 37,978 Carlisle Plastics, Inc. Class A - - - 7,288 Carson Pirie & Scott & Co. 1,792 - - 36,598 Ferro Corp. - 47 856 42,559 Fruit of the Loom, Inc. Class A 24,427 - - 111,840 Information Resources, Inc. 8,220 9,895 - - Jostens, Inc. 14,249 - 491 55,055 Oak Industries, Inc. 4,661 - - 32,191 RalCorp Holdings, Inc. 2,548 6,921 - - Valassis Communications, Inc. 2,382 - - 42,407 TOTALS $ 93,965 $ 45,431 $ 3,720 $ 476,825 REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Growth & Income Portfolio: We have audited the accompanying statement of assets and liabilities of Fidelity Securities Fund: Fidelity Growth & Income Portfolio, including the schedule of portfolio investments, as of July 31, 1996, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 1996 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Securities Fund: Fidelity Growth & Income Portfolio as of July 31, 1996, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts September 6, 1996 DISTRIBUTIONS The Board of Trustees of Fidelity Growth & Income Portfolio voted to pay on September 9, 1996, to shareholders of record at the opening of business on September 6, 1996, a distribution of $1.00 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.12 per share from net investment income. A total of 2.11% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax. A total of 39% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders. The fund will notify shareholders in January 1997 of these percentages for use in preparing 1996 income tax returns. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * 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)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Steven Kaye, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Robert H. Morrison, Manager, Security Transactions John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * ADVISORY BOARD William O. McCoy GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN The Chase Manhattan Bank, N.A. New York, NY FIDELITY'S GROWTH AND INCOME FUNDS Balanced Fund Convertible Securities Fund Equity-Income Fund Equity-Income II Fund Fidelity Fund Global Balanced Fund Growth & Income Portfolio Market Index Fund Puritan Fund Real Estate Investment Portfolio Utilities Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE -----END PRIVACY-ENHANCED MESSAGE-----