-----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, OBaLAsG65mn29ILFU38v0N9I+1/JVgvUxmgvbAzGKKNIadFCaPMIgGqidQChWjKO yR+xZ1FMhmNovDobMKJWDg== 0000035341-97-000004.txt : 19970320 0000035341-97-000004.hdr.sgml : 19970320 ACCESSION NUMBER: 0000035341-97-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970319 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: 97559438 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) BLUE CHIP GROWTH FUND SEMIANNUAL REPORT JANUARY 31, 1997 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 20 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 24 Notes to the financial statements. To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: As 1997 begins, the stock and bond markets generally have continued on the course they followed during the past year. Through January, stocks maintained their unprecedented climb, with the large companies still setting the pace. With low, stable interest rates, the bond market has tended to mirror its historical returns in the mid-single digits. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that there is no assurance that a money market fund will achieve its goal of maintaining a stable net asset value of $1.00 per share, and that these types of funds are neither insured nor guaranteed by any agency of the U.S. government. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. If you have questions, please call us at 1-800-544-8888. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1997 PAST 6 PAST 1 PAST 5 LIFE OF MONTHS YEAR YEARS FUND Fidelity Blue Chip Growth 22.12% 20.44% 134.97% 426.13% Fidelity Blue Chip Growth 18.46% 16.83% 127.92% 410.34% (incl. 3% sales charge) S&P 500(registered trademark) 24.15% 26.34% 119.87% 317.60% Growth Funds Average 20.94% 22.74% 95.27% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on 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 761 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past six months. These benchmarks reflect reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1997 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Fidelity Blue Chip Growth 20.44% 18.63% 20.03% Fidelity Blue Chip Growth 16.83% 17.91% 19.62% (incl. 3% sales charge) S&P 500 26.34% 17.06% 17.02% Growth Funds Average 22.74% 14.04% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a slightly different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19970131 19970212 090220 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 1996/08/31 42875.53 34346.54 1996/09/30 45437.41 36279.56 1996/10/31 46114.04 37280.16 1996/11/30 49453.08 40098.16 1996/12/31 48231.04 39303.82 1997/01/31 51019.56 41759.52 IMATRL PRASUN SHR__CHT 19970131 19970212 090223 R00000000000112 $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, when the fund started, and the current maximum 3% sales charge was paid. As the chart shows, by January 31, 1997, the value of the investment would have grown to $51,034 - a 410.34% 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 $41,760 - a 317.60% 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 An interview with John McDowell, Portfolio Manager of Fidelity Blue Chip Growth Fund Q. HOW DID THE FUND PERFORM, JOHN? A. For the six months that ended January 31, 1997, the fund provided a total return of 22.12%. For a sense of how the fund fared relative to its peer group, the growth funds average had a six-month return of 20.94%, according to Lipper Analytical Services. The Standard & Poor's 500 Index had a return of 24.15% over the same time period. For the 12 months that ended January 31, 1997, the fund had a return of 20.44%, while the Lipper group and the S&P 500 had returns of 22.74% and 26.34%, respectively. Q. CAN YOU POINT TO ANY SPECIFIC MARKET FACTORS THAT INFLUENCED THE FUND'S PERFORMANCE? A. Over the past six months, the three best-performing S&P 500 sectors were health care, technology and finance. Fortunately, the fund was well-positioned in these three areas. Many health care companies are benefiting from the successful introductions of new pharmaceutical products, and this is leading to strong corporate earnings growth. Technology stocks rebounded in the second half of the year. A sharp sell-off in the first half of 1996 resulted in attractive valuations for most technology stocks. As personal computer sales continued to post healthy gains in the second half, technology stock valuations improved. While I did add to my technology positions during the summer, given benefit of 20/20 hindsight, I should have bought even more. Financial stocks, particularly money center banks and insurance stocks, benefited from a benign interest rate environment and strong relative earnings growth compared with the typical S&P 500 company. Q. LARGE-CAPITALIZATION STOCKS - THOSE OF MORE ESTABLISHED, HOUSEHOLD-NAME COMPANIES - RALLIED THROUGHOUT THE PERIOD. WHY DO YOU THINK LARGE CAPS DID WELL, AND HOW DID THIS RALLY AFFECT THE FUND? A. A relatively small group of very large stocks, including Intel, Merck and Microsoft, posted unusually strong price gains over the past six months. Over time, stock price performance tends to correlate well with corporate earnings growth; however, over the past six months, stock price appreciation has generally been well in excess of earnings gains, particularly among many of the very largest companies in the S&P 500. Since stock gains for these companies were not matched by earnings gains over this period, and since stock valuations were high to begin with, it appears that there is some measure of investor speculation in these stocks. Because of these high valuations, we reduced certain positions in the fund. Q. HAVE YOU BEEN SURPRISED BY THE STOCK MARKET'S BEHAVIOR? A. Given the moderate growth in corporate earnings in 1996 and the overall mediocre performance of the bond market, it is surprising that stocks have performed so well. The market appears to be anticipating strong earnings gains and/or significantly lower interest rates over the next couple of years. Additionally, the dollar has been very strong recently. Typically, dollar strength is correlated to stock weakness among U.S.-based multinational corporations, which generate a significant proportion of their earnings overseas. Many multinationals have been among the market's best performers over the past year. Q. THE MERGER AND ACQUISITION ACTIVITY AMONG CORPORATIONS SEEMED BUSY . . . A. The economic climate and healthy equity market combined for good merger and acquisition conditions. Companies were making acquisitions and using their richly valued stocks as currency. Since the market considers these deals to be generally profitable to the acquiring company, that company's stock price tends to increase. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO THE FUND'S PERFORMANCE? WERE THERE ANY DISAPPOINTMENTS? A. Within the technology sector, the fund benefited from positions in Linear Technology, Adaptec, Compaq Computer and IBM. Electronic Data Systems was a disappointment from an earnings perspective. In the finance sector, Allstate, Freddie Mac and American Express were strong performers. Health care stocks - particularly pharmaceuticals such as Merck and Bristol-Myers - also performed well. Toys "R" Us and Frontier Corp. were a drag on fund performance because of disappointing earnings growth. There were also numerous examples - Microsoft and Intel, to name two - of companies that posted strong earnings gains and where it would have helped to own more in the fund. Q. WHAT IS YOUR OUTLOOK? A. Stock prices have risen sharply over the past two years or so, much faster than underlying earnings growth. Consequently, stock valuations are on the high side. While I cannot identify specific factors which might lead to a significant market correction in the near term, current high stock valuations appear to depend on an acceleration in earnings growth and continuing modest inflation. Fortunately, my investment style does not depend on forecasting changes in the economy or changes in interest rates, but rather on the success of the individual companies in the fund. I will continue to balance the near-term growth prospects of these companies with the risks inherent in their market valuations, selling the most expensive stocks and buying companies expected to show the best improvement in earnings growth. 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 common stocks of well-known and established companies FUND NUMBER: 312 TRADING SYMBOL: FBGRX START DATE: December 31, 1987 SIZE: as of January 31, 1997, more than $10.1 billion MANAGER: John McDowell, since 1996; leader, Fidelity Growth Funds Group; manager, Fidelity Management Trust Company; manager, Fidelity Large Cap Stock Fund, 1995 to 1996; joined Fidelity in 1985 (checkmark) JOHN MCDOWELL ON HOW THE STOCK MARKET RALLY HAS AFFECTED THE CORPORATE MINDSET: "The combination of a moderately growing economy and a strong equity market made for a favorable period from a corporate finance standpoint. There were a couple of forces at work. First, there was a record amount of money invested in mutual funds by individual investors in 1996. Second, it was a record period for initial public offerings (IPOs) and corporate financing activity in general. In fact, I believe IPOs - - when a private company decides to raise capital by selling its shares to the public - - increased by about 50% from the previous year. The reason behind the acceleration in IPOs can be traced to investors' demand for more stock. In this type of bull market environment, corporations tend to feel more comfortable that their stock offerings will be successful and are incentivized by their ability to attract relatively high stock valuations. In addition to high levels of IPO activity, we also saw plenty of mergers and acquisitions activity. These are typical developments in a bull market such as we've seen." INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1997 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO General Electric Co. 2.8 2.6 Philip Morris Companies, Inc. 2.4 2.6 International Business Machines Corp. 2.2 1.5 Merck & Co., Inc. 2.0 1.4 Intel Corp. 1.9 1.0 Federal National Mortgage Association 1.4 1.5 Bristol-Myers Squibb Co. 1.4 1.0 Cisco Systems, Inc. 1.3 1.1 Procter & Gamble Co. 1.3 0.8 Allstate Corp. 1.2 0.9 TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1997 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Technology 18.9 14.6 Health 14.4 13.8 Finance 11.8 11.5 Nondurables 10.1 9.6 Energy 7.8 7.8 ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JANUARY 31, 1997 * AS OF JULY 31, 1996 ** Row: 1, Col: 1, Value: 5.3 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 50.0 Row: 1, Col: 4, Value: 44.7 Row: 1, Col: 1, Value: 8.4 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 4, Value: 41.6 Row: 1, Col: 5, Value: 50.0 Stocks 94.7% Short-term investments 5.3% FOREIGN INVESTMENTS 3.0% Stocks 91.6% Short-term investments 8.4% FOREIGN INVESTMENTS 2.9% * * * INVESTMENTS JANUARY 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.7% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 2.0% AEROSPACE & DEFENSE - 1.8% Boeing Co. 923,600 $ 98,941 Lockheed Martin Corp. 506,300 46,580 Precision Castparts Corp. 655,300 33,584 179,105 SHIP BUILDING & REPAIR - 0.2% General Dynamics Corp. 329,900 23,299 TOTAL AEROSPACE & DEFENSE 202,404 BASIC INDUSTRIES - 3.8% CHEMICALS & PLASTICS - 2.7% Air Products & Chemicals, Inc. 712,600 50,862 du Pont (E.I.) de Nemours & Co. 530,500 58,156 Hanna (M.A.) Co. 360,100 7,742 Monsanto Co. 1,839,800 69,683 Praxair, Inc. 1,147,000 53,192 Sealed Air Corp. (a) 391,700 16,745 Union Carbide Corp. 516,900 23,454 279,834 PACKAGING & CONTAINERS - 0.3% Owens-Illinois, Inc. (a) 1,315,400 31,241 PAPER & FOREST PRODUCTS - 0.8% Kimberly-Clark Corp. 796,700 77,678 TOTAL BASIC INDUSTRIES 388,753 CONGLOMERATES - 0.9% AlliedSignal, Inc. 1,048,300 73,643 Tyco International Ltd. 347,500 19,851 93,494 CONSTRUCTION & REAL ESTATE - 0.6% BUILDING MATERIALS - 0.5% Sherwin-Williams Co. 864,100 47,958 CONSTRUCTION - 0.1% Lennar Corp. 451,100 12,010 TOTAL CONSTRUCTION & REAL ESTATE 59,968 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - 1.7% AUTOS, TIRES, & ACCESSORIES - 0.5% AutoZone, Inc. (a) 967,400 $ 20,920 Snap-on Tools Corp. 828,550 30,864 51,784 CONSUMER ELECTRONICS - 0.3% Newell Co. 1,056,100 34,851 HOME FURNISHINGS - 0.5% Leggett & Platt, Inc. 1,524,300 48,968 TEXTILES & APPAREL - 0.4% NIKE, Inc. Class B 535,600 36,354 TOTAL DURABLES 171,957 ENERGY - 7.8% ENERGY SERVICES - 2.3% Baker Hughes, Inc. 377,600 14,726 ENSCO International, Inc. (a) 618,700 34,106 Halliburton Co. 1,391,400 100,703 Schlumberger Ltd. 728,900 80,999 230,534 OIL & GAS - 5.5% Amoco Corp. 487,000 42,369 Anadarko Petroleum Corp. 713,000 46,167 Atlantic Richfield Co. 224,600 29,703 British Petroleum PLC: Ord. 3,235,602 38,098 ADR 560,987 79,450 Burlington Resources, Inc. 1,103,800 54,914 Enron Oil & Gas Co. 870,300 20,017 Occidental Petroleum Corp. 860,100 21,932 Phillips Petroleum Co. 930,800 41,072 Royal Dutch Petroleum Co.: Ord. 345,200 60,400 ADR 299,400 51,946 Union Pacific Resources Group, Inc. 804,900 22,839 Unocal Corp. 1,163,674 49,020 557,927 TOTAL ENERGY 788,461 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - 11.8% BANKS - 3.2% Bank of New York Co., Inc. 1,379,200 $ 50,513 BankAmerica Corp. 648,800 72,422 Citicorp 771,000 89,725 NationsBank Corp. 1,052,900 113,713 326,373 CREDIT & OTHER FINANCE - 1.7% American Express Co. 1,850,943 115,453 Household International, Inc. 584,808 57,969 173,422 FEDERAL SPONSORED CREDIT - 2.5% Federal Home Loan Mortgage Corporation 3,519,600 106,468 Federal National Mortgage Association 3,664,000 144,728 251,196 INSURANCE - 4.0% Aetna, Inc. 784,450 61,972 Allstate Corp. 1,780,000 117,035 American International Group, Inc. 568,600 68,872 MBIA, Inc. 576,050 55,373 Old Republic International Corp. 861,300 23,147 Provident Companies, Inc. 587,200 28,846 UNUM Corp. 622,000 47,039 402,284 SECURITIES INDUSTRY - 0.4% Merrill Lynch & Co., Inc. 528,100 44,492 TOTAL FINANCE 1,197,767 HEALTH - 14.4% DRUGS & PHARMACEUTICALS - 7.5% American Home Products Corp. 1,672,300 105,982 Bristol-Myers Squibb Co. 1,088,400 138,227 Genentech, Inc. special (a) 408,500 22,416 Lilly (Eli) & Co. 609,700 53,120 Merck & Co., Inc. 2,223,400 201,774 Pfizer, Inc. 925,500 85,956 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED Schering-Plough Corp. 936,900 $ 70,853 SmithKline Beecham PLC ADR 555,000 40,099 Warner-Lambert Co. 570,200 45,901 764,328 MEDICAL EQUIPMENT & SUPPLIES - 3.6% Baxter International, Inc. 1,229,900 56,729 Becton, Dickinson & Co. 1,317,600 64,892 Bergen Brunswig Corp. Class A 511,700 15,223 Boston Scientific Corp. (a) 358,600 24,474 Cardinal Health, Inc. 367,550 23,018 Johnson & Johnson 1,558,500 89,809 Medtronic, Inc. 608,800 41,703 Pall Corp. 1,006,100 22,511 St. Jude Medical, Inc. (a) 791,200 29,967 368,326 MEDICAL FACILITIES MANAGEMENT - 3.3% Columbia/HCA Healthcare Corp. 2,587,900 102,222 HEALTHSOUTH Rehabilitation Corp. 723,100 31,545 Health Management Associates, Inc. Class A (a) 1,274,200 35,200 Health Care & Retirement Corp. (a) 991,050 25,643 Oxford Health Plans, Inc. (a) 618,000 33,604 PacifiCare Health Systems, Inc. Class B (a) 591,900 47,648 Tenet Healthcare Corp. (a) 2,208,300 59,624 335,486 TOTAL HEALTH 1,468,140 INDUSTRIAL MACHINERY & EQUIPMENT - 5.6% ELECTRICAL EQUIPMENT - 3.4% Alcatel Alsthom Compagnie Generale d'Electricite SA 166,700 16,601 Emerson Electric Co. 420,000 41,475 General Electric Co. 2,743,000 282,529 340,605 INDUSTRIAL MACHINERY & EQUIPMENT - 1.8% Case Corp. 520,500 27,586 Caterpillar, Inc. 745,690 57,884 Ingersoll-Rand Co. 744,000 33,945 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED Stanley Works 1,735,700 $ 65,957 Timken Co. 294 15 185,387 POLLUTION CONTROL - 0.4% Browning-Ferris Industries, Inc. 1,276,200 41,477 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 567,469 MEDIA & LEISURE - 4.3% ENTERTAINMENT - 0.7% Disney (Walt) Co. 885,600 64,870 LODGING & GAMING - 2.3% HFS, Inc. (a) 1,198,490 83,894 Hilton Hotels Corp. 993,300 28,309 ITT Corp. (a) 785,800 44,889 Marriott International, Inc. 658,830 35,000 Mirage Resorts, Inc. (a) 1,765,600 44,361 236,453 PUBLISHING - 0.9% Knight-Ridder, Inc. 959,800 36,832 New York Times Co. (The) Class A 671,000 25,750 Times Mirror Co. Class A 651,900 30,802 93,384 RESTAURANTS - 0.4% McDonald's Corp. 952,600 43,343 TOTAL MEDIA & LEISURE 438,050 NONDURABLES - 10.1% AGRICULTURE - 0.4% Pioneer Hi-Bred International, Inc. 579,000 39,010 BEVERAGES - 2.0% Anheuser-Busch Companies, Inc. 805,700 34,242 Coca-Cola Co. (The) 1,416,400 81,974 PepsiCo, Inc. 2,491,800 86,902 203,118 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED FOODS - 1.7% CPC International, Inc. 202,000 $ 15,529 General Mills, Inc. 757,820 51,342 Ralston Purina Co. 741,000 58,261 Sysco Corp. 1,448,600 47,623 172,755 HOUSEHOLD PRODUCTS - 3.2% Avon Products, Inc. 580,200 36,408 Clorox Co. 608,900 72,231 First Brands Corp. 708,200 19,121 Gillette Co. 906,300 73,863 Procter & Gamble Co. 1,138,500 131,497 333,120 TOBACCO - 2.8% Philip Morris Companies, Inc. 2,063,000 245,239 RJR Nabisco Holdings Corp. 1,140,741 37,359 282,598 TOTAL NONDURABLES 1,030,601 PRECIOUS METALS - 0.2% Newmont Mining Corp. 452,400 18,039 RETAIL & WHOLESALE - 6.1% APPAREL STORES - 0.1% Gymboree Corp. (a) 511,700 11,769 DRUG STORES - 0.9% General Nutrition Companies, Inc. (a) 1,153,560 20,908 Rite Aid Corp. 1,773,800 70,952 91,860 GENERAL MERCHANDISE STORES - 1.3% Sears, Roebuck & Co. 1,484,600 71,261 Wal-Mart Stores, Inc. 2,777,400 65,963 137,224 GROCERY STORES - 1.2% Kroger Co. (The) (a) 1,264,300 60,371 Safeway, Inc. (a) 1,198,100 57,209 117,580 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - 2.6% Circuit City Stores, Inc. 900,510 $ 31,630 Home Depot, Inc. (The) 827,500 40,961 Lowe's Companies, Inc. 1,419,700 47,028 PETsMART, Inc. (a) 1,606,916 36,557 Staples, Inc. (a) 2,359,300 48,366 Toys "R" Us, Inc. (a) 2,438,600 60,965 265,507 TOTAL RETAIL & WHOLESALE 623,940 SERVICES - 1.4% ADVERTISING - 0.6% Omnicom Group, Inc. 1,187,000 57,718 SERVICES - 0.8% Block (H&R), Inc. 737,500 21,848 Manpower, Inc. 528,800 16,922 Service Corp. International 1,508,400 43,744 82,514 TOTAL SERVICES 140,232 TECHNOLOGY - 18.9% COMMUNICATIONS EQUIPMENT - 3.5% Ascend Communications, Inc. (a) 989,000 68,859 Aspect Telecommunications Corp. 991,400 30,733 Cisco Systems, Inc. (a) 1,936,600 135,078 Lucent Technologies, Inc. 548,121 29,736 Network General Corp. (a) 756,600 21,374 Pairgain Technologies, Inc. 854,100 34,965 3Com Corp. (a) 487,100 32,697 353,442 COMPUTER SERVICES & SOFTWARE - 4.7% Automatic Data Processing, Inc. 1,605,190 66,415 CUC International, Inc. (a) 2,126,050 52,620 Ceridian Corp. (a) 537,241 20,281 Computer Associates International, Inc. 462,700 20,995 Computer Sciences Corp. (a) 508,760 35,995 DST Systems, Inc. (a) 653,300 21,314 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED Electronic Data Systems Corp. 709,100 $ 32,619 Equifax, Inc. 446,200 14,055 First Data Corp. 1,055,200 37,987 HBO & Co. 181,400 11,360 Microsoft Corp. (a) 620,100 63,250 Oracle Systems Corp. (a) 1,164,200 45,258 PeopleSoft, Inc. (a) 734,800 40,047 Sabre Group Holdings, Inc. Class A (a) 493,700 13,268 475,464 COMPUTERS & OFFICE EQUIPMENT - 5.2% Adaptec, Inc. (a) 2,090,200 91,446 Bay Networks, Inc. (a) 1,725,800 37,536 EMC Corp. 898,600 34,034 Hewlett-Packard Co. 678,000 35,680 International Business Machines Corp. 1,437,700 226,078 Pitney Bowes, Inc. 1,271,000 73,241 Silicon Graphics, Inc. (a) 1,246,200 34,115 532,130 ELECTRONICS - 4.7% Intel Corp. 1,211,530 196,571 Linear Technology Corp. 1,842,890 89,841 Maxim Integrated Products, Inc. (a) 989,000 55,631 Motorola, Inc. 1,121,100 76,515 Texas Instruments, Inc. 824,900 64,652 483,210 PHOTOGRAPHIC EQUIPMENT - 0.8% Eastman Kodak Co. 957,700 83,080 TOTAL TECHNOLOGY 1,927,326 TRANSPORTATION - 0.2% RAILROADS - 0.2% CSX Corp. 431,300 20,918 UTILITIES - 4.9% CELLULAR - 0.5% 360 Degrees Communications Co. (a) 1,299,500 25,665 Vodafone Group PLC sponsored ADR 506,200 21,767 47,432 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - 4.4% AT&T Corp. 504,460 $ 19,863 Ameritech Corp. 1,478,200 88,323 BellSouth Corp. 1,000,000 44,375 Cincinnati Bell, Inc. 801,600 49,599 LCI International, Inc. (a) 1,442,500 32,456 MCI Communications Corp. 1,973,100 69,305 SBC Communications, Inc. 1,735,400 95,230 WorldCom, Inc. (a) 1,982,800 49,818 448,969 TOTAL UTILITIES 496,401 TOTAL COMMON STOCKS (Cost $7,817,480) 9,633,920 NONCONVERTIBLE PREFERRED STOCKS - 0.0% ENERGY - 0.0% OIL & GAS - 0.0% Gulf Canada Resources Ltd., Series 1, adj. rate (Cost $5) 2,015 7 CASH EQUIVALENTS - 5.3% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.56%, dated 1/31/97 due 2/3/97 $ 4,516 4,514 SHARES Taxable Central Cash Fund (b) 535,013,868 535,014 TOTAL CASH EQUIVALENTS (Cost $539,528) 539,528 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $8,357,013) $ 10,173,455 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.39%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. INCOME TAX INFORMATION At January 31, 1997, the aggregate cost of investment securities for income tax purposes was $8,370,752,000. Net unrealized appreciation aggregated $1,802,703,000, of which $1,904,885,000 related to appreciated investment securities and $102,182,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JANUARY 31, 1997 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 10,173,455 agreements of $4,514) (cost $8,357,013) - See accompanying schedule Receivable for investments sold 29,120 Receivable for fund shares sold 2,366 Dividends receivable 9,407 Interest receivable 2,210 Other receivables 247 TOTAL ASSETS 10,216,805 LIABILITIES Payable for investments purchased $ 86,142 Payable for fund shares redeemed 16,531 Accrued management fee 4,047 Other payables and accrued expenses 2,461 TOTAL LIABILITIES 109,181 NET ASSETS $ 10,107,624 Net Assets consist of: Paid in capital $ 8,191,419 Undistributed net investment income 12,449 Accumulated undistributed net realized gain (loss) on 87,323 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 1,816,433 investments and assets and liabilities in foreign currencies NET ASSETS, for 292,254 shares outstanding $ 10,107,624 NET ASSET VALUE and redemption price per share $34.59 ($10,107,624 (divided by) 292,254 shares) Maximum offering price per share (100/97.00 of $34.59) $35.66
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED) INVESTMENT INCOME $ 61,948 Dividends Interest 15,334 TOTAL INCOME 77,282 EXPENSES Management fee $ 27,920 Basic fee Performance adjustment (2,997) Transfer agent fees 13,039 Accounting fees and expenses 415 Non-interested trustees' compensation 39 Custodian fees and expenses 104 Registration fees 366 Audit 51 Legal 23 Miscellaneous 39 Total expenses before reductions 38,999 Expense reductions (753) 38,246 NET INVESTMENT INCOME 39,036 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 114,451 Foreign currency transactions (84) 114,367 Change in net unrealized appreciation (depreciation) on: Investment securities 1,672,383 Assets and liabilities in foreign currencies (7) 1,672,376 NET GAIN (LOSS) 1,786,743 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,825,779 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JANUARY JULY 31, 31, 1997 1996 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 39,036 $ 85,559 Net investment income Net realized gain (loss) 114,367 964,681 Change in net unrealized appreciation (depreciation) 1,672,376 (900,783) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,825,779 149,457 FROM OPERATIONS Distributions to shareholders (77,273) (28,183) From net investment income From net realized gain (604,623) (542,584) TOTAL DISTRIBUTIONS (681,896) (570,767) Share transactions 1,526,239 4,526,720 Net proceeds from sales of shares Reinvestment of distributions 668,499 555,579 Cost of shares redeemed (1,410,307) (2,903,085) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 784,431 2,179,214 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 1,928,314 1,757,904 NET ASSETS Beginning of period 8,179,310 6,421,406 End of period (including undistributed net investment $ 10,107,624 $ 8,179,310 income of $12,449 and $62,593, respectively) OTHER INFORMATION Shares Sold 47,520 143,962 Issued in reinvestment of distributions 22,655 17,421 Redeemed (43,809) (92,535) Net increase (decrease) 26,366 68,848
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED JULY 31, ENDED JANUARY 31, 1997 (UNAUDITED) 1996 1995 1994 E 1993 1992
SELECTED PER-SHARE DATA Net asset value, $ 30.76 $ 32.59 $ 25.14 $ 25.72 $ 22.02 $ 18.94 beginning of period Income from Investment Operations Net investment .14 D .34 .07 D .12 .10 .09 income Net realized and 6.22 .42 7.96 3.43 4.36 3.07 unrealized gain (loss) Total from investment 6.36 .76 8.03 3.55 4.46 3.16 operations Less Distributions From net investment (.28) (.12) - (.01) (.14) (.08) income From net realized (2.25) (2.47) (.58) (4.12) (.62) - gain Total distributions (2.53) (2.59) (.58) (4.13) (.76) (.08) Net asset value, end $ 34.59 $ 30.76 $ 32.59 $ 25.14 $ 25.72 $ 22.02 of period TOTAL RETURN B, C 22.12% 2.19% 32.64% 14.95% 20.86 16.73 % % RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 10,108 $ 8,179 $ 6,421 $ 2,229 $ 788 $ 476 period (in millions) Ratio of expenses to .84% A .98% 1.05% 1.27% 1.25 1.27 average net assets % % Ratio of expenses to .82% A .95% 1.02% 1.22% 1.25 1.27 average net assets , F F F F % % after expense reductions Ratio of net investment .84% A 1.10% .25% .21% .46 .55 income to average % % net assets Portfolio turnover rate 45% A 206% 182% 271% 319 71 % % Average commission $ .0420 rate G
A ANNUALIZED B 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). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E EFFECTIVE 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). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1997 (Unaudited) 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 with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned 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. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. The cost of the foreign currency contracts is included in the cost basis of the associated investment. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or 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. 2. OPERATING POLICIES - CONTINUED REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities, and may be utilized by the fund as an additional cash management option. Dividends from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions received by the fund are recorded as interest income. RESTRICTED SECURITIES. The fund is permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, the fund had no investments in restricted securities(excluding 144A issues). 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $2,324,554,000 and $1,984,664,000, 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% of the fund's average net assets over the performance period) based on the fund's investment performance as compared to the appropriate index over a specified period of time. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED For the period, the management fee was equivalent to an annualized rate of .53% 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 $1,190,000 and $12,000, respectively, on sales of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .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 $523,000 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 $542,000 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 $2,000 and $209,000, respectively, under these arrangements. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpressprovides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS For mutual fund and brokerage trading. 1 For quotes.* 2 For account balances and holdings. 3 To review orders and mutual fund activity. 4 To change your PIN. 5 To speak to a Fidelity representative. * 0 BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 for significant savings on Web access from internetMCI. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(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)(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)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75309-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. 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Westshore Blvd. Tampa, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL 3232 Lake Avenue Wilmette, 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 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, 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 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Arthur S. Loring, Secretary John McDowell, Vice President 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 * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES 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 TechnoQuant(trademark) Growth Fund Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) TouchTone Xpress 1-800-544-5555 SM AUTOMATED LINE FOR QUICKEST SERVICE FIDELITY (REGISTERED TRADEMARK) DIVIDEND GROWTH FUND SEMIANNUAL REPORT JANUARY 31, 1997 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 22 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 26 Notes to the financial statements. To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: As 1997 begins, the stock and bond markets generally have continued on the course they followed during the past year. Through January, stocks maintained their unprecedented climb, with the large companies still setting the pace. With low, stable interest rates, the bond market has tended to mirror its historical returns in the mid-single digits. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that there is no assurance that a money market fund will achieve its goal of maintaining a stable net asset value of $1.00 per share, and that these types of funds are neither insured nor guaranteed by any agency of the U.S. government. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. If you have questions, please call us at 1-800-544-8888. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1997 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND Fidelity Dividend Growth 23.20% 30.55% 134.05% S&P 500(registered trademark) 24.15% 26.34% 99.88% Growth Funds Average 20.94% 22.74% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, 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 761 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past six months. These benchmarks reflect reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1997 PAST 1 LIFE OF YEAR FUND Fidelity Dividend Growth 30.55% 25.30% S&P 500 26.34% 20.17% Growth Funds Average 22.74% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a slightly different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19970131 19970227 093839 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 1996/08/31 19614.29 16440.07 1996/09/30 20604.68 17365.32 1996/10/31 21100.90 17844.26 1996/11/30 22533.19 19193.10 1996/12/31 22715.29 18812.89 1997/01/31 23405.00 19988.32 IMATRL PRASUN SHR__CHT 19970131 19970227 093841 R00000000000049 $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 January 31, 1997, the value of the investment would have grown to $23,405 - an 134.05% 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 $19,988 - a 99.88% 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 NOTE TO SHAREHOLDERS: Charles Mangum became Portfolio Manager of Fidelity Dividend Growth Fund on January 7, 1997. Q. HOW DID THE FUND PERFORM, CHARLES? A. Very well. For the six-month period that ended January 31, 1997, the fund had a total return of 23.20%, beating the 20.94% return of the growth funds average, according to Lipper Analytical Services. For the 12-month period that ended January 31, 1997, the fund had a total return of 30.55%, versus 22.74% for the same period for the growth funds average. For the six and 12-month periods that ended January 31, 1997, the Standard & Poor's 500 Index returned 24.15% and 26.34%, respectively. Q. WHAT HELPED THE FUND POST SUCH A STRONG PERFORMANCE? A. The fund's performance was driven by stock picking. The previous manager - - Steve Wymer, who managed the fund through most of the period - didn't pursue any sector-based strategies or position the fund to take advantage of specific economic trends. Instead, the stock-by-stock process he used to select investments for the fund paid off, with securities such as Tupperware, Earthgrains, Interstate Bakeries, Imation and Allegiance performing very well. Q. HOW WOULD YOU DESCRIBE THE STOCK MARKET ENVIRONMENT OVER THE PAST SIX MONTHS? A. While the stock market posted solid returns, the strongest performance came from the stocks of the largest companies, based, in part on the fact that these companies posted the best earnings and revenue growth. In addition, sentiment toward stocks was very positive, with investors putting a great deal of money into the market. Many institutional money managers looked toward the larger stocks to stay fully invested because large-capitalization issues offer lower volatility and a higher degree of liquidity over smaller-company issues. Steve's stock-picking performance was especially noteworthy because mid-capitalization stocks as a whole - which made up a large proportion of the fund during his tenure - didn't perform as well as stocks of larger companies. Q. WHILE THE FUND PERFORMED WELL, THERE MUST HAVE BEEN SOME DISAPPOINTMENTS . . . A. In 1996, Steve had what I would call a legendary year as a stock picker. There were not many stocks that lost ground, and those that did were very small positions in the fund. One stock that didn't do well was Pharmacia & Upjohn, which the fund no longer owns. This company - which was formed by a merger of two companies last year - has had trouble making adjustments after combining forces, and those difficulties have been reflected in earnings disappointments. Q. WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND? A. I've focused more on larger-capitalization stocks. I've looked for companies with solid business prospects, good earnings growth and attractive valuations. In addition, I've cut back on some of the mid-cap names that Steve owned, mainly because my investing style is different from his. Steve tended to focus on special situations such as spin-offs, turnaround stories and those companies that were improving their profit margins. I focus more on revenue growth, because I feel a company with strong revenue growth tends to be a safer investment. This kind of company typically is a large one and includes drug, financial and diversified companies. When I took over the fund, I increased the fund's holdings in companies such as Johnson & Johnson, Schering-Plough, CitiCorp, Wells Fargo and General Electric. Q. THOSE COMPANIES GENERATE FAIRLY STEADY DIVIDENDS, DON'T THEY? A. Yes, they do. Shareholders probably will see more dividend-providing, larger-capitalization companies in the fund, as my strength lies in the analysis of large-cap growth names. Q. YOU'VE ALSO REDUCED THE NUMBER OF STOCKS IN THE FUND . . . A. Yes, I prefer to work with a smaller number of stocks in my portfolio. When I took over the fund in January, there were about 290 stocks in the fund. By the end of January, that number was down to about 220. Ideally, I may cut the number a bit more, to 150 to 200 stocks or so. I feel that if I talk to or analyze, say, five companies a day, in two months time I can completely review each position in the fund. That's the kind of number and time frame that best suits my style. Of course, I stay on top of developments concerning the companies in the fund, by working with analysts who keep track of their performance on a daily basis. Q. WHAT'S YOUR OUTLOOK? A. I really don't spend time developing an overall outlook for the market. I focus on what I can control, which is finding good companies that can grow over time. I look for values or growth opportunities by analyzing companies one at a time. My goal is to find growth companies paying dividends that are going to grow faster than the market and, hopefully, appreciate in price faster than the market as well. 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 FUND NUMBER: 330 TRADING SYMBOL: FDGFX START DATE: April 27, 1993 SIZE: as of January 31, 1997, more than $2.9 billion MANAGER: Charles Mangum, since January 1997; manager, Fidelity OTC Portfolio, June 1996-January 1997; Fidelity Convertible Securities Fund, 1995-1996; Fidelity Select Health Care Portfolio, 1992-1995; Fidelity Select Medical Delivery Portfolio, 1991-1993; joined Fidelity in 1990 (checkmark) CHARLES MANGUM ON HIS INVESTMENT STYLE: "I am first and foremost a growth investor. I focus on growth companies. My reasoning is simple: a true growth company can `grow into' its share price, even if I pay a slight premium to own the stock. That doesn't mean I completely avoid value stocks or other types of stocks if I feel they offer good long-term growth prospects. If I've bought what turns out to be a bargain, I can get what's called a multiplier effect, when a company's stock price rises much faster than the company's earnings growth rate. I'm not a market timer, so I tend to be as fully invested as I reasonably can be at all times." INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1997 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO General Electric Co. 3.0 0.3 Intel Corp. 2.8 0.7 Philip Morris Companies, Inc. 2.4 3.5 Johnson & Johnson 1.9 0.1 Schering-Plough Corp. 1.9 0.2 Citicorp 1.6 0.5 IKON Office Solutions, Inc. 1.5 0.0 Imation Corp. 1.5 0.4 Exxon Corp. 1.4 0.0 International Business Machines 1.3 0.0 Corp. TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1997 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Finance 11.6 8.2 Health 11.0 2.7 Technology 11.0 6.7 Nondurables 8.8 13.4 Energy 7.6 9.3 ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JANUARY 31, 1997 * AS OF JULY 31, 1996 ** Row: 1, Col: 1, Value: 6.8 Row: 1, Col: 2, Value: 1.6 Row: 1, Col: 3, Value: 41.6 Row: 1, Col: 4, Value: 50.0 Row: 1, Col: 1, Value: 6.3 Row: 1, Col: 2, Value: 48.7 Row: 1, Col: 3, Value: 45.0 Stocks 92.6% Bonds 0.6% Short-term investments 6.8% FOREIGN INVESTMENTS 2.8% Stocks 93.7% Bonds 0.0% Short-term investments 6.3% FOREIGN INVESTMENTS 4.3% * ** INVESTMENTS JANUARY 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.1% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 2.6% AEROSPACE & DEFENSE - 1.8% Boeing Co. 124,233 $ 13,308 Harsco Corp. 9,300 652 Lockheed Martin Corp. 9,500 874 McDonnell Douglas Corp. 285,000 19,166 Rockwell International Corp. 230,800 15,175 Sundstrand Corp. 110,000 4,716 53,891 DEFENSE ELECTRONICS - 0.3% Raytheon Co. 217,500 9,978 SHIP BUILDING & REPAIR - 0.5% General Dynamics Corp. 236,500 16,703 TOTAL AEROSPACE & DEFENSE 80,572 BASIC INDUSTRIES - 6.7% CHEMICALS & PLASTICS - 2.8% Betz Dearborn, Inc. 305,300 17,860 Cambrex Corp. 104,100 3,761 Nalco Chemical Co. 735,000 26,092 Olin Corp. 153,000 5,604 Primex Technologies, Inc. (a) 217,900 4,222 Quaker Chemical Corp. 93,300 1,528 Quaker State Corp. 90,200 1,218 Raychem Corp. 170,500 14,769 Union Carbide Corp. 218,500 9,914 84,968 IRON & STEEL - 0.1% Nucor Corp. 65,700 3,417 PACKAGING & CONTAINERS - 1.2% Corning, Inc. 374,500 13,342 Tupperware Corp. 490,400 22,987 36,329 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - CONTINUED PAPER & FOREST PRODUCTS - 2.6% American Pad & Paper Co. (a)(c) 1,145,300 $ 27,344 International Paper Co. 280,500 11,465 Kimberly-Clark Corp. 192,500 18,769 Unisource Worldwide, Inc. 1,008,450 21,934 79,512 TOTAL BASIC INDUSTRIES 204,226 CONGLOMERATES - 0.1% GenCorp, Inc. 142,800 2,785 CONSTRUCTION & REAL ESTATE - 2.6% BUILDING MATERIALS - 0.5% Masco Corp. 298,500 10,298 Sherwin-Williams Co. 60,000 3,330 13,628 ENGINEERING - 0.1% EG&G, Inc. 180,400 3,834 REAL ESTATE - 1.0% Catellus Development Corp. (a) 876,600 12,053 Rouse Co. (The) 120,000 3,720 Trizec Hahn Corp. (sub-vtg.) 600,000 14,098 29,871 REAL ESTATE INVESTMENT TRUSTS - 1.0% Arden Realty Group, Inc. 211,700 5,663 Beacon Properties Corp. 114,300 4,086 Cali Realty Corp. 119,000 3,927 Carr Realty Corp. 237,800 6,926 Crescent Real Estate Equities, Inc. 59,700 3,201 Starwood Lodging Trust combined certificate (SBI) 177,750 7,266 31,069 TOTAL CONSTRUCTION & REAL ESTATE 78,402 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - 2.9% AUTOS, TIRES, & ACCESSORIES - 0.7% Chrysler Corp. 200,000 $ 6,975 NGC Corp. 280,400 6,029 SPX Corp. 221,600 9,002 22,006 CONSUMER DURABLES - 0.2% Minnesota Mining & Manufacturing Co. 77,200 6,581 CONSUMER ELECTRONICS - 0.8% Newell Co. 100,000 3,300 Sunbeam-Oster, Inc. 761,100 21,121 24,421 HOME FURNISHINGS - 0.2% O'Sullivan Industries Holdings (a) 393,500 5,066 TEXTILES & APPAREL - 1.0% Adidas AG 25,500 2,404 NIKE, Inc. Class B 145,000 9,842 Reebok International Ltd. 330,000 15,675 Wolverine World Wide, Inc. 109,400 3,378 31,299 TOTAL DURABLES 89,373 ENERGY - 7.6% ENERGY SERVICES - 0.4% Baker Hughes, Inc. 93,000 3,627 Dresser Industries, Inc. 94,000 3,184 Halliburton Co. 30,000 2,172 Weatherford Enterra, Inc. (a) 74,500 2,710 11,693 OIL & GAS - 7.2% Atlantic Richfield Co. 100,000 13,225 Belco Oil & Gas Corp. (a) 61,500 1,637 Chevron Corp. 205,000 13,607 Cooper Cameron Corp. (a) 55,076 4,014 Exxon Corp. 400,000 41,450 Flores & Rucks, Inc. (a) 60,000 3,082 KCS Group, Inc. 68,400 2,659 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - CONTINUED Monterey Resources, Inc. (a)(c) 809,000 $ 12,539 Pogo Producing Co. 100,000 4,212 Royal Dutch Petroleum Co. ADR 160,000 27,760 Santa Fe Energy Resources, Inc. (a) 425,800 6,334 Tosco Corp. 235,300 20,824 Total SA sponsored ADR 285,000 12,291 USX-Marathon Group 225,000 5,991 Ultramar Diamond Shamrock Corp. 550,500 16,171 Union Pacific Resources Group, Inc. 619,200 17,570 Valero Energy Corp. 370,000 12,488 Vintage Petroleum, Inc. 115,300 3,848 219,702 TOTAL ENERGY 231,395 FINANCE - 11.6% BANKS - 5.3% Advanta Corp. 48,100 2,249 Banc One Corp. 155,790 7,069 Bank of New York Co., Inc. 100,000 3,662 BankAmerica Corp. 217,600 24,290 Citicorp 423,300 49,262 Fifth Third Bancorp 8,000 619 First Bank System, Inc. 50,000 3,800 NationsBank Corp. 275,000 29,700 Northern Trust Corp. 163,000 6,683 State Street Boston Corp. 50,000 3,656 Wells Fargo & Co. 98,200 29,926 160,916 CREDIT & OTHER FINANCE - 1.1% American Express Co. 338,392 21,107 Associates First Capital Corp. 61,000 2,966 Household International, Inc. 20,000 1,983 MBNA Corp. 200,000 6,900 32,956 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED FEDERAL SPONSORED CREDIT - 1.1% Federal National Mortgage Association 565,000 $ 22,318 Student Loan Marketing Association 114,000 12,412 34,730 INSURANCE - 2.7% Aetna, Inc. 213,800 16,890 Allmerica Financial Corp. 638,100 23,370 Conseco, Inc. 274,600 20,183 FBL Financial Group, Inc. Class A 178,400 4,215 Protective Life Corp. 52,500 2,080 Provident Companies, Inc. 118,000 5,797 UNUM Corp. 141,100 10,671 83,206 SAVINGS & LOANS - 1.2% Charter One Financial Corp. 361,600 16,317 TCF Financial Corp. 54,900 2,326 Washington Mutual, Inc. 319,000 17,326 35,969 SECURITIES INDUSTRY - 0.2% Franklin Resources, Inc. 75,750 4,128 Schwab (Charles) Corp. 55,000 2,056 6,184 TOTAL FINANCE 353,961 HEALTH - 11.0% DRUGS & PHARMACEUTICALS - 4.8% American Home Products Corp. 400,000 25,350 Bristol-Myers Squibb Co. 290,000 36,830 Merck & Co., Inc. 285,000 25,864 Schering-Plough Corp. 756,400 57,203 145,247 MEDICAL EQUIPMENT & SUPPLIES - 4.8% Abbott Laboratories 300,000 16,312 Allegiance Corp. 945,660 24,232 Baxter International, Inc. 87,000 4,013 Becton, Dickinson & Co. 307,200 15,130 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - CONTINUED Bergen Brunswig Corp. Class A 222,500 $ 6,619 Johnson & Johnson 1,030,800 59,400 McKesson Corp. 99,800 5,876 Medtronic, Inc. 80,000 5,480 Nellcor, Inc. 665,700 11,317 148,379 MEDICAL FACILITIES MANAGEMENT - 1.4% Columbia/HCA Healthcare Corp. 525,000 20,737 Integramed America, Inc. (a)(c) 605,500 1,060 NovaCare, Inc. (a) 294,900 3,133 United HealthCare Corp. 350,000 17,063 41,993 TOTAL HEALTH 335,619 INDUSTRIAL MACHINERY & EQUIPMENT - 5.9% ELECTRICAL EQUIPMENT - 4.5% Allen Group, Inc. (a) 379,700 9,303 General Electric Co. 898,000 92,494 General Signal Corp. 299,100 13,534 Westinghouse Electric Corp. 1,105,900 20,321 135,652 INDUSTRIAL MACHINERY & EQUIPMENT - 0.7% BW/IP Holdings, Inc. Class A 938,900 15,844 Stanley Works 135,600 5,153 20,997 POLLUTION CONTROL - 0.7% Allied Waste Industries, Inc. (a) 180,000 1,687 Browning-Ferris Industries, Inc. 170,000 5,525 WMX Technologies, Inc. 400,000 14,650 21,862 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 178,511 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - 5.1% ENTERTAINMENT - 0.7% Disney (Walt) Co. 305,000 $ 22,341 LEISURE DURABLES & TOYS - 0.9% Callaway Golf Co. 199,000 6,641 Hasbro, Inc. 407,900 16,112 Outboard Marine Corp. 265,000 4,406 27,159 LODGING & GAMING - 0.4% Hilton Hotels Corp. 165,000 4,702 La Quinta Motor Inns, Inc. 184,900 3,606 Mirage Resorts, Inc. (a) 100,000 2,513 10,821 PUBLISHING - 2.5% ACNielsen Corp. (a) 747,133 12,234 Cognizant Corp. 1,154,400 37,085 Dun & Bradstreet Corp. 744,600 17,870 New York Times Co. (The) Class A 147,100 5,645 Times Mirror Co. Class A 5,600 265 Tribune Co. 100,000 3,825 76,924 RESTAURANTS - 0.6% McDonald's Corp. 367,200 16,708 Morrison Health Care, Inc. 108,100 1,567 18,275 TOTAL MEDIA & LEISURE 155,520 NONDURABLES - 8.8% BEVERAGES - 1.2% Coors (Adolph) Co. Class B 347,100 6,465 PepsiCo, Inc. 850,000 29,643 36,108 FOODS - 1.9% Earthgrains Co. 414,272 19,315 Flowers Industries, Inc. 330,600 7,067 Interstate Bakeries Corp. 207,000 9,186 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED FOODS - CONTINUED Kellogg Co. 100,000 $ 6,962 Nabisco Holdings Corp. Class A 385,000 14,726 Riviana Foods, Inc. 34,800 609 57,865 HOUSEHOLD PRODUCTS - 2.3% Alberto-Culver Co. Class A 337,300 15,052 Dial Corp. 713,200 9,806 Premark International, Inc. 455,000 10,465 Procter & Gamble Co. 170,000 19,635 Unilever NV ADR 90,800 14,937 69,895 TOBACCO - 3.4% American Brands, Inc. 100,000 5,100 Philip Morris Companies, Inc. 614,900 73,096 RJR Nabisco Holdings Corp. 680,000 22,270 Schweitzer-Mauduit International, Inc. 67,700 2,293 102,759 TOTAL NONDURABLES 266,627 PRECIOUS METALS - 0.5% Barrick Gold Corp. 250,000 6,755 Newmont Mining Corp. 211,100 8,418 15,173 RETAIL & WHOLESALE - 4.9% APPAREL STORES - 0.6% Gap, Inc. 265,000 7,619 Payless ShoeSource, Inc. (a) 283,256 10,622 18,241 DRUG STORES - 0.8% CVS Corp. 540,500 23,377 GENERAL MERCHANDISE STORES - 0.8% Proffitts, Inc. (a) 240,500 8,718 Wal-Mart Stores, Inc. 470,000 11,162 Woolworth Corp. (a) 275,000 5,603 25,483 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED GROCERY STORES - 0.2% Dominick's Supermarkets, Inc. (a) 254,800 $ 5,096 RETAIL & WHOLESALE, MISCELLANEOUS - 2.5% Borders Group, Inc. (a) 70,000 3,124 CML Group, Inc. 646,800 2,102 Home Depot, Inc. 470,000 23,265 IKON Office Solutions, Inc. 1,063,000 46,905 Staples, Inc. (a) 100,000 2,050 77,446 TOTAL RETAIL & WHOLESALE 149,643 SERVICES - 1.7% ADVERTISING - 1.2% Interpublic Group of Companies, Inc. 270,000 13,331 Omnicom Group, Inc. 457,700 22,256 35,587 PRINTING - 0.2% New England Business Service, Inc. 339,000 7,034 SERVICES - 0.3% Borg Warner Security Corp. (a) 716,900 7,976 TOTAL SERVICES 50,597 TECHNOLOGY - 11.0% COMMUNICATIONS EQUIPMENT - 0.8% Cisco Systems, Inc. 270,000 18,833 Lucent Technologies, Inc. 110,000 5,967 24,800 COMPUTER SERVICES & SOFTWARE - 1.1% Autodesk, Inc. 177,500 5,613 CompUSA, Inc. (a) 569,800 11,681 DST Systems, Inc. (a) 267,000 8,711 First Data Corp. 170,000 6,120 Policy Management Systems Corp. (a) 64,600 2,907 35,032 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - 2.7% Diebold, Inc. 70,000 $ 4,130 FileNet Corp. (a) 88,500 1,693 Hewlett-Packard Co. 225,000 11,841 International Business Machines Corp. 250,000 39,312 Pitney Bowes, Inc. 242,900 13,997 Silicon Graphics, Inc. (a) 100,000 2,737 Wang Laboratories, Inc. (a) 319,700 7,433 81,143 ELECTRONIC INSTRUMENTS - 0.2% Varian Associates, Inc. 85,000 4,675 ELECTRONICS - 4.0% AMP, Inc. 220,100 8,969 Avnet, Inc. 139,000 8,601 Intel Corp. 533,300 86,528 Linear Technology Corp. 271,100 13,216 Molex, Inc. 140,600 4,956 122,270 PHOTOGRAPHIC EQUIPMENT - 2.2% Eastman Kodak Co. 241,000 20,907 Imation Corp. (a) 1,593,620 46,414 67,321 TOTAL TECHNOLOGY 335,241 TRANSPORTATION - 3.4% AIR TRANSPORTATION - 1.1% Delta Air Lines, Inc. 169,600 13,398 Viad Corp. 1,232,700 19,415 32,813 RAILROADS - 0.7% CSX Corp. 300,000 14,550 Canadian National Railway Co. 200,000 7,951 22,501 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - CONTINUED TRUCKING & FREIGHT - 1.6% Consolidated Freightways, Inc. 665,000 $ 16,874 Roadway Express, Inc. (c) 1,073,590 22,009 USFreightways Corp. 110,200 2,796 Werner Enterprises, Inc. 110,200 1,984 Yellow Corp. (a) 302,700 5,184 48,847 TOTAL TRANSPORTATION 104,161 UTILITIES - 5.7% CELLULAR - 0.5% Century Telephone Enterprises, Inc. 530,200 16,635 ELECTRIC UTILITY - 0.2% CILCORP, Inc. 70,000 2,695 Houston Industries, Inc. 100,000 2,262 Portland General Corp. 37,500 1,472 6,429 GAS - 0.5% Enron Corp. 181,600 7,491 K N Energy, Inc. 52,400 2,037 ONEOK, Inc. 142,000 4,207 13,735 TELEPHONE SERVICES - 4.5% ALLTEL Corp. 500,000 16,063 Ameritech Corp. 280,000 16,730 Cincinnati Bell, Inc. 68,200 4,220 GTE Corp. 685,300 32,209 MCI Communications Corp. 510,000 17,914 NYNEX Corp. 296,000 14,985 Pacific Telesis Group 267,500 10,499 SBC Communications, Inc. 462,000 25,352 137,972 TOTAL UTILITIES 174,771 TOTAL COMMON STOCKS (Cost $2,486,207) 2,806,577 CONVERTIBLE PREFERRED STOCKS - 0.5% SHARES VALUE (NOTE 1) (000S) UTILITIES - 0.5% TELEPHONE SERVICES - 0.5% Worldcom, Inc. 8%, depositary shares (Cost $15,048) 161,000 $ 14,269 CONVERTIBLE BONDS - 0.6% MOODY'S PRINCIPAL RATING AMOUNT (000S) RETAIL & WHOLESALE - 0.6% U.S. Office Products Co. 5 1/2%, 2/1/01 (Cost $19,545) B3 $ 15,000 19,425 CASH EQUIVALENTS - 6.8% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $208,413) 208,412,852 208,413 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $2,729,213) $ 3,048,684 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.39%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Affiliated company (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At January 31, 1997, the aggregate cost of investment securities for income tax purposes was $2,730,843,000. Net unrealized appreciation aggregated $317,841,000, of which $342,215,000 related to appreciated investment securities and $24,374,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS(EXCEPT PER-SHARE AMOUNT) JANUARY 31, 1997 (UNAUDITED) ASSETS Investment in securities, at value (cost $2,729,213) - $ 3,048,684 See accompanying schedule Cash 906 Receivable for investments sold 120,209 Receivable for fund shares sold 33,228 Dividends receivable 2,209 Interest receivable 1,559 Other receivables 1 TOTAL ASSETS 3,206,796 LIABILITIES Payable for investments purchased $ 196,884 Payable for fund shares redeemed 11,043 Accrued management fee 1,466 Other payables and accrued expenses 976 TOTAL LIABILITIES 210,369 NET ASSETS $ 2,996,427 Net Assets consist of: Paid in capital $ 2,592,068 Undistributed net investment income 2,611 Accumulated undistributed net realized gain (loss) on 82,277 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 319,471 investments NET ASSETS, for 144,761 shares outstanding $ 2,996,427 NET ASSET VALUE, offering price and redemption price per $20.70 share ($2,996,427 (divided by) 144,761 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED) INVESTMENT INCOME $ 13,519 Dividends (including $101 received from affiliated issuers) Interest 3,567 TOTAL INCOME 17,086 EXPENSES Management fee $ 5,583 Basic fee Performance adjustment 484 Transfer agent fees 2,117 Accounting fees and expenses 340 Non-interested trustees' compensation 5 Custodian fees and expenses 50 Registration fees 607 Audit 17 Legal 3 Miscellaneous 5 Total expenses before reductions 9,211 Expense reductions (341) 8,870 NET INVESTMENT INCOME 8,216 REALIZED AND UNREALIZED GAIN (LOSS) 86,851 Net realized gain (loss) on investment securities (including realized gain (loss) of $8,171 on sales of investments in affiliated issuers) Change in net unrealized appreciation (depreciation) on 276,168 investment securities NET GAIN (LOSS) 363,019 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 371,235 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JULY 31, JANUARY 31, 1997 1996 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 8,216 $ 6,344 Net investment income Net realized gain (loss) 86,851 65,571 Change in net unrealized appreciation (depreciation) 276,168 (14,621) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 371,235 57,294 FROM OPERATIONS Distributions to shareholders (8,329) (2,757) From net investment income From net realized gain (28,170) (32,750) TOTAL DISTRIBUTIONS (36,499) (35,507) Share transactions 2,217,998 1,696,572 Net proceeds from sales of shares Reinvestment of distributions 36,072 34,964 Cost of shares redeemed (812,248) (998,307) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,441,822 733,229 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 1,776,558 755,016 NET ASSETS Beginning of period 1,219,869 464,853 End of period (including undistributed net investment $ 2,996,427 $ 1,219,869 income of $2,611 and $4,406, respectively) OTHER INFORMATION Shares Sold 113,930 97,237 Issued in reinvestment of distributions 2,034 2,199 Redeemed (41,942) (57,679) Net increase (decrease) 74,022 41,757
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED JULY 31, APRIL 27, 1993 ENDED JANUARY (COMMENCEMENT 31, 1997 OF OPERATIONS) TO
(UNAUDITED) 1996 1995 1994 E JULY 31, 1993
SELECTED PER-SHARE DATA Net asset value, beginning $ 17.24 $ 16.04 $ 11.68 $ 10.80 $ 10.00 of period Income from Investment Operations Net investment income .08 H .11 .05 .02 (.01) Net realized and 3.84 2.25 4.47 1.01 .81 unrealized gain (loss) Total from investment 3.92 2.36 4.52 1.03 .80 operations Less Distributions From net investment (.09) (.09) (.01) (.01) - income From net realized gain (.37) (1.07) (.15) - - In excess of net realized - - - (.14) - gain Total distributions (.46) (1.16) (.16) (.15) - Net asset value, end of period $ 20.70 $ 17.24 $ 16.04 $ 11.68 $ 10.80 TOTAL RETURN B, C 23.20% 15.44% 39.14% 9.51% 8.00% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 2,996 $ 1,220 $ 465 $ 72 $ 18 (in millions) Ratio of expenses to average .98% A 1.02% 1.21% 1.43% 2.50% A net assets , D Ratio of expenses to average .95% A .99% 1.19% 1.40% 2.50% A net assets after expense , F F F F reductions Ratio of net investment .88% A .86% .78% .13% (.73)% income to average net A assets Portfolio turnover rate 116% A 129% 162% 291% 90% A Average commission rate G $ .0419
ANNUALIZED TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. 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. 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). FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1997 (Unaudited) 6. 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 with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions, non-taxable dividends and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 7. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. The cost of the foreign currency contracts is included in the cost basis of the associated investment. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or 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. 2. OPERATING POLICIES - CONTINUED REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities, and may be utilized by the fund as an additional cash management option. Dividends from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions received by the fund are recorded as interest income. 8. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $2,393,791,000 and $1,048,077,000, respectively. 9. 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% of the fund's average net assets over the performance period) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annualized rate of .65% of average net assets after the performance adjustment. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized 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. 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 $540,000 for the period. 10. 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 $319,000 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 $18,000, respectively, under these arrangements. 11. 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 AFFILIATES COST COST INCOME American Pad & Paper Co. $ 3,519 $ - $ - $ 27,344 Earthgrains Co. - 25,582 101 - Integramed America, Inc. - - - 1,060 Monterey Resources, Inc. 6,308 - - 12,539 Roadway Express, Inc. - - - 22,009 TOTALS $ 9,827 $ 25,582 $ 101 $ 62,952 MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpressprovides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS For mutual fund and brokerage trading. 1 For quotes.* 2 For account balances and holdings. 3 To review orders and mutual fund activity. 4 To change your PIN. 5 To speak to a Fidelity representative. * 0 BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 for significant savings on Web access from internetMCI. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(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)(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)(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 Charles Mangum, 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 * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES 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 TechnoQuant(trademark) Growth Fund Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) TouchTone Xpress 1-800-544-5555 SM AUTOMATED LINE FOR QUICKEST SERVICE FIDELITY (REGISTERED TRADEMARK) GROWTH & INCOME PORTFOLIO SEMIANNUAL REPORT JANUARY 31, 1997 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 26 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 30 Notes to the financial statements. To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: As 1997 begins, the stock and bond markets generally have continued on the course they followed during the past year. Through January, stocks maintained their unprecedented climb, with the large companies still setting the pace. With low, stable interest rates, the bond market has tended to mirror its historical returns in the mid-single digits. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that there is no assurance that a money market fund will achieve its goal of maintaining a stable net asset value of $1.00 per share, and that these types of funds are neither insured nor guaranteed by any agency of the U.S. government. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. If you have questions, please call us at 1-800-544-8888. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10 MONTHS YEAR YEARS YEARS Fidelity Growth & Income 19.21% 21.11% 125.59% 359.33% S&P 500(registered trademark) 24.15% 26.34% 119.87% 288.58% Growth & Income Funds Average 20.55% 22.65% 100.52% 226.62% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, 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 581 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past six months. These benchmarks reflect reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1997 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS Fidelity Growth & Income 21.11% 17.67% 16.47% S&P 500 26.34% 17.06% 14.53% Growth & Income Funds Average 22.65% 14.83% 12.47% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a slightly different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970131 19970212 090516 S00000000000001 Growth & Income SP Standard & Poor 500 00027 SP001 1987/01/31 10000.00 10000.00 1987/02/28 10475.23 10395.00 1987/03/31 10789.83 10695.42 1987/04/30 10776.86 10600.23 1987/05/31 10817.24 10692.45 1987/06/30 11214.39 11232.42 1987/07/31 11836.17 11801.90 1987/08/31 12073.71 12242.11 1987/09/30 11978.69 11974.01 1987/10/31 9482.79 9394.81 1987/11/30 8975.97 8620.68 1987/12/31 9437.56 9276.71 1988/01/31 10029.28 9667.26 1988/02/29 10561.08 10117.75 1988/03/31 10334.27 9805.11 1988/04/30 10500.71 9913.95 1988/05/31 10636.89 10000.20 1988/06/30 11128.56 10459.21 1988/07/31 11120.92 10419.47 1988/08/31 10991.08 10065.20 1988/09/30 11389.13 10493.98 1988/10/31 11612.75 10785.71 1988/11/30 11443.11 10631.48 1988/12/31 11606.08 10817.53 1989/01/31 12332.93 11609.37 1989/02/28 12200.07 11320.30 1989/03/31 12577.10 11584.06 1989/04/30 13113.30 12185.28 1989/05/31 13728.35 12678.78 1989/06/30 13822.72 12606.51 1989/07/31 14752.72 13744.88 1989/08/31 15070.66 14014.28 1989/09/30 14989.73 13956.82 1989/10/31 14516.11 13633.02 1989/11/30 14757.08 13911.13 1989/12/31 15041.66 14245.00 1990/01/31 14253.22 13289.16 1990/02/28 14472.23 13460.59 1990/03/31 14726.43 13817.30 1990/04/30 14346.57 13471.87 1990/05/31 15406.66 14785.37 1990/06/30 15335.06 14684.83 1990/07/31 15228.19 14637.84 1990/08/31 13928.01 13314.58 1990/09/30 13124.89 12666.16 1990/10/31 13097.54 12611.70 1990/11/30 13744.67 13426.41 1990/12/31 14019.36 13801.01 1991/01/31 15299.71 14402.73 1991/02/28 16589.27 15432.53 1991/03/31 17503.08 15805.99 1991/04/30 17744.12 15843.93 1991/05/31 18763.90 16528.39 1991/06/30 17489.48 15771.39 1991/07/31 18561.03 16506.33 1991/08/31 19101.46 16897.53 1991/09/30 18932.98 16615.34 1991/10/31 19271.59 16837.99 1991/11/30 18265.44 16159.42 1991/12/31 19885.30 18008.06 1992/01/31 20360.84 17673.11 1992/02/29 20807.27 17902.86 1992/03/31 20379.88 17553.75 1992/04/30 20838.19 18069.83 1992/05/31 20916.20 18158.37 1992/06/30 20505.16 17887.81 1992/07/31 20926.83 18619.43 1992/08/31 20711.09 18237.73 1992/09/30 20923.23 18452.93 1992/10/31 21088.93 18517.52 1992/11/30 21740.71 19148.96 1992/12/31 22179.37 19384.50 1993/01/31 22798.28 19547.33 1993/02/28 23057.09 19813.17 1993/03/31 23903.33 20231.23 1993/04/30 23869.38 19741.63 1993/05/31 24367.36 20270.71 1993/06/30 24742.56 20329.49 1993/07/31 24924.66 20248.18 1993/08/31 25903.44 21015.58 1993/09/30 26044.44 20853.76 1993/10/31 26335.90 21285.43 1993/11/30 25741.33 21083.22 1993/12/31 26510.85 21338.33 1994/01/31 27513.06 22063.83 1994/02/28 26988.09 21465.90 1994/03/31 25800.86 20529.99 1994/04/30 26316.16 20792.77 1994/05/31 26400.05 21133.77 1994/06/30 25941.84 20616.00 1994/07/31 26688.20 21292.20 1994/08/31 27711.43 22165.18 1994/09/30 27389.69 21622.14 1994/10/31 27716.06 22108.63 1994/11/30 26686.75 21303.44 1994/12/31 27111.88 21619.37 1995/01/31 27433.27 22179.96 1995/02/28 28243.15 23044.31 1995/03/31 29131.96 23724.35 1995/04/30 29945.48 24423.03 1995/05/31 30797.75 25399.22 1995/06/30 31353.60 25989.24 1995/07/31 32546.54 26851.05 1995/08/31 32792.91 26918.44 1995/09/30 34111.49 28054.40 1995/10/31 33951.72 27954.25 1995/11/30 35549.44 29181.44 1995/12/31 36704.67 29743.47 1996/01/31 37925.90 30755.94 1996/02/29 38346.55 31041.05 1996/03/31 38672.78 31339.97 1996/04/30 39067.68 31801.92 1996/05/31 39816.63 32622.09 1996/06/30 40062.39 32746.38 1996/07/31 38532.04 31299.65 1996/08/31 39133.25 31959.76 1996/09/30 41198.89 33758.45 1996/10/31 41852.84 34689.51 1996/11/30 44497.07 37311.69 1996/12/31 44054.57 36572.55 1997/01/31 45932.59 38857.60 IMATRL PRASUN SHR__CHT 19970131 19970212 090519 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Growth & Income Portfolio on January 31, 1987. As the chart shows, by January 31, 1997, the value of the investment would have grown to $45,933 - a 359.33% 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 $38,858 - a 288.58% 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 An interview with Steven Kaye, Portfolio Manager of Fidelity Growth & Income Portfolio Q. STEVE, HOW HAS THE FUND PERFORMED? A. For the six months that ended January 31, 1997, the fund had a total return of 19.21%, while the growth & income funds average tracked by Lipper Analytical Services returned 20.55%, and the Standard & Poor's 500 Index posted a return of 24.15%. For the 12 months that ended January 31, 1997, the fund returned 21.11%, the growth & income funds average returned 22.65% and the S&P 500 returned 26.34%. Q. WHAT FACTORS CAUSED THE FUND TO LAG THE LIPPER AVERAGE AND THE S&P 500 OVER THE PAST SIX MONTHS? A. There were several reasons. First, the fund had less invested in technology stocks than the index, and other funds probably held more technology investments as well. This was the top performing sector in the market in 1996, driven by the outstanding performance of the larger technology-related companies such as Microsoft. While the fund invested in some of these companies, such as Intel, I believed that many technology stocks were too expensive. Second, the finance sector posted positive performance, but I believed that most of these stocks were trading at very expensive levels relative to their valuation histories, so I didn't increase the fund's investments in them. Finally, while the fund's tobacco investments - such as its holdings in UST and Philip Morris - were at or near all-time highs toward the end of the period, an adverse decision in a lawsuit in August caused share-price drops in those stocks, hurting the fund's six-month performance. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PERIOD? A. The market exhibited strong performance that came from a select few names. This narrow, often volatile market saw valuations reach toward record highs. Part of the reason behind the market's advance was the positive backdrop of low interest rates and controlled inflation. This good economic news, combined with huge inflows of investor dollars into the market, kept driving stock prices upward. But, again, most of the gains were achieved by a small number of stocks, mainly those of the largest companies. Q. WHAT SORT OF STRATEGY DID YOU PURSUE IN THIS ENVIRONMENT? A. I didn't follow any broad themes, really. I'm a bottom-up investor - I evaluate the merits of individual companies instead of looking first at sectors or economic trends. That being said, one of the fund's largest positions was in the health care sector, specifically in pharmaceutical stocks. Many of these companies had solid business prospects driven by strong prescription growth and the introduction of new products. I didn't choose these investments because they were drug stocks but because their business prospects were positive, their earnings growth was accelerating and there was strong demand for their products. While these stocks' valuations were reaching higher levels, I was comfortable owning them because of their positive business prospects. I also remained attracted to companies involved in defense and aerospace because of the consolidation in the industry, and the strong free cash flow offered by the companies in the industry that remained after that consolidation activity. Q. WHICH STOCKS WERE PARTICULARLY SUCCESSFUL FOR THE FUND? A. The fund's retail stocks were positive contributors, especially drug store stocks, including Rite Aid, CVS and Revco, which CVS has been attempting to acquire. Among the retailers, these companies posted strong earnings growth and the best comparable store sales - this year's results for each store compared to last year's. The drug store chains gained market share as a result of the trend toward managed care in the health industry. Because the big drug store chains have the ability to contract with managed care organizations, they can offer prescription services throughout an entire region at an attractive total cost. With more people coming in the door for their prescriptions, the stores can sell more of the other products they offer. Another positive contributor to the fund was its stake in REITs - real estate investment trusts. Supply and demand among various property types continued to improve in 1996, as demand outpaced supply. Additionally, investors were attracted to REITs by their dividend yields, which typically were about three or four times more than the stock market average. Q. WHAT'S YOUR OUTLOOK AT THE START OF 1997? A. I spend a lot of time looking at stocks' historical valuations. With that perspective, I find today's stock market environment different from anything we've seen historically. The questions at this point are: Does history repeat itself? Will we see sharp stock price declines? Stock prices have increased faster than company earnings over the past year, and history indicates that at some point prices should fall to more accurately reflect company earnings. It's quite possible that earnings will not be that stellar in 1997; we're well into an economic recovery and the positive currency backdrop that was like a wind at the backs of many stocks in the S&P 500 in early 1996 may not be as favorable. There's another point to consider. We've seen the dollar rally versus European and Asian currencies recently, which could cause some earnings problems this year. The dollar's rally hurts in two ways. First, with a stronger dollar, overseas sales translate into fewer dollars after exchange. Second, U.S. companies become less cost competitive overseas. At this point, the economy is doing fine, but it's impossible to predict whether or not that will continue. With the possibility of earnings disappointments on the horizon, I'll continue to do what I always do: look at stocks one at a time, searching for attractively valued stocks of companies with positive business prospects. 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: seeks a high total return through a combination of current income and capital appreciation FUND NUMBER: 027 TRADING SYMBOL: FGRIX START DATE: December 30, 1985 SIZE: as of January 31, 1997, more than $25.4 billion MANAGER: Steven Kaye, since 1993; 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 BUYING AND SELLING STOCKS: "When deciding whether or not to buy a stock, I look first at its valuation. I ask myself whether the valuation is attractive relative to its historical range given today's market environment. Second, I examine the company's earnings growth outlook. I don't want to buy a cheap stock of a company that's not going to grow its earnings, so I examine the stock's valuation relative to its earnings outlook. Finally, I `kick the tires.' That is, I visit with the company's management to get a final feel for the prospects of the company. Once a stock meets my approval through these three steps, I'll buy it. "I'll sell a stock if the company has a change in its business prospects or it reaches what I consider to be an excessive valuation. If I'm disappointed in the company's ability to fulfill its business potential, I'll get rid of the stock. I'll also sell the stock to take profits if the company does well and its success is reflected in a nice increase in the stock price, bringing it to what I consider full valuation." INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1997 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Philip Morris Companies, Inc. 3.2 3.9 General Electric Co. 3.0 3.1 Bristol-Myers Squibb Co. 2.0 1.2 Royal Dutch Petroleum Co. ADR 2.0 2.0 American Express Co. 2.0 1.7 Intel Corp. 1.8 0.2 British Petroleum PLC ADR 1.7 1.7 Federal National Mortgage Association 1.7 1.8 Procter & Gamble Co. 1.4 0.5 Tyco International Ltd. 1.2 1.1 TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1997 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Health 15.0 15.3 Finance 12.7 11.0 Nondurables 9.4 10.6 Technology 8.9 6.3 Energy 7.3 7.4 ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JANUARY 31, 1997 * AS OF JULY 31, 1996 ** Row: 1, Col: 1, Value: 5.8 Row: 1, Col: 2, Value: 1.2 Row: 1, Col: 3, Value: 93.0 Stocks 90.4% Bonds 1.0% Short-term investments 8.6% FOREIGN INVESTMENTS 7.7% Stocks 93.0% Bonds 1.2% Short-term investments 5.8% FOREIGN INVESTMENTS 7.3% Row: 1, Col: 1, Value: 8.6 Row: 1, Col: 2, Value: 1.0 Row: 1, Col: 3, Value: 90.40000000000001 * ** INVESTMENTS JANUARY 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.7% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 5.3% AEROSPACE & DEFENSE - 3.6% Boeing Co. 1,112,820 $ 119,211 British Aerospace PLC 2,471,644 50,207 Gulfstream Aerospace Corp. (a) 1,281,200 29,628 Lockheed Martin Corp. 3,069,305 282,376 McDonnell Douglas Corp. 2,620,600 176,235 Northrop Grumman Corp. 1,791,600 139,969 Rockwell International Corp. 1,624,300 106,798 904,424 DEFENSE ELECTRONICS - 1.1% Litton Industries, Inc. (a)(d) 2,448,200 110,169 Raytheon Co. 3,690,500 169,302 279,471 SHIP BUILDING & REPAIR - 0.6% General Dynamics Corp. 2,184,600 154,287 TOTAL AEROSPACE & DEFENSE 1,338,182 BASIC INDUSTRIES - 6.0% CHEMICALS & PLASTICS - 3.5% Air Products & Chemicals, Inc. 1,659,700 118,461 Cytec Industries, Inc. (a) 900,000 35,888 du Pont (E.I.) de Nemours & Co. 1,154,600 126,573 Ethyl Corp. 1,886,900 16,510 Ferro Corp. 1,214,000 36,116 Grace (W.R.) & Co. 1,402,200 69,759 IMC Global, Inc. 362,100 13,805 Monsanto Co. 2,400,000 90,900 Morton International, Inc. 300,000 12,188 Praxair, Inc. 3,825,000 177,384 Raychem Corp. 706,100 61,166 Schulman (A.), Inc. 1,325,500 27,670 Union Carbide Corp. 2,065,600 93,727 880,147 IRON & STEEL - 0.1% Nucor Corp. 334,900 17,415 METALS & MINING - 0.2% Aluminum Co. of America 813,600 56,138 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - CONTINUED PACKAGING & CONTAINERS - 1.0% Corning, Inc. 3,642,800 $ 129,775 Crown Cork & Seal Co., Inc. 36,200 2,082 Tupperware Corp. 2,583,400 121,097 252,954 PAPER & FOREST PRODUCTS - 1.2% Champion International Corp. 300,000 12,563 International Paper Co. 350,000 14,306 Kimberly-Clark Corp. 2,723,900 265,580 Willamette Industries, Inc. 399,400 25,112 317,561 TOTAL BASIC INDUSTRIES 1,524,215 CONGLOMERATES - 2.9% AlliedSignal, Inc. 2,639,000 185,390 American Standard Companies, Inc. (a) 1,662,800 67,551 Tyco International Ltd. 5,316,609 303,711 United Technologies Corp. 960,400 66,988 Whitman Corp. 4,670,200 107,415 731,055 CONSTRUCTION & REAL ESTATE - 2.1% BUILDING MATERIALS - 0.1% Sherwin-Williams Co. 520,200 28,871 REAL ESTATE - 0.1% Rouse Co. (The) 1,076,900 33,384 REAL ESTATE INVESTMENT TRUSTS - 1.9% Bay Apartment Communities, Inc. 411,900 14,828 Beacon Properties Corp. 1,906,200 68,147 CBL & Associates Properties, Inc. (d) 1,957,100 50,151 Cali Realty Corp. 875,900 28,905 Carr Realty Corp. 185,100 5,391 Crescent Real Estate Equities, Inc. 823,000 44,133 Duke Realty Investors, Inc. 424,353 16,815 Equity Residential Properties Trust (SBI) 2,203,685 94,758 Highwoods Properties, Inc. 480,500 16,818 Irvine Apartment Communities, Inc. 191,400 5,096 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - CONTINUED REAL ESTATE INVESTMENT TRUSTS - CONTINUED Liberty Property Trust (SBI) 888,200 $ 22,871 Macerich Co. 647,600 17,809 Manufactured Home Communities, Inc. 526,100 12,429 Public Storage, Inc. 1,685,500 49,301 Speiker Properties, Inc. 270,500 9,467 Urban Shopping Centers, Inc. 666,400 20,159 477,078 TOTAL CONSTRUCTION & REAL ESTATE 539,333 DURABLES - 3.4% AUTOS, TIRES, & ACCESSORIES - 1.4% Chrysler Corp. 548,600 19,132 Eaton Corp. 726,400 50,848 General Motors Corp. 2,687,638 158,571 Scania AB Class B 893,500 22,552 Volvo AB Class B 3,800,000 90,671 341,774 CONSUMER DURABLES - 0.7% Minnesota Mining & Manufacturing Co. 1,978,300 168,650 CONSUMER ELECTRONICS - 0.3% Newell Co. 2,547,500 84,068 TEXTILES & APPAREL - 1.0% Fruit of the Loom, Inc. Class A (a)(d) 4,111,800 164,986 Intimate Brands, Inc. Class A 888,300 15,767 Liz Claiborne, Inc. 323,800 13,640 Unifi, Inc. 2,070,600 63,153 257,546 TOTAL DURABLES 852,038 ENERGY - 7.3% ENERGY SERVICES - 1.5% Baker Hughes, Inc. 835,100 32,569 Dresser Industries, Inc. 1,000,300 33,885 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED ENERGY SERVICES - CONTINUED Schlumberger Ltd. 2,010,700 $ 223,439 Western Atlas, Inc. (a) 1,287,000 87,355 377,248 OIL & GAS - 5.8% Amoco Corp. 468,200 40,733 Anadarko Petroleum Corp. 471,100 30,504 British Petroleum PLC ADR 3,072,510 435,144 Chevron Corp. 650,400 43,170 Kerr-McGee Corp. 489,900 33,681 Mobil Corp. 485,800 63,761 Occidental Petroleum Corp. 2,319,400 59,145 Royal Dutch Petroleum Co. ADR 2,927,900 507,991 Tosco Corp. 647,200 57,277 Total SA: Class B 140,000 12,045 sponsored ADR 1,022,477 44,094 USX-Marathon Group 936,000 24,921 Union Pacific Resources Group, Inc. 2,501,869 70,991 Unocal Corp. 1,273,591 53,650 1,477,107 TOTAL ENERGY 1,854,355 FINANCE - 12.6% BANKS - 3.5% Bank of New York Co., Inc. 5,038,254 184,526 BankAmerica Corp. 274,200 30,607 Barnett Banks, Inc. 593,900 26,132 Citicorp 2,495,000 290,356 CoreStates Financial Corp. 800,000 39,800 Fleet Financial Group, Inc. 1,746,299 94,300 National City Corp. 2,644,833 120,009 Norwest Corp. 2,382,300 113,457 899,187 CREDIT & OTHER FINANCE - 2.6% American Express Co. 8,132,130 507,242 Associates First Capital Corp. 529,600 25,752 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED CREDIT & OTHER FINANCE - CONTINUED Beneficial Corp. 575,000 $ 38,669 First Chicago NBD Corp. 343,600 19,628 Household International, Inc. 815,582 80,844 672,135 FEDERAL SPONSORED CREDIT - 3.5% Federal Home Loan Mortgage Corporation 5,523,200 167,077 Federal National Mortgage Association 10,984,000 433,868 Student Loan Marketing Association 2,667,300 290,402 891,347 INSURANCE - 2.6% Allmerica Financial Corp. 1,150,700 42,144 Allstate Corp. 2,023,010 133,013 General Re Corp. 545,400 88,082 ITT Hartford Group, Inc. 2,249,100 165,028 MBIA, Inc. 1,195,100 114,879 PMI Group, Inc. 312,300 16,318 Providian Corp. 319,000 17,186 Travelers Group, Inc. (The) 1,152,665 60,371 UNUM Corp. 341,300 25,811 662,832 SECURITIES INDUSTRY - 0.4% Lehman Brothers Holdings, Inc. 2,866,520 90,654 TOTAL FINANCE 3,216,155 HEALTH - 14.7% DRUGS & PHARMACEUTICALS - 9.1% Allergan, Inc. 3,030,000 107,186 American Home Products Corp. 2,715,000 172,063 Astra AB Class A Free shares 1,550,000 73,862 Bristol-Myers Squibb Co. 4,080,700 518,249 Genentech, Inc. special (a)(d) 2,272,300 124,692 Lilly (Eli) & Co. 2,848,866 248,207 Merck & Co., Inc. 2,425,000 220,069 Pfizer, Inc. 2,846,600 264,378 Pharmacia & Upjohn, Inc. 468,350 17,446 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED Schering-Plough Corp. 1,330,300 $ 100,604 SmithKline Beecham PLC ADR 3,009,700 217,451 Warner-Lambert Co. 3,303,160 265,904 2,330,111 MEDICAL EQUIPMENT & SUPPLIES - 4.0% Allegiance Corp. 2,520,520 64,588 Bard (C.R.), Inc. 998,600 28,210 Bausch & Lomb, Inc. (d) 3,259,900 110,429 Baxter International, Inc. 3,374,600 155,653 Beckman Instruments, Inc. 750,000 29,625 Becton, Dickinson & Co. 2,504,500 123,347 Biomet, Inc. 2,322,100 35,993 Boston Scientific Corp. (a) 360,895 24,631 Guidant Corp. 298,825 16,659 Johnson & Johnson 2,680,600 154,470 Medtronic, Inc. 1,061,200 72,692 Nellcor, Inc. (a) 529,400 9,000 Pall Corp. 2,846,100 63,681 St. Jude Medical, Inc. (a) 1,365,550 51,720 Stryker Corp. 2,488,900 72,178 U.S. Surgical Corp. 150,000 6,019 1,018,895 MEDICAL FACILITIES MANAGEMENT - 1.6% Columbia/HCA Healthcare Corp. 1,763,466 69,657 Coram Healthcare Corp. (a) 1,492,500 8,022 Covance, Inc. (a) 802,875 15,154 FHP International Corp. (a) 722,500 26,191 Fresenius Medical Care AG sponsored ADR (a) 42,035 1,251 Integrated Health Services, Inc. 291,900 7,772 Quest Diagnostics, Inc. (a) 401,437 6,323 Tenet Healthcare Corp. (a) 7,486,100 202,125 United HealthCare Corp. 1,212,400 59,105 395,600 TOTAL HEALTH 3,744,606 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HOLDING COMPANIES - 0.3% Norfolk Southern Corp. 368,600 $ 32,667 U.S. Industries, Inc. (a) 1,423,460 48,220 80,887 INDUSTRIAL MACHINERY & EQUIPMENT - 5.1% ELECTRICAL EQUIPMENT - 4.4% Alcatel Alsthom Compagnie Generale d'Electricite SA 888,576 88,014 American Superconductor Corp. (a) 304,750 3,276 Emerson Electric Co. 869,300 85,843 General Electric Co. 7,328,200 754,805 General Instrument Corp. (a) 486,200 12,094 Oak Industries, Inc. (a)(d) 1,464,700 32,040 Scientific-Atlanta, Inc. 291,000 5,529 Sensormatic Electronics Corp. 1,414,000 23,154 Westinghouse Electric Corp. 6,706,635 123,234 1,127,989 INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% Stanley Works 1,066,100 40,512 POLLUTION CONTROL - 0.5% Browning-Ferris Industries, Inc. 728,600 23,680 WMX Technologies, Inc. 3,022,700 110,706 134,386 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,302,887 MEDIA & LEISURE - 2.7% BROADCASTING - 0.2% HSN, Inc. (a) 1,214,825 24,600 Jacor Communications, Inc. Class A (a) 1,206,600 31,975 56,575 ENTERTAINMENT - 0.4% Disney (Walt) Co. 1,241,800 90,962 Viacom, Inc. Class B (non-vtg.) (a) 500,000 17,125 108,087 LODGING & GAMING - 0.9% ITT Corp. (a) 2,912,600 166,382 Mirage Resorts, Inc. (a) 2,236,400 56,190 222,572 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED PUBLISHING - 1.2% ACNielsen Corp. (a) 841,332 $ 13,777 Cognizant Corp. 3,432,600 110,272 Dun & Bradstreet Corp. 3,169,900 76,078 Times Mirror Co. Class A 2,097,900 99,126 299,253 RESTAURANTS - 0.0% Brinker International, Inc. (a) 155,000 1,686 Starbucks Corp. (a) 265,900 9,107 10,793 TOTAL MEDIA & LEISURE 697,280 NONDURABLES - 9.4% AGRICULTURE - 0.1% Pioneer Hi-Bred International, Inc. 363,100 24,464 BEVERAGES - 1.4% Anheuser-Busch Companies, Inc. 2,040,000 86,700 PepsiCo, Inc. 7,834,000 273,211 359,911 FOODS - 1.6% General Mills, Inc. 1,306,300 88,502 Kellogg Co. 478,000 33,281 Nestle SA (Reg.) 20,000 21,687 Quaker Oats Co. 332,100 12,744 RalCorp Holdings, Inc. (a) 661,766 15,221 Ralston Purina Co. 1,413,507 111,137 Sysco Corp. 2,692,900 88,529 Tyson Foods, Inc. 1,035,200 35,067 406,168 HOUSEHOLD PRODUCTS - 3.0% Avon Products, Inc. 1,120,600 70,318 Dial Corp. 1,511,800 20,787 Gillette Co. 818,120 66,677 Premark International, Inc. 1,500,700 34,516 Procter & Gamble Co. 3,101,300 358,200 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED HOUSEHOLD PRODUCTS - CONTINUED Rubbermaid, Inc. 2,122,700 $ 49,087 Unilever NV ADR 917,600 150,945 750,530 TOBACCO - 3.3% Philip Morris Companies, Inc. 6,792,100 807,411 RJR Nabisco Holdings Corp. 245,746 8,048 UST, Inc. 948,100 29,154 844,613 TOTAL NONDURABLES 2,385,686 PRECIOUS METALS - 0.1% Newmont Mining Corp. 719,500 28,690 RETAIL & WHOLESALE - 5.5% APPAREL STORES - 0.6% Footstar, Inc. (a) 514,793 11,647 Limited, Inc. (The) 3,611,000 61,838 Payless ShoeSource, Inc. (a) 1,113,668 41,763 TJX Companies, Inc. 702,700 27,932 143,180 DRUG STORES - 1.3% CVS Corp. 1,817,400 78,603 Revco (D.S.), Inc. (a) 2,429,693 91,113 Rite Aid Corp. 2,305,440 92,218 Walgreen Co. 1,663,300 68,403 330,337 GENERAL MERCHANDISE STORES - 1.6% Carson Pirie Scott & Co. (a)(d) 1,644,874 44,000 Federated Department Stores, Inc. (a) 1,628,430 53,535 May Department Stores Co. (The) 805,200 35,831 Price/Costco, Inc. (a) 1,484,200 39,517 Wal-Mart Stores, Inc. 10,108,100 240,067 412,950 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED GROCERY STORES - 0.9% Ahold NV 202,000 $ 12,458 American Stores Co. 900,000 37,800 Kroger Co. (The) (a) 2,301,326 109,888 Safeway, Inc. (a) 1,717,700 82,020 242,166 RETAIL & WHOLESALE, MISCELLANEOUS - 1.1% Corporate Express, Inc. (a) 787,500 17,719 Home Depot, Inc. (The) 3,806,700 188,432 Staples, Inc. (a) 1,086,100 22,265 Toys "R" Us, Inc. (a) 1,117,200 27,930 Viking Office Products, Inc. (a) 479,900 13,317 269,663 TOTAL RETAIL & WHOLESALE 1,398,296 SERVICES - 1.2% ADVERTISING - 0.1% Omnicom Group, Inc. 477,700 23,228 PRINTING - 0.2% Deluxe Corp. 265,900 8,176 Donnelley (R.R.) & Sons Co. 1,042,700 32,584 Valassis Communications, Inc. (a) 704,200 12,940 53,700 SERVICES - 0.9% ADT Ltd. (a) 1,875,200 41,958 Block (H&R), Inc. 3,474,100 102,920 Jostens, Inc. (d) 2,878,700 59,373 Service Corp. International 1,131,900 32,825 237,076 TOTAL SERVICES 314,004 TECHNOLOGY - 8.8% COMMUNICATIONS EQUIPMENT - 0.8% Cisco Systems, Inc. (a) 2,059,000 143,615 Lucent Technologies, Inc. 1,079,976 58,589 202,204 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - 2.6% Automatic Data Processing, Inc. 2,555,200 $ 105,721 CUC International, Inc. (a) 1,498,800 37,095 Ceridian Corp. (a) 1,920,500 72,499 DST Systems, Inc. (a) 1,467,300 47,871 Electronic Data Systems Corp. 4,876,700 224,328 Electronics for Imaging, Inc. (a) 321,800 29,847 First Data Corp. 2,550,000 91,800 Information Resources, Inc. (a) 1,317,778 20,426 NCR Corp. (a) 865,000 32,762 662,349 COMPUTERS & OFFICE EQUIPMENT - 2.2% Adaptec, Inc. (a) 1,224,200 53,559 Bay Networks, Inc. (a) 400,000 8,700 EMC Corp. (a) 500,000 18,938 International Business Machines Corp. 1,635,000 257,104 Pitney Bowes, Inc. 3,403,500 196,127 Silicon Graphics, Inc. (a) 792,800 21,703 556,131 ELECTRONIC INSTRUMENTS - 0.2% Perkin-Elmer Corp. 653,300 45,649 ELECTRONICS - 2.4% AMP, Inc. 278,100 11,333 Avnet, Inc. 316,700 19,596 Intel Corp. 2,875,000 466,469 Motorola, Inc. 600,000 40,950 Texas Instruments, Inc. 635,000 49,768 Thomas & Betts Corp. 776,198 36,384 624,500 PHOTOGRAPHIC EQUIPMENT - 0.6% Eastman Kodak Co. 1,178,600 102,244 Polaroid Corp. 879,300 38,689 140,933 TOTAL TECHNOLOGY 2,231,766 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - 1.0% AIR TRANSPORTATION - 0.4% AMR Corp. (a) 593,400 $ 47,769 Southwest Airlines Co. 1,016,200 22,356 Viad Corp. 3,085,300 48,593 118,718 RAILROADS - 0.6% Burlington Northern Santa Fe Corp. 982,519 85,970 CSX Corp. 1,225,800 59,451 145,421 TOTAL TRANSPORTATION 264,139 UTILITIES - 4.3% CELLULAR - 0.0% 360 Degrees Communications Co. (a) 500 10 ELECTRIC UTILITY - 0.6% Allegheny Power System, Inc. 257,800 7,895 American Electric Power Co., Inc. 411,300 17,018 Duke Power Co. 200,000 9,375 Entergy Corp. 2,115,300 56,849 Texas Utilities Co. 167,400 6,780 Veba AG Ord. 900,000 49,628 147,545 GAS - 0.0% Consolidated Natural Gas Co. 234,200 13,027 TELEPHONE SERVICES - 3.7% Ameritech Corp. 2,740,100 163,721 BCE, Inc. 306,000 15,413 Bell Atlantic Corp. 1,206,300 81,124 BellSouth Corp. 500,000 22,188 Cincinnati Bell, Inc. 364,300 22,541 Frontier Corp. 15,300 335 GTE Corp. 2,281,100 107,212 MCI Communications Corp. 2,144,200 75,315 NYNEX Corp. 2,550,500 129,119 Pacific Telesis Group 1,734,700 68,087 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - CONTINUED SBC Communications, Inc. 3,364,700 $ 184,638 WorldCom, Inc. (a) 2,596,800 65,245 934,938 TOTAL UTILITIES 1,095,520 TOTAL COMMON STOCKS (Cost $16,881,629) 23,599,094 CONVERTIBLE PREFERRED STOCKS - 0.3% ENERGY - 0.0% OIL & GAS - 0.0% Tosco Financing Trust $2.875 (e) 115,000 6,325 FINANCE - 0.0% SECURITIES INDUSTRY - 0.0% Salomon, Inc. $3.484 106,000 6,493 INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% ELECTRICAL EQUIPMENT - 0.2% Loral Space & Communications Ltd. $3.00 (e) 727,000 39,530 NONDURABLES - 0.0% TOBACCO - 0.0% RJR Nabisco Holdings Corp. depositary shares $.6012 1,825,500 12,094 RETAIL & WHOLESALE - 0.1% APPAREL STORES - 0.1% TJX Companies, Inc., Series E, $7.00 72,000 15,480 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $73,064) 79,922 CORPORATE BONDS - 0.6% MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S) CONVERTIBLE BONDS - 0.3% CONSTRUCTION & REAL ESTATE - 0.0% REAL ESTATE INVESTMENT TRUSTS - 0.0% Liberty Property 8%, 7/1/01 B1 $ 1,591 $ 2,036 HEALTH - 0.2% DRUGS & PHARMACEUTICALS - 0.2% Roche Holdings, Inc. liquid yield option notes 0%, 4/20/10 (e) - 72,400 34,028 MEDIA & LEISURE - 0.0% BROADCASTING - 0.0% Home Shopping Network, Inc. 5 7/8%, 3/1/06 (e) B- 4,321 4,224 RETAIL & WHOLESALE - 0.0% GROCERY STORES - 0.0% Food Lion, Inc. 5%, 6/1/03 (e) Baa1 6,700 7,521 TECHNOLOGY - 0.1% ELECTRONICS - 0.1% National Semiconductor Corp. 6 1/2%, 10/1/02 (e) Ba2 31,640 31,996 TOTAL CONVERTIBLE BONDS 79,805 NONCONVERTIBLE BONDS - 0.3% DURABLES - 0.1% TEXTILES & APPAREL - 0.1% Westpoint Stevens, Inc. 8 3/4%, 12/15/01 Ba3 16,910 17,333 FINANCE - 0.1% ASSET-BACKED SECURITIES - 0.1% Airplanes Pass Through Trust Class D 10 7/8%, 3/15/19 Ba2 14,530 16,092 CORPORATE BONDS - CONTINUED MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (C) AMOUNT (000S) (000S) NONCONVERTIBLE BONDS - CONTINUED HEALTH - 0.1% MEDICAL FACILITIES MANAGEMENT - 0.1% Tenet Healthcare Corp. 10 1/8%, 3/1/05 Ba3 $ 23,000 $ 25,242 MEDIA & LEISURE - 0.0% BROADCASTING - 0.0% SCI Television, Inc. secured 11%, 6/30/05 B2 7,250 7,758 TOTAL NONCONVERTIBLE BONDS 66,425 TOTAL CORPORATE BONDS (Cost $133,562) 146,230 U.S. TREASURY OBLIGATIONS - 0.6% 8 1/8%, 8/15/19 Aaa 10,000 11,401 6%, 2/15/26 Aaa 172,500 154,279 TOTAL U.S. TREASURY OBLIGATIONS (Cost $166,452) 165,680 CASH EQUIVALENTS - 5.8% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.56%, dated 1/31/97 due 2/3/97 $ 19,993 19,984 SHARES Taxable Central Cash Fund (b) 1,451,323,821 1,451,324 TOTAL CASH EQUIVALENTS (Cost $1,471,308) 1,471,308 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $18,726,015) $ 25,462,234 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.39%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 4. Affiliated company (see Note 7 of Notes to Financial Statements). 5. 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 $123,624,000 or 0.5% of net assets. INCOME TAX INFORMATION At January 31, 1997, the aggregate cost of investment securities for income tax purposes was $18,729,740,000. Net unrealized appreciation aggregated $6,732,494,000, of which $6,901,255,000 related to appreciated investment securities and $168,761,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JANUARY 31, 1997 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 25,462,234 agreements of $19,984) (cost $18,726,015) - See accompanying schedule Cash 1 Receivable for investments sold 170,334 Receivable for fund shares sold 50,567 Dividends receivable 29,233 Interest receivable 14,130 Other receivables 868 TOTAL ASSETS 25,727,367 LIABILITIES Payable for investments purchased $ 176,031 Payable for fund shares redeemed 15,118 Accrued management fee 10,292 Other payables and accrued expenses 5,849 Collateral on securities loaned, at value 61,340 TOTAL LIABILITIES 268,630 NET ASSETS $ 25,458,737 Net Assets consist of: Paid in capital $ 18,592,362 Undistributed net investment income 21,496 Accumulated undistributed net realized gain (loss) on 108,718 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 6,736,161 investments and assets and liabilities in foreign currencies NET ASSETS, for 794,585 shares outstanding $ 25,458,737 NET ASSET VALUE, offering price and redemption price per $32.04 share ($25,458,737 (divided by) 794,585 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED) INVESTMENT INCOME $ 194,115 Dividends (including $5,375 received from affiliated issuers) Interest (including income on securities loaned of $551) 52,953 TOTAL INCOME 247,068 EXPENSES Management fee $ 56,237 Transfer agent fees 24,180 Accounting and security lending fees 440 Non-interested trustees' compensation 62 Custodian fees and expenses 260 Registration fees 1,213 Audit 78 Legal 52 Miscellaneous 87 Total expenses before reductions 82,609 Expense reductions (1,817) 80,792 NET INVESTMENT INCOME 166,276 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain of 210,131 $5,190 on sales of investments in affiliated issuers) Foreign currency transactions (21) 210,110 Change in net unrealized appreciation (depreciation) on: Investment securities 3,522,252 Assets and liabilities in foreign currencies (86) 3,522,166 NET GAIN (LOSS) 3,732,276 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 3,898,552 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JANUARY JULY 31, 31, 1997 1996 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 166,276 $ 288,201 Net investment income Net realized gain (loss) 210,110 936,554 Change in net unrealized appreciation (depreciation) 3,522,166 1,118,264 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,898,552 2,343,019 FROM OPERATIONS Distributions to shareholders (191,527) (271,415) From net investment income From net realized gain (790,988) (453,173) TOTAL DISTRIBUTIONS (982,515) (724,588) Share transactions 4,763,955 8,197,294 Net proceeds from sales of shares Reinvestment of distributions 963,156 707,541 Cost of shares redeemed (2,390,057) (3,423,684) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 3,337,054 5,481,151 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 6,253,091 7,099,582 NET ASSETS Beginning of period 19,205,646 12,106,064 End of period (including undistributed net investment $ 25,458,737 $ 19,205,646 income of $21,496 and $46,747, respectively) OTHER INFORMATION Shares Sold 159,057 295,617 Issued in reinvestment of distributions 34,043 27,008 Redeemed (79,493) (123,924) Net increase (decrease) 113,607 198,701
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED JULY 31, ENDED JANUARY 31, 1997 (UNAUDITED) 1996 1995 1994 E 1993 1992
SELECTED PER-SHARE DATA Net asset value, $ 28.20 $ 25.10 $ 22.17 $ 21.90 $ 21.34 $ 19.92 beginning of period Income from Investment Operations Net investment .22 D .49 .43 .45 .53 .50 income Net realized and 5.00 3.99 4.14 1.07 3.02 1.94 unrealized gain (loss) Total from investment 5.22 4.48 4.57 1.52 3.55 2.44 operations Less Distributions From net investment (.26) (.48) (.40) (.48) (.59) (.38) income From net (1.12) (.90) (1.24) (.77) (2.40) (.64) realized gain Total distributions (1.38) (1.38) (1.64) (1.25) (2.99) (1.02) Net asset value, end of $ 32.04 $ 28.20 $ 25.10 $ 22.17 $ 21.90 $ 21.34 period TOTAL RETURN B, C 19.21% 18.39% 21.95% 7.08% 19.10% 12.75% H H H H H RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 25,459 $ 19,206 $ 12,106 $ 8,757 $ 6,646 $ 4,199 period (in millions) Ratio of expenses to .73% A .75% .78% .83% .83% .86% average net assets Ratio of expenses to .71% A .74% .77% .82% .83% .86% average net assets , F F F F after expense reductions Ratio of net investment 1.47% A 1.82% 2.21% 2.09% 2.67% 2.49% income to average net assets Portfolio turnover rate 34% A 41% 67% 92% 87% 221% Average commission $ .0420 rate G
ANNUALIZED 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). TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. 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. 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). FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1997 (Unaudited) 12. 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 with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the funds are informed of the ex-dividend date. Non-cash dividends included in 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for 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. 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. 13. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. The cost of the foreign currency contracts is included in the cost basis of the associated investment. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or 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. 2. OPERATING POLICIES - CONTINUED REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities, and may be utilized by the fund as an additional cash management option. Dividends from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions received by the fund are recorded as interest income. RESTRICTED SECURITIES. The fund is permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, the fund had no investments in restricted securities (excluding 144A issues). 14. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $6,308,779,000 and $3,609,370,000, respectively, of which U.S. government and government agency obligations aggregated $156,192,000 and $0, respectively. 15. 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 annualized rate of .50% of average net assets. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .21% of average net assets. ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $1,948,000 for the period. 16. 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 $59,815,000 and $61,340,000, respectively. 17. 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 $1,149,000 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 $1,000 and $667,000, respectively, under these arrangements. 18. 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 Bausch & Lomb, Inc. $ 4,924 $ - $ 1,660 $110,429 CBL & Associates Properties, Inc. 5,148 - 2,213 50,151 Carlisle Plastics, Inc. Class A - - - - Carson Pirie Scott & Co. - - - 44,000 Ferro Corp. - 7,361 236 - Fruit of the Loom, Inc. Class A 5,208 12,001 - 164,986 Genentech, Inc. special 1,453 - - 124,692 Jostens, Inc. - - 1,266 59,373 Litton Industries, Inc. 3,534 - - 110,169 Oak Industries, Inc. 12,219 2,498 - 32,040 Valassis Communications, Inc. - 4,914 - - TOTALS $ 32,486 $ 26,774 $ 5,375 $ 695,840 MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpressprovides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS For mutual fund and brokerage trading. 1 For quotes.* 2 For account balances and holdings. 3 To review orders and mutual fund activity. 4 To change your PIN. 5 To speak to a Fidelity representative. * 0 BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 for significant savings on Web access from internetMCI. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO 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 1502 N. Westshore Blvd. Tampa, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL 3232 Lake Avenue Wilmette, 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 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, 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 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(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)(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)(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 * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES CUSTODIAN The Chase Manhattan Bank New York, NY FIDELITY'S GROWTH AND INCOME FUNDS Balanced Fund Convertible Securities Fund Equity-Income Fund Equity-Income II Fund Fidelity Fund Global Balanced Fund Growth & Income Portfolio Market Index Fund Puritan Fund Real Estate Investment Portfolio Utilities Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) TouchTone Xpress 1-800-544-5555 SM AUTOMATED LINE FOR QUICKEST SERVICE FIDELITY (registered trademark) OTC PORTFOLIO SEMIANNUAL REPORT JANUARY 31, 1997 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 22 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 26 Notes to the financial statements. To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING 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. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: As 1997 begins, the stock and bond markets generally have continued on the course they followed during the past year. Through January, stocks maintained their unprecedented climb, with the well-known, blue chip companies still setting the pace. With low, stable interest rates, the bond market has tended to mirror its historical returns in the mid-single digits. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. It's also advisable to keep money you'll need in the near future in a more stable investment, traditionally short-term bond or money market funds. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. If you have questions, please call us at 1-800-544-8888. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS
PERIODS ENDED JANUARY 31, 1997 PAST 6 PAST 1 PAST 5 PAST 10 MONTHS YEAR YEARS YEARS Fidelity OTC 25.10% 28.99% 106.61% 343.67% Fidelity OTC (incl. 3% sales 21.35% 25.12% 100.41% 330.36% charge) NASDAQ(registered trademark) Composite Index 28.03% 30.99% 134.04% 299.59% Mid-Cap Funds Average 18.37% 20.65% 92.16% 269.77%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, 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 181 mutual funds with similar objectives tracked by Lipper Analytical Services, Inc. over the past six 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, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1997 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS Fidelity OTC 28.99% 15.62% 16.07% Fidelity OTC (incl. 3% sales charge) 25.12% 14.92% 15.71% NASDAQ Composite Index 30.99% 18.54% 14.86% Mid-Cap Funds Average 20.65% 13.85% 13.63% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking 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 19970131 19970210 133512 S00000000000001 OTC Portfolio FI NASDAQ w/Wilshire Divs 00093 F0091 1987/01/31 9700.00 10000.00 1987/02/28 10738.16 10850.79 1987/03/31 10711.95 10991.76 1987/04/30 10591.35 10690.57 1987/05/31 10685.73 10669.80 1987/06/30 10900.70 10890.02 1987/07/31 11425.03 11165.20 1987/08/31 11959.84 11692.01 1987/09/30 11886.43 11429.92 1987/10/31 8305.30 8329.64 1987/11/30 7801.95 7874.85 1987/12/31 8773.50 8540.36 1988/01/31 9085.13 8919.76 1988/02/29 9690.40 9509.53 1988/03/31 9912.14 9721.52 1988/04/30 10211.78 9853.50 1988/05/31 10121.89 9635.98 1988/06/30 10793.08 10281.69 1988/07/31 10757.12 10103.68 1988/08/31 10499.43 9834.92 1988/09/30 10900.95 10139.40 1988/10/31 10894.96 10015.19 1988/11/30 10541.38 9740.01 1988/12/31 10778.63 10013.64 1989/01/31 11473.63 10550.36 1989/02/28 11443.15 10522.57 1989/03/31 11943.06 10721.21 1989/04/30 12528.33 11284.00 1989/05/31 13089.21 11789.76 1989/06/30 13058.72 11516.73 1989/07/31 13631.79 12021.83 1989/08/31 14241.45 12448.00 1989/09/30 14322.76 12558.06 1989/10/31 13839.83 12114.16 1989/11/30 13966.92 12141.45 1989/12/31 14054.52 12122.87 1990/01/31 13056.60 11098.70 1990/02/28 13419.48 11381.97 1990/03/31 13928.91 11657.42 1990/04/30 13524.16 11259.47 1990/05/31 14410.42 12318.03 1990/06/30 14438.33 12423.06 1990/07/31 14249.91 11792.66 1990/08/31 13021.71 10273.85 1990/09/30 12305.07 9300.31 1990/10/31 12045.56 8919.94 1990/11/30 12881.76 9725.76 1990/12/31 13386.76 10141.63 1991/01/31 14440.95 11251.98 1991/02/28 15560.13 12322.85 1991/03/31 16433.80 13133.85 1991/04/30 16404.92 13215.26 1991/05/31 17206.39 13813.84 1991/06/30 16376.04 13005.31 1991/07/31 17531.32 13734.63 1991/08/31 18455.54 14397.07 1991/09/30 18293.35 14445.56 1991/10/31 19088.72 14902.74 1991/11/30 18186.29 14394.64 1991/12/31 19967.62 16125.94 1992/01/31 20829.82 17073.52 1992/02/29 20870.11 17454.83 1992/03/31 20201.30 16652.69 1992/04/30 19605.01 15977.03 1992/05/31 19887.04 16176.51 1992/06/30 19451.91 15592.99 1992/07/31 19862.87 16086.16 1992/08/31 19371.33 15612.18 1992/09/30 19969.22 16187.14 1992/10/31 20713.36 16811.71 1992/11/30 22175.38 18150.01 1992/12/31 22950.74 18840.57 1993/01/31 23102.85 19397.35 1993/02/28 22199.13 18702.19 1993/03/31 22968.63 19259.30 1993/04/30 22297.56 18475.63 1993/05/31 22897.05 19586.04 1993/06/30 22923.89 19699.70 1993/07/31 23174.43 19739.10 1993/08/31 23603.92 20826.15 1993/09/30 24252.62 21404.25 1993/10/31 24572.50 21886.01 1993/11/30 23923.05 21207.47 1993/12/31 24863.33 21856.57 1994/01/31 25532.81 22542.27 1994/02/28 25265.02 22337.73 1994/03/31 24255.65 20975.37 1994/04/30 23586.18 20723.81 1994/05/31 23462.58 20781.83 1994/06/30 22597.41 19975.36 1994/07/31 23091.79 20453.67 1994/08/31 24245.35 21705.00 1994/09/30 24307.15 21688.24 1994/10/31 24863.33 22084.15 1994/11/30 24049.66 21333.71 1994/12/31 24193.17 21402.43 1995/01/31 24141.18 21517.04 1995/02/28 25409.58 22637.45 1995/03/31 26262.11 23330.02 1995/04/30 27364.17 24117.35 1995/05/31 28143.92 24729.07 1995/06/30 30327.23 26722.06 1995/07/31 32323.40 28685.72 1995/08/31 32739.27 29251.59 1995/09/30 33211.75 29947.88 1995/10/31 33031.65 29757.50 1995/11/30 33624.91 30443.67 1995/12/31 33441.11 30262.38 1996/01/31 33363.93 30504.05 1996/02/29 34554.71 31683.96 1996/03/31 34620.86 31743.73 1996/04/30 36792.93 34332.87 1996/05/31 38138.08 35879.33 1996/06/30 36803.96 34209.29 1996/07/31 34400.35 31209.67 1996/08/31 36429.08 32983.72 1996/09/30 38984.36 35467.29 1996/10/31 38827.41 35327.38 1996/11/30 41592.17 37400.18 1996/12/31 41378.35 37371.27 1997/01/31 43022.86 39958.65 IMATRL PRASUN SHR__CHT 19970131 19970210 133515 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity OTC Portfolio on January 31, 1987 and the current maximum 3% sales charge was paid. As the chart shows, by January 31, 1997, the value of the investment would have grown to $43,036 - a 330.36% 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 $39,959 - a 299.59% 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 MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: On January 7, 1997, Robert Bertelson (right photo) replaced Charles Mangum as Portfolio Manager of Fidelity OTC Portfolio. The following is an interview with Charles Mangum covering most of the period, followed by comments by Bob Bertelson on changes he's made to the fund and his outlook. Q. CHARLES, HOW DID THE FUND PERFORM? C.M. For the six months that ended January 31, 1997, the fund had a total return of 25.10%, compared to 28.03% for the NASDAQ Composite Index. According to Lipper Analytical Services, the mid-cap funds average returned 18.37% for the same period. For the 12 months that ended January 31, 1997, the fund returned 28.99%, while the NASDAQ returned 30.99% and the mid-cap funds average returned 20.65%. Q. WHAT FACTORS AFFECTED THE FUND'S RELATIVE PERFORMANCE? C.M. The fund lagged the index because it didn't perform as well in January after I had cut back some of our holdings in large-company stocks, such as Intel and Microsoft. Both of those two stocks are large components of the NASDAQ, and they performed very well in January. The stocks had posted large gains in 1996, but I was concerned they had reached the end of their run because statistics had shown that personal computer demand might be slowing. In addition, one of the fund's larger positions, Nellcor, posted disappointing earnings as its turnaround took longer than anticipated. The fund did well against the mid-cap average because during most of the period, I focused more on large-capitalization names in the NASDAQ - such as Microsoft, Intel, Cisco Systems and Oracle - than other funds, and those types of stocks performed better than mid-capitalization stocks overall. Q. WHAT WAS THE MARKET ENVIRONMENT LIKE DURING THE PAST SIX MONTHS? C.M. The market was paced by the strong performance of stocks of the largest companies, based in part on the fact that these companies posted the best earnings and revenue growth. In addition, sentiment toward stocks was very positive, with investors putting a great deal of money into the market. Many institutional money managers looked toward the larger stocks to stay fully invested because large-capitalization issues offer lower volatility and a higher degree of liquidity than smaller-company issues. As a result of this euphoria, valuations of stocks in such indexes as the NASDAQ are at or near historically high levels. Q. TURNING TO YOU, BOB, WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND EARLIER THIS MONTH? B.B. I've made some adjustments to some of the fund's industry weightings. The fund was quite overweighted in health care stocks compared to the NASDAQ and, though I like some segments of that sector, I've reduced the position. Instead, I've invested in energy, transportation and biotechnology stocks. While I think we'll see lower oil and gas prices this year, I've invested in energy companies that have the opportunity to significantly grow their reserves and production levels over the next few years. Lower commodity prices should help airlines, so I've added to investments there as well. Q. WHAT ABOUT BIOTECHNOLOGY? B.B. Biotech stocks lagged behind the rest of the market in 1996. However, there are a lot of new drugs up for approval by the Food and Drug Administration. Historically, these approvals have helped drive biotech stock price performance. Since it can be difficult to predict which drugs will show efficacy and receive FDA approval, I've been putting together a portfolio within a portfolio to give the fund exposure to many possible approvals, while also minimizing the downside that might result from concentrating on a smaller number of biotech stocks. Q. ARE YOU PURSUING ANY OTHER NOTEWORTHY STRATEGIES? B.B. The stock market has been strong for an extended period of time, having seen a sharp advance after a correction last July. With each passing day, we probably get closer to some sort of correction. Corrections in the over-the-counter market can be very severe, characterized by low levels of liquidity that cause unwarranted drops in the prices of smaller-sized stocks. As a result, I've been trying to improve the liquidity of the fund, in part by adding to some of the larger-cap names in the over-the-counter market that I think look favorably valued, such as Intel. If we get into a corrective environment, it's my belief that the larger stocks will decline less and remain liquid enough for me to sell them, allowing me to redeploy those assets to invest in attractive small stocks if they experience sharp price declines. Q. DOES THAT MEAN YOU FORESEE PROBLEMS IN THE MARKET GOING FORWARD? B.B. No. I'm cautiously optimistic. I'm optimistic because the economy seems to be growing at just the right pace, not so strong that the Federal Reserve Board feels it has to raise interest rates to head off inflation, or so weak that most companies miss earnings estimates. Several sectors of the market - including technology - continue to post strong growth rates. Others, such as the cyclical areas that rise and fall with the economy have performed well, but haven't been rewarded by investor interest. There is an opportunity for a rotation toward those stocks that have lagged but whose business prospects have improved. It's difficult to see what might change this favorable environment. Usually, higher interest rates hurt a market like this. While rates may bounce around, it looks as if we won't see them rise significantly unless the economy accelerates dramatically or we see clear evidence of wage inflation. At the same time, I'm cautious because many stocks are up significantly since hitting lows last July. Stock prices have risen faster than earnings, so the market is vulnerable to a change in sentiment or interest rate increases. I can't pick when a correction might happen, so I don't try to figure out the market. Instead, I focus on investing stock-by-stock, looking for those companies that do the best, sell at reasonable valuations and offer the opportunity to surprise Wall Street with their performance. FUND FACTS GOAL: long-term capital growth by investing mainly in equity securities traded on the over-the-counter market FUND NUMBER: 093 TRADING SYMBOL: FOCPX START DATE: December 31, 1984 SIZE: as of January 31, 1997, more than $3.6 billion MANAGER: Robert Bertelson, since January 1997; manager, Fidelity Convertible Securities Fund, June 1996-January 1997; Fidelity Select Industrial Equipment Portfolio, 1994-June 1996; Fidelity Select Energy Portfolio, 1992-1994; joined Fidelity in 1991 (checkmark) BOB BERTELSON ON HIS INVESTMENT APPROACH: "I'm a growth investor. I like to find companies with leadership positions in unit growth markets - where companies are increasing revenues not by increasing prices but by selling units at a rate faster than the overall economy. It's also crucial that they have the opportunity to increase their market share. Ideally, I also prefer companies that aren't dependent on external sources for financing. If they generate free cash flow, that's good, but it's not always the case with rapidly growing companies. But the lack of dependence on external sources of financing is a positive. "I also recognize the limits of knowledge and the fact that unforeseen consequences can change business prospects for a company. As a result, I like to diversify my investments so that I don't put myself in a position where any one investment, theme or strategy can severely undercut performance. I decide the size of a position in the fund in relation to the stock's liquidity. I want to leave myself room to change my mind either way, increasing a position if the company's story is getting better, or decreasing it if it has reached full valuation or if business prospects deteriorate." THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1997 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Intel Corp. 6.5 4.0 Cisco Systems, Inc. 3.7 3.2 WorldCom, Inc. 3.0 0.4 Oracle Systems Corp. 2.6 3.3 MCI Communications Corp. 2.5 0.5 Microsoft Corp. 2.4 2.3 PacifiCare Health Systems, Inc. Class B 1.7 0.3 Proffitts, Inc. 1.5 1.0 Oxford Health Plans, Inc. 1.4 0.7 Parametric Technology Corp. 1.3 0.5 TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1997 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Technology 40.7 38.2 Health 12.0 10.7 Retail & Wholesale 9.4 8.4 Finance 7.9 10.0 Utilities 6.6 3.8 ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JANUARY 31, 1997 * AS OF JULY 31, 1996 ** Row: 1, Col: 1, Value: 5.3 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 47.34999999999999 Row: 1, Col: 4, Value: 47.34999999999999 Stocks 93.2% Bonds 0.6% Short-term investments 6.2% FOREIGN INVESTMENTS 2.6% Stocks 94.7% Bonds 0.0% Short-term investments 5.3% FOREIGN INVESTMENTS 3.2% Row: 1, Col: 1, Value: 6.2 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 46.6 Row: 1, Col: 4, Value: 44.6 * ** INVESTMENTS JANUARY 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.7% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 0.2% AEROSPACE & DEFENSE - 0.1% Aviall, Inc. 25,000 $ 285 BE Aerospace, Inc. 100,000 2,656 2,941 SHIP BUILDING & REPAIR - 0.1% Avondale Industries, Inc. 127,000 2,858 Newport News Shipbuilding, Inc. 153,800 2,460 5,318 TOTAL AEROSPACE & DEFENSE 8,259 BASIC INDUSTRIES - 0.2% CHEMICALS & PLASTICS - 0.1% Fuller (H.B.) Co. 75,683 3,775 PAPER & FOREST PRODUCTS - 0.1% Fort Howard Corp. (a) 80,000 2,540 TOTAL BASIC INDUSTRIES 6,315 CONSTRUCTION & REAL ESTATE - 0.5% BUILDING MATERIALS - 0.3% RPM, Inc. 486,900 9,069 ENGINEERING - 0.2% MasTec, Inc. (a) 135,700 8,650 TOTAL CONSTRUCTION & REAL ESTATE 17,719 DURABLES - 0.4% AUTOS, TIRES, & ACCESSORIES - 0.1% Ugly Duckling Corp. (a) 130,000 2,763 CONSUMER DURABLES - 0.0% Stratasys, Inc. 20,000 398 TEXTILES & APPAREL - 0.3% Westpoint Stevens, Inc. Class A (a) 301,000 9,405 TOTAL DURABLES 12,566 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - 2.9% OIL & GAS - 2.9% Abacan Resource Corp. (a) 1,800,000 $ 19,574 Belden & Blake Corp. (a) 220,900 5,799 Chesapeake Energy Corp. (a) 750,100 17,909 Flores & Rucks, Inc. (a) 199,000 10,224 Forcenergy Gas Exploration, Inc. (a) 682,900 22,280 Rutherford-Moran Oil Corp. 300,000 6,375 Swift Energy Co. (a) 299,900 10,946 Tosco Corp. 100,000 8,850 Vastar Resources, Inc. 108,400 3,916 105,873 FINANCE - 7.9% BANKS - 2.9% Fifth Third Bancorp 124,950 9,667 First American Corp. 455 28 First Commerce Bancshares, Inc. 115,600 2,659 First Commerce Bancshares, Inc. Class B 445,900 7,692 First Security Corp. 197,500 6,764 First Tennessee National Corp. 80,900 3,276 Marshall & Ilsley Corp. 304,400 11,567 Northern Trust Corp. 881,700 36,150 Peoples Heritage Financial Group, Inc. 147,900 4,289 SouthTrust Corp. 178,800 6,750 U.S. Bancorp 198,800 9,058 Zions Bancorp 60,900 7,034 104,934 CREDIT & OTHER FINANCE - 1.6% Aames Financial Corp. 310,000 13,330 Cityscape Financial Corp. (a) 926,900 27,575 Concord EFS, Inc. 100,000 2,000 IMC Mortgage Co. (a) 5,000 250 Money Store, Inc. 140,000 3,570 Rac Financial Group, Inc. (a) 275,000 9,075 Triad Guaranty, Inc. (a) 107,800 3,342 59,142 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED INSURANCE - 0.3% GCR Holdings Ltd. 257,600 $ 6,021 Life USA Holding, Inc. (a) 542,000 5,827 11,848 SAVINGS & LOANS - 3.1% Astoria Financial Corp. 293,500 11,447 Charter One Financial Corp. 747,795 33,744 Collective Bancorp., Inc. 204,800 7,040 Long Island Bancorp., Inc. 440,000 16,115 Washington Federal, Inc. 152,000 3,952 Washington Mutual, Inc. 755,273 41,021 113,319 TOTAL FINANCE 289,243 HEALTH - 12.0% DRUGS & PHARMACEUTICALS - 2.7% Alkermes, Inc. (a) 204,900 4,764 Amgen, Inc. (a) 272,800 15,379 Biogen, Inc. (a) 713,600 33,361 Cell Genesys, Inc. (a) 345,100 2,588 COR Therapeutics, Inc. (a) 127,000 1,730 Guilford Pharmaceuticals, Inc. (a) 161,200 3,949 IDEXX Laboratories, Inc. (a) 370,000 12,025 Immunex Corp. 9,900 200 Ligand Pharmaceuticals, Inc. Class B 200,000 2,775 Magainin Pharmaceuticals, Inc. (a) 664,200 5,314 Millennium Pharmaceuticals, Inc. 77,000 1,492 Protein Design Labs, Inc. 20,000 700 Sangstat Medical Corp. (a) 100,000 3,050 Sigma Aldrich Corp. 340,000 10,795 98,122 MEDICAL EQUIPMENT & SUPPLIES - 3.5% AmeriSource Health Corp. Class A (a) 71,900 3,523 Biomet, Inc. 1,989,400 30,836 Biopsys Medical, Inc. (a) 111,200 2,975 Conmed Corp. (a) 427,400 8,281 Datascope Corp. (a)(b) 959,600 20,871 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - CONTINUED Heartport, Inc. 50,000 $ 1,581 InControl, Inc. 100,000 738 Nellcor, Inc. (a) 1,904,900 32,383 St. Jude Medical, Inc. (a) 471,150 17,845 Stryker Corp. 234,800 6,809 Xomed Surgical Products, Inc. (a) 188,500 2,851 128,693 MEDICAL FACILITIES MANAGEMENT - 5.8% Cambridge Heart, Inc. 42,100 521 Integramed America, Inc. (a) 200,000 350 Lincare Holdings, Inc. (a) 876,940 33,159 National Surgery Centers, Inc. (a) 351,500 11,995 Oxford Health Plans, Inc. (a) 910,600 49,514 PacifiCare Health Systems, Inc. Class B (a) 764,100 61,510 PhyMatrix Corp. (a) 556,300 8,831 Physician Corp. of America (a) 520,600 5,108 Quorum Health Group, Inc. (a) 742,800 21,448 TheraTx, Inc. (a) 1,016,800 12,202 United HealthCare Corp. 100,000 4,876 209,514 TOTAL HEALTH 436,329 INDUSTRIAL MACHINERY & EQUIPMENT - 0.7% ELECTRICAL EQUIPMENT - 0.1% Cymer, Inc. (a) 50,000 2,575 INDUSTRIAL MACHINERY & EQUIPMENT - 0.6% Duriron Co., Inc. 390,000 10,359 Greenfield Industries, Inc. 100,800 2,722 PRI Automation, Inc. (a) 112,400 6,758 Park Ohio Industries, Inc. (a) 285,363 4,405 24,244 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 26,819 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - 4.9% BROADCASTING - 2.1% Clear Channel Communications, Inc. (a) 242,100 $ 10,320 Evergreen Media Corp. Class A (a) 870,700 26,992 HSN, Inc. (a) 68,000 1,377 Heartland Wireless Communications, Inc. (a)(b) 1,183,300 11,093 PanAmSat Corp. (a) 52,300 1,543 Sinclair Broadcast Group, Inc. Class A (a)(b) 348,700 8,892 TCI Group Class A 959,900 12,779 Tele-Communications Liberty Media Group, Series A 67,500 1,283 Young Broadcasting, Inc. Class A (a) 55,000 1,690 75,969 ENTERTAINMENT - 0.5% All American Communications, Inc. (a)(b) 970,800 13,834 Regal Cinemas, Inc. 200,000 5,350 19,184 LODGING & GAMING - 0.7% Anchor Gaming (a) 28,200 1,043 HFS, Inc. (a) 341,100 23,877 24,920 PUBLISHING - 0.6% Gibson Greetings, Inc. (a) 223,400 4,133 Scholastic Corp. (a) 288,800 17,039 21,172 RESTAURANTS - 1.0% Apple South, Inc. 535,000 7,958 Applebee's International, Inc. 906,000 24,462 Rare Hospitality International, Inc. (a) 184,700 2,817 35,237 TOTAL MEDIA & LEISURE 176,482 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - 1.4% FOODS - 0.2% Tyson Foods, Inc. 188,200 $ 6,375 HOUSEHOLD PRODUCTS - 1.2% Alberto-Culver Co. Class A 632,400 28,221 Brady (W.H.) Co. Class A 271,000 6,233 Safeskin Corp. (a) 359,800 8,635 43,089 TOTAL NONDURABLES 49,464 RETAIL & WHOLESALE - 9.4% APPAREL STORES - 1.0% Gymboree Corp. (a) 766,050 17,619 Just for Feet, Inc. (a) 48,600 1,434 Loehmanns, Inc. (a) 153,500 2,341 Ross Stores, Inc. 375,400 15,391 36,785 GENERAL MERCHANDISE STORES - 3.3% Casey's General Stores, Inc. 625,900 11,031 Dollar Tree Stores (a) 546,000 23,069 Price/Costco, Inc. (a) 846,400 22,535 Proffitts, Inc. (a)(b) 1,459,500 52,907 Stein Mart, Inc. (a) 470,000 9,459 119,001 GROCERY STORES - 0.3% Central Garden & Pet Co. (a) 485,000 13,095 RETAIL & WHOLESALE, MISCELLANEOUS - 4.8% Bed Bath & Beyond, Inc. (a) 607,200 16,698 Corporate Express, Inc. (a) 1,158,150 26,058 IKON Office Solutions, Inc. 48,200 2,127 Officemax, Inc. 1,100,000 13,200 PETsMART, Inc. (a) 306,200 6,966 Staples, Inc. (a) 1,263,100 25,894 U.S. Office Products Co. (a) 1,200,300 39,760 Viking Office Products, Inc. (a) 1,580,700 43,864 174,567 TOTAL RETAIL & WHOLESALE 343,448 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - 3.4% LEASING & RENTAL - 0.8% Aaron Rents, Inc. Class B 503,600 $ 5,665 Alrenco, Inc. (a) 100,000 1,138 Danka Business Systems PLC sponsored ADR 362,500 16,131 Renters Choice, Inc. (a) 388,200 6,381 29,315 PRINTING - 0.3% ASM Lithography Holding NV (a) 150,000 10,969 SERVICES - 2.3% APAC Teleservices, Inc. (a) 252,100 9,895 Aresco, Inc. 200,000 4,975 Employee Solutions, Inc. (a) 510,100 13,008 G & K Services, Inc. Class A 160,000 5,120 HCIA, Inc. (a) 379,300 14,650 HealthCare COMPARE Corp. (a) 771,900 32,902 PMT Services, Inc. 75,000 1,200 Zebra Technologies Corp. Class A (a) 126,900 3,363 85,113 TOTAL SERVICES 125,397 TECHNOLOGY - 40.7% COMMUNICATIONS EQUIPMENT - 7.3% ADC Telecommunications, Inc. (a) 137,000 4,915 Ascend Communications, Inc. (a) 606,900 42,255 Aspect Telecommunications Corp. (a) 293,600 9,102 Brite Voice Systems, Inc. (a) 313,700 5,176 Centigram Communications Corp. 2,800 37 Cisco Systems, Inc. (a) 1,921,900 134,053 Davox Corp. (a) 15,900 668 Dynatech Corp. (a) 163,500 5,886 Ericsson (L.M.) Telephone Co. Class B ADR 200,000 6,734 InterVoice, Inc. (a) 167,000 2,088 Larscom, Inc. Class A (a) 300,000 3,600 Natural Microsystems 50,000 1,725 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMMUNICATIONS EQUIPMENT - CONTINUED Pairgain Technologies, Inc. 72,800 $ 2,980 Tellabs, Inc. (a) 316,600 13,040 3Com Corp. (a) 527,000 35,375 267,634 COMPUTER SERVICES & SOFTWARE - 13.8% Adobe Systems, Inc. 222,200 8,416 American Business Information, Inc. (a) 402,500 9,006 Autodesk, Inc. 185,000 5,851 BDM International, Inc. (a) 57,700 3,036 BMC Software, Inc. (a) 190,000 8,241 Black Box Corp. (a) 271,100 10,166 Broderbund Software, Inc. (a) 328,200 10,133 Baan Co. NV (a) 200,000 9,075 Cellular Technical Services, Inc. (a) 100,000 1,375 Citrix Systems, Inc. (a) 79,600 3,682 Clarify, Inc. (a) 67,700 2,437 Electronic Arts, Inc. (a) 75,800 2,416 Electronics for Imaging, Inc. (a) 92,800 8,607 Fiserv, Inc. (a) 347,300 11,613 HBO & Co. 94,400 5,912 HNC Software, Inc. 25,000 753 Intersolv, Inc. 88,500 885 Intuit, Inc. (a) 282,200 8,254 Maxis, Inc. (a) 517,900 6,895 McAfee Associates, Inc. (a) 232,987 13,571 Microsoft Corp. (a) 847,800 86,476 Netscape Communications Corp. (a) 200,600 7,598 Novell, Inc. 750,000 9,469 Oracle Systems Corp. (a) 2,475,425 96,232 Parametric Technology Corp. (a) 816,160 47,133 Paychex, Inc. 251,200 12,183 PeopleSoft, Inc. (a) 80,000 4,360 Project Software & Development, Inc. (a) 6,700 300 Saville Systems Ireland PLC sponsored ADR (a) 1,001,600 42,067 Shared Medical Systems Corp. 688,500 32,489 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED SunGard Data Systems, Inc. (a) 641,700 $ 25,347 Sybase, Inc. (a) 373,000 6,481 Symantec Corp. 200,000 3,200 503,659 COMPUTERS & OFFICE EQUIPMENT - 4.4% Adaptec, Inc. (a) 652,400 28,543 Creative Technology Corp. Ltd. (a) 385,000 5,462 Dell Computer Corp. (a) 151,600 10,025 EMC Corp. (a) 500,000 18,938 FileNet Corp. (a) 120,300 2,301 General Binding Corp. 87,100 2,667 Ingram Micro, Inc. Class A (a) 617,000 12,803 Quantum Corp. (a) 669,200 25,430 Read Rite Corp. (a) 50,000 1,650 Seagate Technology 100,000 5,150 Sun Microsystems, Inc. (a) 439,400 13,951 Tech Data Corp. (a) 405,400 10,338 Wang Laboratories, Inc. (a) 990,700 23,032 160,290 ELECTRONIC INSTRUMENTS - 1.4% Applied Materials, Inc. (a) 200,000 9,875 KLA Instruments Corp. (a) 299,000 12,745 Lam Research Corp. (a) 305,300 12,326 Novellus System, Inc. (a) 159,500 12,640 Teradyne, Inc. 100,000 3,088 50,674 ELECTRONICS - 13.8% Actel Corp. (a) 200,000 4,100 Altera Corp. (a) 508,200 21,980 Atmel Corp. (a) 617,700 28,646 Brightpoint, Inc. 200,000 5,675 DH Technology, Inc. (a) 272,100 4,677 Hadco Corp. (a) 107,000 5,805 Integrated Device Technology, Inc. (a) 605,900 6,362 Intel Corp. 1,469,900 238,491 Lattice Semiconductor Corp. (a) 395,100 20,496 Linear Technology Corp. 574,100 27,987 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED ELECTRONICS - CONTINUED Maxim Integrated Products, Inc. (a) 381,100 $ 21,437 Microchip Technology, Inc. (a) 536,700 20,462 Molex, Inc. 876,437 33,524 Sanmina Corp. (a) 426,100 25,353 Tencor Instruments (a) 614,400 25,037 Uniphase Corp. (a) 283,200 12,353 502,385 TOTAL TECHNOLOGY 1,484,642 TRANSPORTATION - 3.5% AIR TRANSPORTATION - 1.4% ASA Holdings, Inc. 150,000 3,375 Comair Holdings, Inc. 400,000 8,150 Continental Airlines, Inc. 500,000 13,938 Northwest Airlines Corp. Class A (a) 740,000 25,160 50,623 RAILROADS - 0.6% Wisconsin Central Transportation Corp. (a) 571,200 21,206 TRUCKING & FREIGHT - 1.5% Air Express International Corp. 660,300 20,923 American Freightways Corp. (a) 210,000 2,809 Expeditors International of Washington, Inc. 516,000 11,159 Landstar System, Inc. (a) 100,000 2,375 M.S. Carriers, Inc. (a) 311,900 4,990 Roadway Express, Inc. 100,000 2,050 USFreightways Corp. 319,300 8,102 Werner Enterprises, Inc. 268,300 4,829 57,237 TOTAL TRANSPORTATION 129,066 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 6.6% CELLULAR - 0.5% Arch Communications Group, Inc. (a) 904,200 $ 7,460 Pagemart Wireless, Inc. Class A (a) 1,188,500 8,170 Palmer Wireless, Inc. (a) 114,300 1,186 16,816 TELEPHONE SERVICES - 6.1% Brooks Fiber Properties, Inc. 351,000 8,995 MCI Communications Corp. 2,567,000 90,166 Teleport Communications Group, Inc. Class A (a) 456,100 14,196 WorldCom, Inc. (a) 4,408,834 110,772 224,129 TOTAL UTILITIES 240,945 TOTAL COMMON STOCKS (Cost $2,808,921) 3,452,567 CASH EQUIVALENTS - 5.3% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.56%, dated 1/31/97 due 2/3/97 $ 11,820 11,815 SHARES Taxable Central Cash Fund (c) 181,203,897 181,204 TOTAL CASH EQUIVALENTS (Cost $193,019) 193,019 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $3,001,940) $ 3,645,586 LEGEND 1. Non-income producing 2. Affiliated company (see Note 7 of Notes to Financial Statements). 3. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.39%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. INCOME TAX INFORMATION At January 31, 1997, the aggregate cost of investment securities for income tax purposes was $3,004,434,000. Net unrealized appreciation aggregated $641,152,000, of which $751,993,000 related to appreciated investment securities and $110,841,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS(EXCEPT PER-SHARE AMOUNTS) JANUARY 31, 1997 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 3,645,586 agreements of $11,815) (cost $3,001,940) - See accompanying schedule Receivable for investments sold 80,208 Receivable for fund shares sold 12,988 Dividends receivable 532 Interest receivable 832 Other receivables 798 TOTAL ASSETS 3,740,944 LIABILITIES Payable to custodian bank $ 302 Payable for investments purchased 114,054 Payable for fund shares redeemed 20,664 Accrued management fee 1,564 Other payables and accrued expenses 821 TOTAL LIABILITIES 137,405 NET ASSETS $ 3,603,539 Net Assets consist of: Paid in capital $ 2,813,225 Distributions in excess of net investment income (3,554) Accumulated undistributed net realized gain (loss) on 150,222 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 643,646 investments and assets and liabilities in foreign currencies NET ASSETS, for 105,935 shares outstanding $ 3,603,539 NET ASSET VALUE and redemption price per share $34.02 ($3,603,539 (divided by) 105,935 shares) Maximum offering price per share (100/97.00 of $34.02) $35.07
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED) INVESTMENT INCOME $ 5,419 Dividends Interest 5,082 TOTAL INCOME 10,501 EXPENSES Management fee $ 10,381 Basic fee Performance adjustment (944) Transfer agent fees 3,974 Accounting fees and expenses 408 Non-interested trustees' compensation 9 Custodian fees and expenses 83 Registration fees 280 Audit 32 Legal 10 Interest 2 Miscellaneous 13 Total expenses before reductions 14,248 Expense reductions (196) 14,052 NET INVESTMENT INCOME (LOSS) (3,551) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain (loss) of 318,633 $(4,160) on sales of investments in affiliated issuers) Foreign currency transactions (2) 318,631 Change in net unrealized appreciation (depreciation) on: Investment securities 368,936 Assets and liabilities in foreign currencies (1) 368,935 NET GAIN (LOSS) 687,566 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 684,015 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JANUARY JULY 31, 31, 1997 1996 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ (3,551) $ 10,370 Net investment income (loss) Net realized gain (loss) 318,631 380,992 Change in net unrealized appreciation (depreciation) 368,935 (255,943) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 684,015 135,419 FROM OPERATIONS Distributions to shareholders (6,872) (1,479) From net investment income From net realized gain (391,420) (130,433) TOTAL DISTRIBUTIONS (398,292) (131,912) Share transactions 1,607,844 2,256,968 Net proceeds from sales of shares Reinvestment of distributions 390,322 129,010 Cost of shares redeemed (1,315,493) (1,864,420) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 682,673 521,558 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 968,396 525,065 NET ASSETS Beginning of period 2,635,143 2,110,078 End of period (including under (over) distribution $ 3,603,539 $ 2,635,143 of net investment income of $(3,554) and $8,871, respectively) OTHER INFORMATION Shares Sold 48,796 70,969 Issued in reinvestment of distributions 12,633 4,239 Redeemed (39,960) (58,605) Net increase (decrease) 21,469 16,603
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED JULY 31, ENDED JANUARY 31, 1997 (UNAUDITED) 1996 1995 1994 D 1993 1992
SELECTED PER-SHARE DATA Net asset value, $ 31.20 $ 31.09 $ 22.42 $ 25.90 $ 24.65 $ 24.28 beginning of period Income from Investment Operations Net investment (.04) G .13 .09 .12 .06 .08 income (loss) Net realized and 7.26 1.80 8.79 (.08) 3.68 2.92 unrealized gain (loss) Total from investment 7.22 1.93 8.88 .04 3.74 3.00 operations Less Distributions (.08) (.02) (.09) (.12) (.25) (.12) From net investment income From net realized gain (4.32) (1.80) (.12) (3.40) (2.24) (2.51) Total distributions (4.40) (1.82) (.21) (3.52) (2.49) (2.63) Net asset value, end $ 34.02 $ 31.20 $ 31.09 $ 22.42 $ 25.90 $ 24.65 of period TOTAL RETURN B, C 25.10% 6.43% 39.98% (.36) 16.67% 13.30% % RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 3,604 $ 2,635 $ 2,110 $ 1,230 $ 1,327 $ 1,037 period (in millions) Ratio of expenses to .89% A .83% .82% .89% 1.08% 1.17% average net assets Ratio of expenses to .87% A, .82% .81% .88% 1.08% 1.17% average net assets E E E E after expense reductions Ratio of net investment (.22)% .42% .35% .48% .53% .59% income (loss) to A average net assets Portfolio turnover rate 164% A 133% 62% 222% 213% 245% Average commission $ .0273 rate F
ANNUALIZED 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). TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 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 (LOSS) PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. 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). FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1997 (Unaudited) 19. 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 with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED the fair market value of the securities received. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned 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. Distributions in excess of net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences that 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. 20. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. The cost of the foreign currency contracts is included in the cost basis of the associated investment. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or 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, 2. OPERATING POLICIES - CONTINUED REPURCHASE AGREEMENTS - CONTINUED at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities, and may be utilized by the fund as an additional cash management option. Dividends from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions received by the fund are recorded as interest income. 21. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $2,781,442,000 and $2,492,135,000, respectively. 22. 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 .35%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus).20% of the fund's average net assets over the performance period) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annualized rate of .59% of average net assets after the performance adjustment. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED SALES LOAD. For the period, Fidelity Distributors Corporation, an affiliate of FMR and the general distributor of the fund, received sales charges of $320,000 on sales of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .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 $159,000 for the period. 23. BANK BORROWINGS. The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, the fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $6,255,000. The weighted average interest rate was 5.57%. 24. 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 $83,000 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 $27,000 and $86,000, respectively, under these arrangements. 25. 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 All American Communications, Inc. $ 199 $ - $ - $ 13,834 Datascope Corp. 2,664 - - 20,871 Heartland Wireless Communications, Inc. 1,540 - - 11,093 Proffitts, Inc. 15,015 4,939 - 52,907 Sinclair Broadcast Group, Inc. Class A 2,247 2,332 - 8,892 TheraTx, Inc. 1,621 10,002 - - TOTALS $ 23,286 $ 17,273 $ - $ 107,597 MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpressprovides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS For mutual fund and brokerage trading. 1 For quotes.* 2 For account balances and holdings. 3 To review orders and mutual fund activity. 4 To change your PIN. 5 To speak to a Fidelity representative. * 0 BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 for significant savings on Web access from internetMCI. SM (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+ TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. 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 * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES CUSTODIAN Brown Brothers Harriman & Co. 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