-----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, KWJTGr4PE+Ch8GZxCD0ADo6jHVut+xP/iIhgUzXBQ8PSSLN0XSaYrJGu7XubT1GT rBbyyA7N0fcVTsJqGnlBOQ== 0000357057-96-000003.txt : 19960315 0000357057-96-000003.hdr.sgml : 19960315 ACCESSION NUMBER: 0000357057-96-000003 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960131 FILED AS OF DATE: 19960314 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: 96534750 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) GROWTH & INCOME PORTFOLIO SEMIANNUAL REPORT JANUARY 31, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 25 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 29 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although the markets were fairly positive in 1995, no one can predict what lies ahead for investors. The previous year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells securities that have grown in value). Effective October 20, 1995, the fund's 3% sales charge was eliminated. If this sales charge had been taken into account, total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10 MONTHS YEAR YEARS YEARS Growth & Income 16.53% 38.25% 147.89% 442.52% S&P 500(registered trademark) 14.54% 38.66% 113.54% 311.87% Growth & Income Funds Average 11.28% 32.47% 100.70% 237.40% 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 Standard & Poor's Composite Index of 500 Stocks - a common proxy for the U.S. stock market. 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 498 growth & income funds with similar objectives tracked by Lipper Analytical Services over the past six months. Both benchmarks include reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1996 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS Growth & Income 38.25% 19.91% 18.42% S&P 500(registered trademark) 38.66% 16.38% 15.20% Growth & Income Funds Average 32.47% 14.82% 12.80% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS Growth & IncomeStandard & Poor 01/31/86 10000.00 10000.00 02/28/86 10955.53 10748.00 03/31/86 12270.58 11347.74 04/30/86 12384.11 11219.51 05/31/86 12781.46 11816.39 06/30/86 13112.58 12016.08 07/31/86 12544.34 11344.38 08/31/86 13218.56 12186.14 09/30/86 12373.41 11178.34 10/31/86 12973.25 11823.33 11/30/86 13011.38 12110.64 12/31/86 12763.28 11801.82 01/31/87 14304.84 13391.53 02/28/87 14984.65 13920.49 03/31/87 15434.67 14322.79 04/30/87 15416.12 14195.32 05/31/87 15473.89 14318.82 06/30/87 16042.00 15041.92 07/31/87 16931.45 15804.55 08/31/87 17271.24 16394.05 09/30/87 17135.32 16035.03 10/31/87 13564.98 12581.08 11/30/87 12839.98 11544.40 12/31/87 13500.28 12422.93 01/31/88 14346.73 12945.93 02/29/88 15107.46 13549.21 03/31/88 14783.01 13130.54 04/30/88 15021.10 13276.29 05/31/88 15215.89 13391.80 06/30/88 15919.23 14006.48 07/31/88 15908.30 13953.26 08/31/88 15722.56 13478.84 09/30/88 16291.96 14053.04 10/31/88 16611.85 14443.72 11/30/88 16369.18 14237.17 12/31/88 16602.31 14486.32 01/31/89 17642.05 15546.72 02/28/89 17451.99 15159.61 03/31/89 17991.33 15512.83 04/30/89 18758.36 16317.94 05/31/89 19638.18 16978.82 06/30/89 19773.18 16882.04 07/31/89 21103.52 18406.49 08/31/89 21558.34 18767.26 09/30/89 21442.57 18690.31 10/31/89 20765.06 18256.70 11/30/89 21109.76 18629.13 12/31/89 21516.85 19076.23 01/31/90 20389.00 17796.22 02/28/90 20702.29 18025.79 03/31/90 21065.92 18503.47 04/30/90 20522.53 18040.88 05/31/90 22038.97 19799.87 06/30/90 21936.55 19665.23 07/31/90 21783.68 19602.30 08/31/90 19923.79 17830.25 09/30/90 18774.93 16961.92 10/31/90 18735.82 16888.98 11/30/90 19661.53 17980.01 12/31/90 20054.47 18481.66 01/31/91 21885.99 19287.46 02/28/91 23730.68 20666.51 03/31/91 25037.87 21166.64 04/30/91 25382.67 21217.44 05/31/91 26841.45 22134.03 06/30/91 25018.42 21120.29 07/31/91 26551.24 22104.50 08/31/91 27324.32 22628.37 09/30/91 27083.32 22250.48 10/31/91 27567.69 22548.64 11/30/91 26128.41 21639.93 12/31/91 28445.60 24115.53 01/31/92 29125.85 23666.99 02/29/92 29764.46 23974.66 03/31/92 29153.09 23507.15 04/30/92 29808.69 24198.26 05/31/92 29920.28 24316.83 06/30/92 29332.29 23954.51 07/31/92 29935.49 24934.25 08/31/92 29626.88 24423.10 09/30/92 29930.34 24711.29 10/31/92 30167.38 24797.78 11/30/92 31099.74 25643.39 12/31/92 31727.23 25958.80 01/31/93 32612.56 26176.85 02/28/93 32982.79 26532.86 03/31/93 34193.32 27092.70 04/30/93 34144.75 26437.06 05/31/93 34857.12 27145.57 06/30/93 35393.83 27224.29 07/31/93 35654.32 27115.40 08/31/93 37054.44 28143.07 09/30/93 37256.15 27926.37 10/31/93 37673.07 28504.44 11/30/93 36822.55 28233.65 12/31/93 37923.33 28575.28 01/31/94 39356.98 29546.84 02/28/94 38606.02 28746.12 03/31/94 36907.71 27492.79 04/30/94 37644.84 27844.70 05/31/94 37764.84 28301.35 06/30/94 37109.38 27607.97 07/31/94 38177.03 28513.51 08/31/94 39640.74 29682.56 09/30/94 39180.51 28955.34 10/31/94 39647.37 29606.83 11/30/94 38174.96 28528.55 12/31/94 38783.10 28951.63 01/31/95 39242.84 29702.35 02/28/95 40401.36 30859.85 03/31/95 41672.79 31770.52 04/30/95 42836.53 32706.16 05/31/95 44055.68 34013.43 06/30/95 44850.82 34803.56 07/31/95 46557.30 35957.65 08/31/95 46909.72 36047.90 09/30/95 48795.93 37569.12 10/31/95 48567.37 37435.00 11/30/95 50852.90 39078.40 12/31/95 52505.44 39831.05 01/31/96 54252.38 41186.90 $10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity Growth & Income Portfolio on January 31, 1986. As the chart shows, by January 31, 1996, the value of your investment would have grown to $54,252 - a 442.52% increase on your initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends reinvested, the same $10,000 investment in the S&P 500 would have grown to $41,187 - a 311.87% 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. It has done very well. For the six months ended January 31, 1996, the fund had a total return of 16.53%, compared to an 11.28% return for the growth and income funds average tracked by Lipper Analytical Services, and 14.54% for the Standard & Poor's Composite Index of 500 Stocks. For the 12 months ended January 31, 1996, the fund had a total return of 38.25%, while the average growth and income fund returned 32.47% and the S&P 500 had a total return of 38.66%. Q. WHAT WERE THE KEYS TO THE FUND'S STRONG PERFORMANCE? A. The fund's investments in the consumer nondurables sector - such as food, beverage and tobacco companies - and the health care sector performed well. These stocks attracted investor interest because they generally sustain strong earnings growth regardless of the economic backdrop. As evidence of an economic slowdown mounted throughout the year, investors were attracted to these types of stocks and their prices appreciated. In addition, some of the fund's investments in the financial sector were strong contributors to performance, including Fannie Mae - the Federal National Mortgage Association - American Express, Freddie Mac - the Federal Home Loan Mortgage Corporation - and Sallie Mae - the Student Loan Marketing Association. Sallie Mae bought back stock, reduced excess capital and cut expenses. Finally, the fund's performance compared to the market and other similar funds benefited from its relatively small weighting in technology stocks. While this sector generally performed well through the first half of 1995, it gave back some of its gains during this recent six-month period. Q. LET'S TAKE A LOOK AT THE FUND'S CONSUMER NONDURABLES INVESTMENTS. WHAT SPARKED THEM TO DO WELL DURING THE PERIOD? A. Most of the strength in the nondurables sector - especially from large-cap, blue chip stocks such as Philip Morris and PepsiCo - came from investors' anticipation of potential earnings disappointments in 1996. The market shifted much of its focus to "safe" stocks - those whose earnings growth generally remains steady regardless of the economic backdrop. Philip Morris - the fund's largest holding during this period - posted very strong earnings due to strong sales of its Marlboro brand and increases in international unit sales. The company raised its dividend and bought back stock, helping the stock price show a significant increase. PepsiCo - also one of the fund's top 10 holdings - saw share price gains on the heels of beating earnings expectations and a stock buy-back program. Q. YOU ALSO MENTIONED THE BENEFITS OF THE FUND'S HEALTH CARE INVESTMENTS. WHAT WAS THE STORY THERE? A. Many health care stocks - especially pharmaceutical companies - performed well over the past six months, driven by steady earnings growth and new product development. Many of them had been undervalued for some time, but they saw solid share price gains over the period. Examples here included American Home Products, Pfizer, Bristol-Myers Squibb, Merck and Johnson & Johnson. Johnson & Johnson's earnings growth was helped by a new product called "stents." These are metal devices that hold the walls of arteries open after angioplasty is performed to open clogged arteries. In addition, drug store chains - which are included in the retail sector - were solid performers, including Walgreen's and Rite Aid. Q. WHICH STOCKS DIDN'T PERFORM AS WELL AS YOU WOULD HAVE LIKED? A. Many retail stocks - with the exception of drug and grocery stores - lagged during the period. This sector has been hurt for some time by overcapacity - too many stores and too much square footage - in light of only moderate growth in consumer spending. A weak Christmas shopping season didn't help the situation. Wal-Mart was hurt by poor comparable store sales - - existing stores didn't do as well compared to last year - and poor growth in its Sam's Club division. In the basic industries sector, another disappointment was James River, a paper manufacturer. Because its business is perceived to be economically sensitive, this company's stock dropped along with many other paper producers as data suggested an economic slowdown. In addition, James River's management didn't follow through with some expected changes, thereby hurting the stock. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. If interest rates continue the decline we've seen since the second quarter of 1995, that could help the economy to turn around somewhat. For the time being, the economy looks like it will have some difficulties. We're already seeing rising commodity inventories and slumping retail sales. While rates have come down and the economy has not gone into recession, it's still weak. I don't foresee any turnaround until the latter part of 1996. 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 START DATE: December 30, 1985 SIZE: as of January 31, 1996, more than $16 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 INVESTOR EXPECTATIONS FOR THE STOCK MARKET: "Investors currently are putting a lot of money into the stock market. That's typical when the market shows the kind of strength it has demonstrated over the past year. At the same time, we should see what I call a "digestion" phase, when stock valuations consolidate to reflect company prospects more accurately than they do at the moment, as valuations are high on an historical basis. Investors need to maintain the perspective that the market has averaged 12% annual growth over extended periods of time, not the more than 30% we saw last year. "Investors are best off having a consistent investment program as opposed to trying to time the market or, even worse, getting into the market after it's had a big run. Those investors who experienced the crash of 1987 and stayed in the market probably have experienced strong growth in their portfolios over the past nine years. Those who invest with a long-term view can benefit from the sharp upswings we've seen lately, and withstand the kind of "digestion" phase the market goes through from time to time. Long-term investing can reduce the risk of chasing the market on its way up, only to suffer when there is a market-wide price correction." INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Philip Morris Companies, Inc. 4.2 4.0 General Electric Co. 3.1 2.8 Federal National Mortgage Association 2.3 2.1 American Express Co. 1.9 2.0 British Petroleum PLC ADR 1.6 1.9 PepsiCo, Inc. 1.4 1.5 Ameritech Corp. 1.3 1.4 Loral Corp. 1.3 0.8 SBC Communications, Inc. 1.2 1.3 Lockheed Martin Corp. 1.1 1.3 TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Health 15.4 13.9 Nondurables 12.0 11.0 Finance 11.5 9.7 Utilities 7.3 7.2 Aerospace & Defense 5.8 5.8 ASSET ALLOCATION AS OF JANUARY 31, 1996 * AS OF JULY 31, 1995 ** Stocks 91.9% Bonds 0.5% Convertibles 1.0% Short-term investments 6.6% FOREIGN INVESTMENTS 8.4% Stocks 88.7% Bonds 0.4% Convertibles 0.6% Short-term investments 10.3% FOREIGN INVESTMENTS 5.9% Row: 1, Col: 1, Value: 10.4 Row: 1, Col: 2, Value: 1.6 Row: 1, Col: 3, Value: 1.3 Row: 1, Col: 4, Value: 42.0 Row: 1, Col: 5, Value: 44.7 Row: 1, Col: 1, Value: 6.6 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 1.5 Row: 1, Col: 4, Value: 40.0 Row: 1, Col: 5, Value: 49.9 * ** INVESTMENTS JANUARY 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.7% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 5.8% AEROSPACE & DEFENSE - 2.9% British Aerospace PLC 805,411 $ 10,878 Flightsafety International, Inc. 578,300 28,843 General Motors Corp. Class H 1,059,400 60,386 Lockheed Martin Corp. 2,473,605 186,448 McDonnell Douglas Corp. 1,147,100 102,092 Northrop Grumman Corp. 946,500 60,576 Rockwell International Corp. 390,700 22,905 Sundstrand Corp. 36,700 2,532 474,660 DEFENSE ELECTRONICS - 2.2% Litton Industries, Inc. (a) 2,035,500 100,248 Loral Corp. 4,441,200 205,406 Raytheon Co. 1,176,400 57,791 363,445 SHIP BUILDING & REPAIR - 0.7% General Dynamics Corp. 1,797,500 104,929 TOTAL AEROSPACE & DEFENSE 943,034 BASIC INDUSTRIES - 3.9% CHEMICALS & PLASTICS - 2.8% Albemarle Corp. 90,600 1,687 du Pont (E.I.) de Nemours & Co. 429,600 33,026 Ethyl Corp. 2,988,900 31,757 Ferro Corp. (c) 1,585,000 39,823 Grace (W.R.) & Co. 460,200 28,360 Great Lakes Chemical Corp. 1,302,800 97,221 Lubrizol Corp. 1,110,500 32,066 NL Industries, Inc. 501,000 7,390 Praxair, Inc. 1,527,700 51,942 Raychem Corp. 1,015,200 67,892 Schulman (A.), Inc. 534,300 12,155 Union Carbide Corp. 1,420,700 59,845 463,164 IRON & STEEL - 0.1% Nucor Corp. 184,900 10,747 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - CONTINUED METALS & MINING - 0.2% Aluminum Co. of America 698,600 $ 38,772 PACKAGING & CONTAINERS - 0.4% Corning, Inc. 637,200 19,913 Crown Cork & Seal Co., Inc. (a) 897,900 36,926 56,839 PAPER & FOREST PRODUCTS - 0.4% James River Corp. 2,187,300 57,417 Kimberly-Clark Corp. 45,000 3,628 61,045 TOTAL BASIC INDUSTRIES 630,567 CONGLOMERATES - 2.1% Allied-Signal, Inc. 727,000 36,259 Dial Corp. (The) 37,400 1,178 ITT Industries, Inc. 528,700 13,746 Tyco International Ltd. 5,004,548 177,036 United Technologies Corp. 480,200 49,281 Whitman Corp. 2,897,600 65,920 343,420 CONSTRUCTION & REAL ESTATE - 1.8% BUILDING MATERIALS - 0.4% Lafarge Corp. 271,026 5,048 Sherwin-Williams Co. 1,167,000 49,160 54,208 CONSTRUCTION - 0.0% Pulte Corp. 115,700 3,818 REAL ESTATE INVESTMENT TRUSTS - 1.4% Bay Apartment Communities, Inc. 246,000 5,873 Beacon Properties Corp. 636,000 15,821 CBL & Associates Properties, Inc. (c) 1,256,200 25,752 Cali Realty Corp. 333,900 7,221 Carr Realty Corp. 185,100 4,489 Crescent Real Estate Equities, Inc. 323,000 10,982 Duke Realty Investors, Inc. 350,500 11,260 Equity Residential Properties Trust (SBI) 1,237,400 38,050 Highwoods Properties, Inc. 480,500 14,655 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - CONTINUED REAL ESTATE INVESTMENT TRUSTS - CONTINUED Irvine Apartment Communities, Inc. 191,400 $ 3,852 Liberty Property Trust (SBI) 628,200 13,899 Macerich Co. 647,600 12,709 Manufactured Home Communities, Inc. 515,500 9,408 Patriot American Hospitality, Inc. 112,300 3,088 Public Storage, Inc. 1,485,500 30,267 Speiker Properties, Inc. 294,100 7,389 Urban Shopping Centers, Inc. 621,800 13,213 227,928 TOTAL CONSTRUCTION & REAL ESTATE 285,954 DURABLES - 1.6% AUTOS, TIRES, & ACCESSORIES - 0.8% Chrysler Corp. 374,300 21,616 General Motors Corp. 1,989,438 104,694 126,310 CONSUMER ELECTRONICS - 0.2% Matsushita Electric Industrial Co. Ltd. 1,000,000 16,620 Sony Corp. 145,000 8,868 25,488 TEXTILES & APPAREL - 0.6% Fruit of the Loom, Inc. Class A (a) 2,203,000 55,350 Intimate Brands, Inc. Class A 888,300 13,102 Stride Rite Corp. 300,600 2,480 Unifi, Inc. 1,437,200 31,978 102,910 TOTAL DURABLES 254,708 ENERGY - 5.8% ENERGY SERVICES - 1.2% BJ Services Co. (a) 479,724 12,833 BJ Services Co. (warrants) (a) 152,780 993 Baker Hughes, Inc. 835,100 21,608 Dresser Industries, Inc. 688,700 17,906 Schlumberger Ltd. 1,910,700 133,988 187,328 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - 4.6% Amerada Hess Corp. 962,100 $ 53,036 Amoco Corp. 618,200 43,506 Atlantic Richfield Co. 100,000 11,363 British Petroleum PLC: ADR 2,591,209 252,967 Ord. 3,980,894 31,852 Burlington Resources, Inc. 454,900 17,059 Chevron Corp. 650,400 33,740 Kerr-McGee Corp. 489,900 30,986 Mobil Corp. 485,800 53,800 Occidental Petroleum Corp. 1,885,900 40,547 Royal Dutch Petroleum Co. 751,800 104,500 Total SA sponsored ADR 1,000,000 34,500 Union Pacific Resources Group, Inc. 299,000 7,774 Unocal Corp. 1,242,272 37,113 752,743 TOTAL ENERGY 940,071 FINANCE - 11.3% BANKS - 1.5% Banc One Corp. 2,407,400 91,180 Bank of New York Co., Inc. 1,075,000 55,094 Chase Manhattan Corp. 250,000 17,250 Citicorp 400,000 29,550 Fleet Financial Group, Inc. 1,384,599 55,384 248,458 CREDIT & OTHER FINANCE - 2.2% American Express Co. 6,824,230 313,915 Beneficial Corp. 640,400 31,300 Household International, Inc. 228,900 14,850 360,065 FEDERAL SPONSORED CREDIT - 4.1% Federal Home Loan Mortgage Corp. 1,530,800 131,075 Federal National Mortgage Association 10,884,000 375,498 Student Loan Marketing Association 2,202,800 162,181 668,754 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED INSURANCE - 3.4% Alexander & Alexander Services, Inc. 154,350 $ 2,991 Allmerica Financial Corp. 734,500 19,556 Allstate Corp. 2,373,010 103,523 Aon Corp. 642,300 34,925 General Re Corp. 441,400 67,534 ITT Hartford Group, Inc. 2,923,700 146,550 Loews Corp. 531,400 43,907 MBIA, Inc. 647,200 47,731 PMI Group, Inc. 312,300 15,654 Prudential Reinsurance Holdings, Inc. 158,000 3,437 St. Paul Companies, Inc. (The) 157,500 8,978 Travelers, Inc. (The) 709,666 46,661 541,447 SAVINGS & LOANS - 0.0% Ahmanson (H.F.) & Co. 49,000 1,176 SECURITIES INDUSTRY - 0.1% Lehman Brothers Holdings, Inc. 383,020 9,815 Nomura Securities Co. Ltd. 509,000 11,026 20,841 TOTAL FINANCE 1,840,741 HEALTH - 15.0% DRUGS & PHARMACEUTICALS - 7.7% Allergan, Inc. 2,944,000 97,888 American Home Products Corp. 1,755,000 179,010 Astra AB: Class A Free shares 1,450,000 58,942 Class B Free shares 148,720 5,970 Bristol-Myers Squibb Co. 1,350,300 119,502 COR Therapeutics, Inc. (a) 517,000 5,364 Genentech, Inc. special (a) 1,701,500 91,668 Glaxo PLC sponsored ADR 800,000 23,300 Lilly (Eli) & Co. 558,866 32,135 Merck & Co., Inc. 1,750,000 122,938 Pharmacia & Upjohn, Inc. 3,268,350 136,862 Pfizer, Inc. 2,165,400 148,871 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED Schering-Plough Corp. 1,673,800 $ 90,594 Scios, Inc. 795,000 4,273 SmithKline Beecham PLC ADR 2,000,000 112,500 Warner-Lambert Co. 154,800 14,513 1,244,330 MEDICAL EQUIPMENT & SUPPLIES - 5.1% Bausch & Lomb, Inc. 2,462,000 95,710 Baxter International, Inc. 3,652,600 166,193 Beckman Instruments, Inc. 628,800 22,008 Becton, Dickinson & Co. 376,300 32,503 Boston Scientific Corp. (a) 1,161,095 59,506 Guidant Corp. 889,125 40,789 Johnson & Johnson 1,215,300 116,669 McKesson Corp. 762,700 38,135 Medtronic, Inc. 826,200 47,197 Pall Corp. 3,170,100 85,593 St. Jude Medical, Inc. (a) 2,984,650 131,697 836,000 MEDICAL FACILITIES MANAGEMENT - 2.2% Columbia/HCA Healthcare Corp. 1,436,177 79,887 FHP International Corp. (a) 442,500 12,777 PacifiCare Health Systems, Inc. (a) 20,500 1,855 Tenet Healthcare Corp. (a) 4,852,400 103,720 United HealthCare Corp. 2,461,400 154,761 U.S. Healthcare, Inc. 125,500 6,087 359,087 TOTAL HEALTH 2,439,417 HOLDING COMPANIES - 0.2% U.S. Industries, Inc. 2,040,760 36,734 INDUSTRIAL MACHINERY & EQUIPMENT - 4.8% ELECTRICAL EQUIPMENT - 3.7% Alcatel Alsthom Cie Generale d'Electricite SA 185,000 16,892 American Superconductor Corp. (a) 304,750 4,190 Duracell International, Inc. 196,500 9,776 Emerson Electric Co. 201,400 16,867 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED ELECTRICAL EQUIPMENT - CONTINUED General Electric Co. 6,604,000 $ 506,857 Mitsubishi Electric Co. Ord. 33,000 239 Oak Industries, Inc. (a)(c) 1,119,700 25,753 Omron Corp. 849,000 18,708 Scientific-Atlanta, Inc. 541,000 8,521 607,803 INDUSTRIAL MACHINERY & EQUIPMENT - 0.3% Caterpillar, Inc. 34,200 2,202 Cooper Industries, Inc. 670,776 25,238 Stanley Works 322,800 16,624 44,064 POLLUTION CONTROL - 0.8% Browning-Ferris Industries, Inc. 1,199,400 35,382 WMX Technologies, Inc. 3,222,700 96,278 Wheelabrator Technologies, Inc. 343,300 5,536 137,196 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 789,063 MEDIA & LEISURE - 3.3% BROADCASTING - 0.4% Comcast Corp. Class A special 1,681,300 33,836 Infinity Broadcasting Corp. (a) 38,123 1,515 TCI Group Class A 1,050,000 22,181 U.S. Satellite Broadcasting Co., Inc. Class A 17,000 459 57,991 ENTERTAINMENT - 0.0% Disney (Walt) Co. 60,500 3,887 LEISURE DURABLES & TOYS - 0.4% Hasbro, Inc. 1,514,600 62,856 LODGING & GAMING - 1.8% Aztar Corp. (a)(c) 2,298,200 19,247 Circus Circus Enterprises, Inc. (a) 107,500 3,427 Hilton Hotels Corp. 1,315,500 102,280 ITT Corp. 2,854,400 158,419 Mirage Resorts, Inc. (a) 313,300 12,219 President Riverboat Casinos, Inc. (a) 1,200,000 1,650 297,242 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED PUBLISHING - 0.2% Times Mirror Co. Class A 1,124,400 $ 34,856 RESTAURANTS - 0.5% Brinker International, Inc. (a) 1,135,800 14,623 Darden Restaurants, Inc. 5,041,000 57,972 Starbucks Corp. (a) 855,900 14,336 86,931 TOTAL MEDIA & LEISURE 543,763 NONDURABLES - 12.0% AGRICULTURE - 0.1% Pioneer Hi-Bred International, Inc. 348,100 17,753 BEVERAGES - 1.9% Anheuser-Busch Companies, Inc. 1,170,000 81,315 PepsiCo, Inc. 3,897,000 232,359 313,674 FOODS - 2.7% ConAgra, Inc. 1,016,300 46,623 General Mills, Inc. 961,000 55,258 Kellogg Co. 1,273,000 97,544 Nestle SA (Reg.) 20,000 21,019 RalCorp Holdings, Inc. (a)(c) 1,905,166 51,201 Ralston Purina Co. 1,160,607 74,714 Sysco Corp. 2,104,500 67,344 Tyson Foods, Inc. 14,100 367 Universal Foods Corp. 367,000 14,174 428,244 HOUSEHOLD PRODUCTS - 1.5% Avon Products, Inc. 200,000 15,800 Clorox Co. 48,100 3,974 Colgate-Palmolive Co. 29,000 2,146 Helene Curtis Industries, Inc. 272,500 15,873 Premark International, Inc. 372,700 19,287 Procter & Gamble Co. 490,000 41,099 Rubbermaid, Inc. 2,248,100 63,790 Tambrands, Inc. 1,067,100 52,421 Unilever NV ADR 208,000 30,134 244,524 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED TOBACCO - 5.8% Philip Morris Companies, Inc. 7,421,200 $ 690,172 RJR Nabisco Holdings Corp. 4,889,746 158,917 Seita 385,000 14,811 UST, Inc. 2,454,300 82,526 946,426 TOTAL NONDURABLES 1,950,621 PRECIOUS METALS - 0.3% Newmont Mining Corp. 370,500 20,748 Santa Fe Pacific Gold Corp. 1,612,240 26,400 47,148 RETAIL & WHOLESALE - 5.4% APPAREL STORES - 0.5% Gap, Inc. 453,200 21,357 Limited, Inc. (The) 2,911,000 48,759 TJX Companies, Inc. 879,200 16,595 86,711 DRUG STORES - 1.3% Revco (D.S.), Inc. (a) 1,990,093 55,971 Rite Aid Corp. 2,845,400 91,408 Walgreen Co. 2,001,500 69,802 217,181 GENERAL MERCHANDISE STORES - 1.7% Carson Pirie Scott & Co. (a)(c) 1,644,874 29,402 Dayton Hudson Corp. 358,200 26,775 Federated Department Stores, Inc. (a) 1,328,430 35,868 May Department Stores Co. (The) 1,075,700 47,869 Price/Costco, Inc. (a) 1,526,600 23,853 Sears, Roebuck & Co. 560,500 23,261 Wal-Mart Stores, Inc. 4,452,000 90,710 277,738 GROCERY STORES - 0.6% Kroger Co. (The) (a) 721,326 25,066 Safeway, Inc. (a) 1,420,200 36,215 Stop & Shop Companies, Inc. (a) 1,472,300 35,703 96,984 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - 1.3% BT Office Products International, Inc. (a) 180,000 $ 2,790 Home Depot, Inc. (The) 3,639,400 167,412 Officemax, Inc. (a) 554,450 12,752 Petsmart, Inc. 63,900 1,949 Tandy Corp. 588,400 22,506 207,409 TOTAL RETAIL & WHOLESALE 886,023 SERVICES - 1.9% PRINTING - 0.3% Deluxe Corp. 660,300 19,396 Valassis Communications, Inc. (a) 1,922,400 32,441 51,837 SERVICES - 1.6% ADT Ltd. 5,222,700 75,729 BET PLC Ord. 1,563,600 3,098 Block (H & R), Inc. 864,800 31,890 Jostens, Inc. 1,087,500 25,013 Loewen Group, Inc. 1,360,000 38,126 Service Corp. International 543,600 23,579 Western Atlas, Inc. (a) 1,080,700 57,817 255,252 TOTAL SERVICES 307,089 TECHNOLOGY - 4.9% COMMUNICATIONS EQUIPMENT - 0.5% Cisco Systems, Inc. (a) 767,000 63,853 General Instrument Corp. (a) 638,700 14,610 78,463 COMPUTER SERVICES & SOFTWARE - 2.1% Automatic Data Processing, Inc. 1,650,200 65,802 Ceridian Corp. (a) 1,562,300 70,304 First Data Corp. 1 - General Motors Corp. Class E 2,992,500 166,084 Information Resources, Inc. (a)(c) 2,000,000 27,500 Reuters Holdings PLC ADR Class B 110,000 6,174 335,864 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - 1.7% Canon, Inc. 959,000 $ 18,088 Diebold, Inc. 99,300 5,548 Digital Equipment Corp. (a) 514,000 37,201 International Business Machines Corp. 1,003,000 109,076 Pitney Bowes, Inc. 2,015,700 91,210 Silicon Graphics, Inc. 474,300 13,340 Sun Microsystems, Inc. (a) 134,000 6,164 Wang Laboratories, Inc. (a) 237,900 4,431 285,058 ELECTRONICS - 0.1% AMP, Inc. 528,100 20,596 Intel Corp. 95,100 5,253 25,849 PHOTOGRAPHIC EQUIPMENT - 0.5% Polaroid Corp. 1,695,200 76,072 TOTAL TECHNOLOGY 801,306 TRANSPORTATION - 1.3% AIR TRANSPORTATION - 0.2% AMR Corp. 68,400 5,198 Southwest Airlines Co. 1,216,200 31,621 36,819 RAILROADS - 1.1% Burlington Northern Santa Fe Corp. 832,519 68,162 CSX Corp. 1,225,800 56,846 Union Pacific Corp. 699,300 46,591 171,599 TOTAL TRANSPORTATION 208,418 UTILITIES - 7.3% CELLULAR - 0.1% AirTouch Communications, Inc. (a) 395,800 11,181 Vodafone Group PLC sponsored ADR 97,700 3,493 14,674 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED ELECTRIC UTILITY - 0.3% Allegheny Power System, Inc. 257,800 $ 7,798 American Electric Power Co., Inc. 180,800 8,000 Boston Edison Co. 126,500 3,716 Duke Power Co. 100,000 4,975 Entergy Corp. 728,300 21,576 NIPSCO Industries, Inc. 87,700 3,344 Texas Utilities Co. 167,400 6,842 56,251 GAS - 0.1% Consolidated Natural Gas Co. 234,200 10,539 TELEPHONE SERVICES - 6.8% AT&T Corp. 1,126,300 75,321 Ameritech Corp. 3,595,200 216,161 Bell Atlantic Corp. 1,547,800 106,605 BellSouth Corp. 1,595,900 68,424 Cincinnati Bell, Inc. 780,600 25,370 Frontier Corp. 3,515,700 104,592 GTE Corp. 1,637,600 75,330 Koninklijke Ptt Nederland NV 926,100 35,534 NYNEX Corp. 2,827,000 151,598 SBC Communications, Inc. 3,539,700 200,436 WorldCom, Inc. (a) 1,385,200 50,733 1,110,104 TOTAL UTILITIES 1,191,568 TOTAL COMMON STOCKS (Cost $10,794,182) 14,439,645 CONVERTIBLE PREFERRED STOCKS - 0.1% BASIC INDUSTRIES - 0.1% PAPER & FOREST PRODUCTS - 0.1% International Paper $2.625 (d) 150,000 7,163 CONVERTIBLE PREFERRED STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - 0.0% INSURANCE - 0.0% Allstate Corp. exchangeable $2.30 90,000 $ 3,993 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $10,560) 11,156 CORPORATE BONDS - 0.8% MOODY'S PRINCIPAL RATINGS (B) AMOUNT (000S) CONVERTIBLE BONDS - 0.5% CONSTRUCTION & REAL ESTATE - 0.0% REAL ESTATE INVESTMENT TRUSTS - 0.0% Liberty Property exchangeable 8%, 7/1/01 - $ 1,591 1,748 FINANCE - 0.2% BANKS - 0.2% Bank of New York Co., Inc. 7 1/2%, 8/15/01 A3 14,872 38,890 HEALTH - 0.2% DRUGS & PHARMACEUTICALS - 0.2% Roche Holdings, Inc. liquid yield option notes 0%, 4/20/10 (d) - 72,400 32,309 RETAIL & WHOLESALE - 0.1% APPAREL STORES - 0.1% Baby Superstore, Inc. 4 7/8%, 10/1/00 B3 6,375 6,726 GROCERY STORES - 0.0% Food Lion, Inc. 5%, 6/1/03 (d) A3 6,700 6,591 TOTAL RETAIL & WHOLESALE 13,317 TOTAL CONVERTIBLE BONDS 86,264 CORPORATE BONDS - CONTINUED MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (B) AMOUNT (000S) (000S) NONCONVERTIBLE BONDS - 0.3% DURABLES - 0.0% TEXTILES & APPAREL - 0.0% Westpoint Stevens, Inc. 8 3/4%, 12/15/01 B1 $ 4,010 $ 4,070 HEALTH - 0.2% MEDICAL FACILITIES MANAGEMENT - 0.2% Tenet Healthcare Corp. 10 1/8%, 3/1/05 Ba3 23,000 25,761 MEDIA & LEISURE - 0.1% BROADCASTING - 0.1% Citicasters, Inc. 9 3/4%, 2/15/04 B- 6,250 6,375 SCI Television, Inc. secured 11%, 6/30/05 B2 7,250 7,748 TOTAL MEDIA & LEISURE 14,123 TOTAL NONCONVERTIBLE BONDS 43,954 TOTAL CORPORATE BONDS (Cost $108,012) 130,218 U.S. TREASURY OBLIGATIONS - 2.5% U.S. Treasury Bills, yield at date of purchase 5.22%, 3/21/96 - 400,000 397,472 8 1/8%, 8/15/19 Aaa 10,000 12,481 TOTAL U.S. TREASURY OBLIGATIONS (Cost $407,393) 409,953 REPURCHASE AGREEMENTS - 7.9% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88% dated 1/31/96 due 2/1/96 $ 1,281,046 1,280,837 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $12,600,984) $ 16,271,809 LEGEND (1.) Non-income producing (2.) Standard & Poor's credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. (3.) Affiliated company (see Note 7 of Notes to Financial Statements). (4.) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $46,063,000 or 0.3% of net assets. INCOME TAX INFORMATION At January 31, 1996, the aggregate cost of investment securities for income tax purposes was $12,605,375,000. Net unrealized appreciation aggregated $3,666,434,000, of which $3,755,881,000 related to appreciated investment securities and $89,447,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JANUARY 31, 1996 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 16,271,809 agreements of $1,280,837) (cost $12,600,984) - See accompanying schedule Receivable for investments sold 43,971 Receivable for fund shares sold 91,705 Dividends receivable 22,510 Interest receivable 2,702 Other receivables 17,746 TOTAL ASSETS 16,450,443 LIABILITIES Payable for investments purchased $ 301,513 Payable for fund shares redeemed 18,049 Accrued management fee 6,420 Other payables and accrued expenses 3,842 Collateral on securities loaned, at value 39,000 TOTAL LIABILITIES 368,824 NET ASSETS $ 16,081,619 Net Assets consist of: Paid in capital $ 12,165,278 Undistributed net investment income 6,954 Accumulated undistributed net realized gain (loss) on 238,581 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 3,670,806 investments and assets and liabilities in foreign currencies NET ASSETS, for 575,460 shares outstanding $ 16,081,619 NET ASSET VALUE, offering price and redemption price per $27.95 share ($16,081,619 (divided by) 575,460 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1996 (UNAUDITED) INVESTMENT INCOME $ 136,107 Dividends (including $1,783 received from affiliated issuers) Interest (including income on securities loaned of $178) 37,466 TOTAL INCOME 173,573 EXPENSES Management fee $ 34,441 Transfer agent fees 14,577 Accounting and security lending fees 397 Non-interested trustees' compensation 43 Custodian fees and expenses 172 Registration fees 995 Audit 64 Legal 41 Miscellaneous 6 Total expenses before reductions 50,736 Expense reductions (922) 49,814 NET INVESTMENT INCOME 123,759 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain (loss) of 418,296 $1,026 on sales of investments in affiliated issuers) Foreign currency transactions 4,931 423,227 Change in net unrealized appreciation (depreciation) on: Investment securities 1,575,036 Assets and liabilities in foreign currencies 39 1,575,075 NET GAIN (LOSS) 1,998,302 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 2,122,061 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JANUARY JULY 31, 31,1996 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 123,759 $ 220,509 Net investment income Net realized gain (loss) 423,227 462,592 Change in net unrealized appreciation (depreciation) 1,575,075 1,412,882 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,122,061 2,095,983 FROM OPERATIONS Distributions to shareholders (144,195) (175,942) From net investment income From net realized gain (453,161) (508,140) TOTAL DISTRIBUTIONS (597,356) (684,082) Share transactions 3,062,748 3,118,020 Net proceeds from sales of shares Reinvestment of distributions 583,649 667,970 Cost of shares redeemed (1,195,547) (1,849,027) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,450,850 1,936,963 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 3,975,555 3,348,864 NET ASSETS Beginning of period 12,106,064 8,757,200 End of period (including undistributed net investment $ 16,081,619 $ 12,106,064 income of $6,954 and $27,390, respectively) OTHER INFORMATION Shares Sold 116,340 136,992 Issued in reinvestment of distributions 22,698 30,753 Redeemed (45,855) (80,408) Net increase (decrease) 93,183 87,337
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED JULY 31, ENDED JANUARY 31, 1996 (UNAUDITED) 1995 1994 D 1993 1992 1991
SELECTED PER-SHARE DATA Net asset value, $ 25.10 $ 22.17 $ 21.90 $ 21.34 $ 19.92 $ 17.10 beginning of period Income from Investment Operations Net investment .24 .43 .45 .53 .50 .46 income Net realized 3.79 4.14 1.07 3.02 1.94 3.10 and unrealized gain (loss) Total from 4.03 4.57 1.52 3.55 2.44 3.56 investment operations Less Distributions (.28) (.40) (.48) (.59) (.38) (.52) From net investment income From net realized (.90) (1.24) (.77) (2.40) (.64) (.22) gain Total distributions (1.18) (1.64) (1.25) (2.99) (1.02) (.74) Net asset value, $ 27.95 $ 25.10 $ 22.17 $ 21.90 $ 21.34 $ 19.92 end of period TOTAL RETURN B, C 16.53% 21.95% 7.08% 19.10 12.75 21.89 % % % RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 16,082 $ 12,106 $ 8,757 $ 6,646 $ 4,199 $ 2,686 period (in millions) Ratio of expenses to .75% A .78% .83% .83 .86 .87 average net assets % % % Ratio of expenses to .73% A, .77% .82% .83 .86 .87 average net assets E E E % % % after expense reductions Ratio of net 1.82% A 2.21% 2.09% 2.67 2.49 2.62 investment income % % % to average net assets Portfolio turnover rate 49% A 67% 92% 87 221 215 % % %
A ANNUALIZED B 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). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D 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. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1996 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Growth & Income Portfolio (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED date. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, paydown gains/losses on certain securities, foreign currency transactions, market discount, non-taxable dividends and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying U.S. Treasury or Federal Agency securities, the market value of which is required to be at least equal to the repurchase price. For term repurchase agreement transactions, the underlying securities are marked-to-market daily and maintained at a value at least equal to the repurchase price. FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $4,345,868,000 and $3,071,183,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .20%. For the period, the management fee was equivalent to an annualized rate of .51% of average net assets. SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an affiliate of FMR and the general distributor of the fund, received sales charges of $980,000 on sales of shares of the fund. Effective October 20, 1995, the fund's 3% sales charge was eliminated. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .21% of average net assets. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $2,309,000 for the period. 5. SECURITY LENDING. The fund loaned securities to certain brokers who paid the fund negotiated lenders' fees. These fees are included in interest income. The fund receives U.S. Treasury obligations and/or cash as collateral against the loaned securities, in an amount at least equal to 102% of the market value of the loaned securities at the inception of each loan. This collateral must be maintained at not less than 100% of the market value of the loaned securities during the period of the loan. At period end, the value of the securities loaned and the value of collateral amounted to $37,800,000 and $39,000,000, respectively. 6. EXPENSE REDUCTIONS. FMR has directed certain portfolio trades to brokers who paid a portion of the fund's expenses. For the period, the fund's expenses were reduced by $569,000 under this arrangement. In addition, the fund has entered into an arrangement with its 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 transfer agent fees were reduced by $353,000 under this arrangement. 7. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES DOLLAR AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Aztar Corp. $ 2,453 $ 2,635 $ - $ 19,247 CBL & Associates Properties, Inc. 7,425 - 1,355 25,752 Carson Pirie Scott & Co. 1,792 - - 29,402 Ferro Corp. - - 428 39,823 Information Resources, Inc. 7,410 - - 27,500 Oak Industries, Inc. 4,661 - - 25,753 RalCorp Holdings, Inc. 2,548 - - 51,201 TOTALS $ 26,289 $ 2,635 $ 1,783 $ 218,678 TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 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)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. 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 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29155 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Steven Kaye, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Robert H. Morrison, Manager, Security Transactions John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN The Chase Manhattan Bank, N.A. New York, NY FIDELITY'S GROWTH AND INCOME FUNDS Balanced Fund Convertible Securities Fund Equity-Income Fund Equity-Income II Fund Fidelity Fund Global Balanced Fund Growth & Income Portfolio Market Index Fund Puritan Fund Real Estate Investment Portfolio Utilities Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (registered trademark) OTC PORTFOLIO SEMIANNUAL REPORT JANUARY 31, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 29 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 33 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING 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 DEAR SHAREHOLDER: Although the markets were fairly positive in 1995, no one can predict what lies ahead for investors. The previous year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1996 PAST 6 PAST 1 PAST 5 PAST 10 MONTHS YEAR YEARS YEARS OTC 3.22% 38.20% 131.04% 301.87% OTC (incl. 3% sales charge) 0.12% 34.06% 124.11% 289.82% NASDAQ 6.34% 41.77% 171.10% 261.56% Mid-Cap Funds Average 6.24% 33.28% 129.75% 278.64% 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 - a common proxy for over-the-counter stocks. 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 119 mid-cap funds with similar objectives tracked by Lipper Analytical Services 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 include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1996 PAST 1 PAST 5 PAST 10 YEAR YEARS YEARS OTC 38.20% 18.23% 14.92% OTC (incl. 3% sales charge) 34.06% 17.51% 14.57% NASDAQ 41.77% 22.07% 13.71% Mid-Cap Funds Average 33.28% 17.84% 13.83% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS OTC Portfolios (093NASDAQ w/Wilshire 01/31/86 9700.00 10000.00 02/28/86 10405.04 10721.64 03/31/86 10928.14 11188.09 04/30/86 11172.63 11456.47 05/31/86 11445.55 11977.68 06/30/86 11542.20 12151.68 07/31/86 10547.19 11142.53 08/31/86 11070.28 11501.35 09/30/86 9938.80 10548.56 10/31/86 10426.58 10866.13 11/30/86 10267.30 10801.06 12/31/86 10089.64 10533.93 01/31/87 11333.23 11852.70 02/28/87 12546.20 12861.12 03/31/87 12515.57 13028.20 04/30/87 12374.67 12671.21 05/31/87 12484.94 12646.59 06/30/87 12736.11 12907.61 07/31/87 13348.71 13233.78 08/31/87 13973.57 13858.20 09/30/87 13887.81 13547.55 10/31/87 9703.70 9872.87 11/30/87 9115.60 9333.83 12/31/87 10250.73 10122.63 01/31/88 10614.83 10572.33 02/29/88 11322.02 11271.36 03/31/88 11581.09 11522.62 04/30/88 11931.18 11679.06 05/31/88 11826.15 11421.24 06/30/88 12610.36 12186.58 07/31/88 12568.35 11975.59 08/31/88 12267.27 11657.04 09/30/88 12736.40 12017.93 10/31/88 12729.40 11870.70 11/30/88 12316.29 11544.54 12/31/88 12593.48 11868.87 01/31/89 13405.50 12505.03 02/28/89 13369.88 12472.09 03/31/89 13953.97 12707.53 04/30/89 14637.78 13374.59 05/31/89 15293.10 13974.05 06/30/89 15257.48 13650.44 07/31/89 15927.04 14249.12 08/31/89 16639.35 14754.24 09/30/89 16734.35 14884.69 10/31/89 16170.11 14358.55 11/30/89 16318.59 14390.89 12/31/89 16420.94 14368.88 01/31/90 15255.01 13154.96 02/28/90 15678.98 13490.71 03/31/90 16274.18 13817.19 04/30/90 15801.28 13345.52 05/31/90 16836.77 14600.19 06/30/90 16869.38 14724.68 07/31/90 16649.24 13977.49 08/31/90 15214.24 12177.29 09/30/90 14376.93 11023.38 10/31/90 14073.73 10572.54 11/30/90 15050.72 11527.65 12/31/90 15640.76 12020.57 01/31/91 16872.44 13336.63 02/28/91 18180.06 14605.90 03/31/91 19200.84 15567.16 04/30/91 19167.10 15663.66 05/31/91 20103.52 16373.13 06/30/91 19133.35 15414.81 07/31/91 20483.15 16279.25 08/31/91 21562.98 17064.41 09/30/91 21373.49 17121.90 10/31/91 22302.77 17663.77 11/30/91 21248.40 17061.54 12/31/91 23329.66 19113.60 01/31/92 24337.04 20236.74 02/29/92 24384.11 20688.69 03/31/92 23602.69 19737.93 04/30/92 22906.00 18937.10 05/31/92 23235.52 19173.54 06/30/92 22727.12 18481.91 07/31/92 23207.27 19066.44 08/31/92 22632.98 18504.66 09/30/92 23331.54 19186.13 10/31/92 24200.97 19926.42 11/30/92 25909.15 21512.66 12/31/92 26815.06 22331.17 01/31/93 26992.78 22991.10 02/28/93 25936.91 22167.15 03/31/93 26835.97 22827.48 04/30/93 26051.90 21898.62 05/31/93 26752.34 23214.75 06/30/93 26783.70 23349.47 07/31/93 27076.42 23396.16 08/31/93 27578.22 24684.61 09/30/93 28336.15 25369.82 10/31/93 28709.89 25940.84 11/30/93 27951.09 25136.58 12/31/93 29049.69 25905.94 01/31/94 29831.89 26718.69 02/28/94 29519.01 26476.24 03/31/94 28339.69 24861.49 04/30/94 27557.49 24563.31 05/31/94 27413.09 24632.08 06/30/94 26402.24 23676.20 07/31/94 26979.87 24243.13 08/31/94 28327.66 25726.29 09/30/94 28399.86 25706.43 10/31/94 29049.69 26175.68 11/30/94 28099.01 25286.21 12/31/94 28266.68 25367.67 01/31/95 28205.95 25503.51 02/28/95 29687.91 26831.49 03/31/95 30683.99 27652.38 04/30/95 31971.60 28585.58 05/31/95 32882.64 29310.63 06/30/95 35433.57 31672.86 07/31/95 37765.84 34000.33 08/31/95 38251.74 34671.03 09/30/95 38803.77 35496.33 10/31/95 38593.35 35270.67 11/30/95 39286.50 36083.97 12/31/95 39071.74 35869.10 01/31/96 38981.57 36155.54 $10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity OTC Portfolio on January 31, 1986 and paid a 3% sales charge. As the chart shows, by January 31, 1996, the value of your investment would have grown to $38,982 - a 289.82% increase on your initial investment. For comparison, look at how the NASDAQ did over the same period. The same $10,000 investment would have grown to $36,156 - a 261.56% 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 Abigail Johnson, Portfolio Manager of Fidelity OTC Portfolio Q. ABBY, HOW DID THE FUND PERFORM? A. The fund's performance slowed toward the end of 1995. The fund had a total return of 3.22% for the six months ended January 31, 1996. That lagged the fund's benchmark - the NASDAQ Composite Index - which returned 6.34% during the same period. For the 12 months ended January 31, 1996, the fund rose 38.20%, compared to 41.77% for the index. Q. WHY DID THE FUND TRAIL THE INDEX DURING THE PERIOD? A. A couple of reasons come to mind. First, the fund was still overweighted in technology stocks relative to the index when their performance began to slip in the fall. I did reduce the fund's exposure to the sector - which had produced strong gains for the fund during 1995 - from 42.6% to 28.0% over the past six months. As I searched for appropriate stocks in which to invest the proceeds of those sales, the fund's cash position grew. It was nearly 16% on January 31, 1996; typically, that figure is 10% or less. That slowed the fund's performance somewhat relative to the OTC market toward the end of the period. In addition, what the fund didn't own affected relative performance. The fund wasn't heavily invested in some of the strongest performing Internet and biotech stocks during the period. Some of these stocks posted extraordinary gains. However, the Internet stocks as a group were extremely expensive, while some of the smaller biotech companies represented speculative "concept" stocks - built on dreams of new products that may never make it to market. I wasn't comfortable with the high level of risk inherent in these stocks. Q. YOU MENTIONED CUTTING BACK ON TECHNOLOGY. WHAT FACTORS NEGATIVELY AFFECTED THESE STOCKS DURING THE PERIOD? A. First, their valuations - prices relative to earnings - had risen to high levels. Second, signs of excess inventory of personal computers and memory computer chips began to appear in the fall. These have been key indicators of the overall health of the sector in past technology cycles. Because the earnings prospects for some technology companies quickly deteriorated, I took some profits and reduced the fund's exposure. Q. DID ALL TECHNOLOGY STOCKS MOVE IN TANDEM? A. No. We've actually seen a real divergence among the different industries that make up the sector. For example, companies that manufacture computer networking equipment generally have seen steadier earnings growth and have tended to be less cyclical than those in the PC and semiconductor industries. There's been a tremendous demand for more computer network capacity, which has helped fuel strong profits for companies such as Cisco Systems. Q. YOU'VE CUT BACK THE FUND'S INVESTMENT IN THE LARGEST SOFTWARE COMPANY OF THEM ALL, MICROSOFT . . . A. I did lock in some of the strong gains Microsoft made during 1995. I had concerns that the stock's valuation was getting excessive, and there remained some big question marks in the company's future. For example, Windows NT has done well, but still was only a small part of Microsoft's business at the end of the period. However, Microsoft is a very powerful player in the software industry, and it remained the fund's second largest holding on January 31. Q. ALTHOUGH IT REMAINED THE FUND'S LARGEST INVESTMENT AT THE END OF THE PERIOD, YOU ALSO REDUCED THE FUND'S STAKE IN MICROPROCESSOR MANUFACTURER INTEL. WERE THE REASONS SIMILAR? A. They were. Intel's stock had posted strong advances, and I took some profits. And like Microsoft, I had some concerns about the company's business prospects going forward. I've already mentioned the slowdown in PC sales near the end of the year. But the big picture for Intel revolves around the company's product cycles. The company recently announced it will launch the "Pentium Pro" - its newest chip -sooner than expected. It seems the period of time between each new generation of microprocessor has been shrinking, yet it costs the same amount or more to launch each new product. Therein lies the concern: investors, including myself, are worried that these compressed product cycles could negatively affect profitability. However, it's difficult to count Intel out because it has dominated its industry. Q. WHAT OTHER SECTORS AFFECTED THE FUND'S PERFORMANCE RECENTLY? A. I mentioned not owning some of the very small biotech companies. But those that the fund did own - larger stocks such as Amgen - boosted performance. Amgen is one of the few biotech companies that actually has products in the marketplace that can help produce a solid earnings stream. In addition, health care stocks - which grew from 8.3% of the fund to 10.1% over the past six months - generally were strong performers. I look for companies that have products that have the potential to help the medical community improve patient outcomes and keep costs down. Q. YOU ALSO INCREASED THE FUND'S WEIGHTING IN FINANCIAL STOCKS DURING THE PERIOD, FROM 8.0% TO 11.2%. WHERE DID YOU FIND OPPORTUNITIES? A. Regional banks such as Northern Trust and Union Bank of San Francisco benefited from falling interest rates, solid loan growth and better-than-average balance sheets. In addition, the valuations of these stocks were driven higher by the takeover mania that has swept the banking industry. As the period progressed, I cut back somewhat on the regional banks and moved more heavily into insurance stocks, which I felt also could benefit from lower interest rates. Life USA Holding, Ohio Casualty and Mercury General are examples. Q. WHAT WILL BE THE KEYS TO THE FUND'S PERFORMANCE AS 1996 PROGRESSES? A. I'm concerned about corporate earnings. I think many companies - especially in the technology sector - will have difficulty matching 1995's powerful earnings growth rates. That's mainly because of the sluggish U.S. economy and the stronger U.S. dollar. Many technology companies produce more than half of their sales overseas. Last year's weak dollar produced favorable currency exchange rates, which positively affected earnings. I would caution shareholders to temper their expectations in light of the strength of the OTC market over the past 12 months. It's important to remember that yearly returns that top 30% are far and away the historical exception; the norm is far less. FUND FACTS GOAL: to increase the value of the fund's shares over the long term by investing mainly in equity securities traded on the over-the-counter market START DATE: December 31, 1984 SIZE: as of January 31, 1996, more than $2.3 billion MANAGER: Abigail Johnson, since April 1994; manager, Fidelity Dividend Growth Fund, 1993-1994; Fidelity Select Developing Communications Portfolio, 1991-1993; Fidelity Select Telecommunications Portfolio, 1991-1992; Fidelity Select Industrial Equipment Portfolio, 1988-1991; joined Fidelity in 1988 (checkmark) ABIGAIL JOHNSON ON THE RECENT ENVIRONMENT FOR SMALL- AND MID-CAPITALIZATION STOCKS: "The stocks of small- and medium-sized companies generally have lagged those of larger companies for quite some time now. For example, for the three years ended January 31, 1996, the Dow Jones Industrial Average - which measures the performance of 30 large-cap industrial companies - rose 76.46%, while the NASDAQ index - which includes many small- and mid-cap companies - rose 57.26%. Historically, small stocks have tended to outperform large stocks over longer periods, but large companies generally offer steadier earnings growth, which attracts investors during certain economic and market cycles. I have gone with the flow somewhat, and increased the fund's holdings in some larger stocks over the past year. While they've performed well, the nucleus of the fund is still small- and mid-cap stocks, which dominate the OTC market." (solid bullet) The fund had roughly a 12% stake in cyclical stocks at the end of the period. The earnings of these stocks tend to improve as the economy expands. Examples included railroad company Wisconsin Central and manufacturing conglomerate Pentair. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Intel Corp. 3.6 6.1 Microsoft Corp. 1.8 5.2 Amgen, Inc. 1.6 0.8 Oracle Systems Corp. 1.4 1.5 MCI Communications Corp. 1.3 0.9 Cisco Systems, Inc. 1.1 0.6 WorldCom, Inc. 1.1 0.6 General Electric Co. 1.0 0.0 Glenayre Technologies, Inc. 0.9 0.5 TCI Group Class A 0.8 0.0 TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Technology 28.0 42.6 Finance 11.2 8.0 Health 10.1 8.3 Utilities 5.9 4.3 Industrial Machinery & Equipment 4.8 3.6 ASSET ALLOCATION AS OF JANUARY 31, 1996 * AS OF JULY 31, 1995 ** Row: 1, Col: 1, Value: 16.0 Row: 1, Col: 2, Value: 3.5 Row: 1, Col: 3, Value: 30.5 Row: 1, Col: 4, Value: 50.0 Row: 1, Col: 1, Value: 9.6 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 40.0 Row: 1, Col: 4, Value: 48.4 Stocks 81.1% Bonds 2.9% Short-term investments 16.0% FOREIGN INVESTMENTS 5.3% Stocks 90.2% Bonds 0.2% Short-term investments 9.6% FOREIGN INVESTMENTS 4.3% * ** INVESTMENTS JANUARY 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 81.1% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 0.6% AEROSPACE & DEFENSE - 0.5% C A E Industries Ltd. 200,000 $ 1,511 Greenwich Air Services, Inc. 54,100 1,210 McDonnell Douglas Corp. 100,000 8,900 11,621 DEFENSE ELECTRONICS - 0.1% Loral Corp. 50,000 2,312 Trimble Navigation Ltd. (a) 62,800 1,005 3,317 TOTAL AEROSPACE & DEFENSE 14,938 BASIC INDUSTRIES - 1.6% CHEMICALS & PLASTICS - 0.8% AEP Industries, Inc. 24,000 528 Carbide/Graphite Group, Inc. (The) (a) 2,500 40 First Mississippi Corp. 130,000 3,201 Fuller (H.B.) Co. 100,000 3,625 OM Group, Inc. 173,100 5,712 PT Tri Polyta Indonesia sponsored ADR 29,000 421 Petrolite Corp. 43,300 1,180 Union Carbide Corp. 100,000 4,213 18,920 IRON & STEEL - 0.1% Schnitzer Steel, Inc. Class A 113,600 3,436 METALS & MINING - 0.3% Stillwater Mining Co. (a) 134,900 2,782 Stillwater Mining Co. (a)(d) 200,000 4,125 6,907 PAPER & FOREST PRODUCTS - 0.4% Pentair, Inc. 171,900 9,025 TOTAL BASIC INDUSTRIES 38,288 CONSTRUCTION & REAL ESTATE - 1.8% BUILDING MATERIALS - 0.3% Hoganas AB Class B Free shares 93,000 2,359 National House Industrial Co. Ltd. 153,000 2,757 Thermo Power Corp. (a) 100,200 1,516 6,632 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - CONTINUED CONSTRUCTION - 1.1% American Homestar Corp. (a) 103,750 $ 1,777 Redman Industries, Inc. (a) 138,800 4,806 Schuler Homes, Inc. (a) 167,800 1,363 Sekisui House Ltd. 238,000 3,022 Southern Energy Homes, Inc. (a) 183,125 3,022 Sumitomo Forestry Co. Ltd. (a) 197,000 3,182 Toll Brothers, Inc. (a) 180,000 3,510 U.S. Home Corp. (a) 200,000 5,600 26,282 REAL ESTATE - 0.1% Price Enterprises, Inc. 200,000 3,050 REAL ESTATE INVESTMENT TRUSTS - 0.3% Equity Inns, Inc. 300,000 3,825 RFS Hotel Investors, Inc. 105,000 1,864 5,689 TOTAL CONSTRUCTION & REAL ESTATE 41,653 DURABLES - 1.5% AUTOS, TIRES, & ACCESSORIES - 0.4% Jason, Inc. (a) 82,000 543 Masland Corp. 100,000 1,388 PACCAR, Inc. 137,900 6,309 Tower Automotive, Inc. (a) 100,000 1,513 9,753 CONSUMER ELECTRONICS - 0.1% Sony Corp. ADR 3,600 223 Sony Corp. 46,400 2,838 3,061 HOME FURNISHINGS - 0.4% Haverty Furniture Companies, Inc. 279,300 3,456 Ladd Furniture, Inc. 30,033 420 Miller (Herman), Inc. 100,000 3,200 Stanley Furniture (a) 200,000 1,800 8,876 TEXTILES & APPAREL - 0.6% Justin Industries, Inc. 381,000 4,143 Mohawk Industries, Inc. (a) 163,100 2,222 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED TEXTILES & APPAREL - CONTINUED Sam & Libby, Inc. (a) 30,048 $ 28 Westpoint Stevens, Inc. Class A (a) 423,000 8,143 14,536 TOTAL DURABLES 36,226 ENERGY - 1.2% ENERGY SERVICES - 0.3% Global Industries Ltd. (a) 194,800 2,751 Noble Drilling Corp. (a) 235,000 2,306 Offshore Logistics, Inc. (a) 154,950 1,937 6,994 OIL & GAS - 0.9% Barrett Resources Corp. (a) 100,000 2,550 Belden & Blake Corp. (a) 150,000 2,437 Cairn Energy USA, Inc. (a) 100,000 1,400 Chesapeake Energy Corp. (a) 195,000 9,019 Flores & Rucks, Inc. (a) 227,000 3,320 Petroleum Geo-Services AS sponsored ADR (a) 25,000 538 TransTexas Gas Corp. (a) 95,000 1,116 Union Pacific Resources Group, Inc. 48,000 1,248 21,628 TOTAL ENERGY 28,622 FINANCE - 11.2% BANKS - 4.9% Bank of New Hampshire Corp. 110,000 4,262 BanPonce Corp. 281,761 11,517 Boatmen's Bancshares, Inc. 137,100 5,878 CCB Financial Corp. 52,800 2,759 Central Fidelity Banks, Inc. 25,000 791 Commerce Bancorp, Inc. 105,000 2,179 Dauphin Deposit Corp. 39,900 1,117 Deposit Guaranty Corp. 25,000 1,075 Fifth Third Bancorp 330,450 15,634 First American Corp. 77,258 3,689 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED BANKS - CONTINUED First Commerce Bancshares, Inc. 115,600 $ 2,312 First Commerce Bancshares, Inc. Class B 445,900 6,911 First Security Corp. 125,000 4,594 First Tennessee National Corp. 40,000 2,440 Fleet Financial Group, Inc. 98,400 3,936 HUBCO, Inc. 32,470 727 Liberty Bancorporation, Inc. 69,700 2,588 Meridian Bancorp, Inc. 53,833 2,584 Northern Trust Corp. 117,850 6,246 Peoples Heritage Financial Group, Inc. 150,000 3,000 Regions Financial Corp. 98,200 4,137 Southern National Corp. 114,511 3,335 Trans Financial Bancorp, Inc. 60,000 953 Union Bank of San Francisco 163,600 9,325 Union Planters Corp. 20,916 638 U.S. Bancorp 144,100 4,737 Zions Bancorporation 122,200 9,348 116,712 CREDIT & OTHER FINANCE - 0.3% Greenpoint Financial Corp. 105,500 2,723 Investors Financial Services Corp. (a) 14,795 335 Investors Financial Services Corp. Class A (a) 2,690 61 Triad Guaranty, Inc. (a) 102,800 3,084 6,203 INSURANCE - 4.0% Allied Group, Inc. 108,500 4,069 Allmerica Financial Corp. 26,100 695 American National Insurance Co. 31,000 2,139 Amerin Corp. 111,900 2,895 Berkley (W.R.) Corp. 137,360 6,902 Capital RE Corp. 100,000 3,025 Cincinnati Financial Corp. 130,000 8,158 Delphi Financial Group, Inc. Class A (a) 102,600 2,385 GCR Holdings Ltd. 5,000 114 HealthCare COMPARE Corp. (a) 126,700 6,145 Home Beneficial Corp. Class B 35,500 852 Liberty Corp. (The) 100,000 3,487 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED INSURANCE - CONTINUED Life Partners Group, Inc. 200,000 $ 2,625 Life USA Holding, Inc. (a) 279,300 2,444 Mercury General Corp. 164,600 7,983 Mid Ocean Ltd. 60,000 2,340 NAC Re Corp. 9,300 316 Ohio Casualty Corp. 262,700 9,720 SAFECO Corp. 292,600 10,497 Security-Connecticut Corp. 127,300 3,183 Titan Holdings, Inc. 100,000 1,350 Trenwick Group, Inc. 45,400 2,463 UNUM Corp. 70,400 4,330 US Facilities Corp. 94,000 1,857 USLife Corp. 101,100 3,248 Western National Corp. 200,000 3,275 96,497 SAVINGS & LOANS - 1.8% Astoria Financial Corp. 68,100 3,345 Charter One Financial Corp. 252,900 7,998 Collective Bancorp, Inc. 182,800 4,593 Commercial Federal Corp. 158,700 5,872 First Financial Corp. of Wisconsin 100,000 2,188 Glendale Federal Bank FSB (a) 100,000 1,675 Long Island Bancorp, Inc. 150,000 3,872 Quaker City Bancorp (a) 97,600 1,238 Roosevelt Financial Group, Inc. 100,000 1,738 Springfield Institution for Savings 64,000 1,144 Standard Financial, Inc. (a) 50,000 756 Washington Federal, Inc. 120,000 2,880 Washington Mutual, Inc. 164,000 4,958 42,257 SECURITIES INDUSTRY - 0.2% Nomura Securities Co. Ltd. 188,000 4,072 Quick & Reilly Group, Inc. (The) 75,000 1,744 5,816 TOTAL FINANCE 267,485 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - 10.1% DRUGS & PHARMACEUTICALS - 4.9% Alkermes, Inc. (a) 150,000 $ 1,481 Amgen, Inc. (a) 618,400 37,181 Biochem Pharmaceuticals, Inc. (a) 26,900 1,180 Biogen, Inc. (a) 189,800 13,333 COR Therapeutics, Inc. (a) 100,000 1,038 Cell Genesys, Inc. (a) 149,800 1,479 Chiron Corp. (a) 35,000 4,025 Copley Pharmaceutical, Inc. (a) 266,700 5,134 Depotech Corp. 2,000 39 Genetics Institute, Inc. depositary shares (a) 60,000 3,825 Genzyme Corp. (a) 120,000 9,105 Gilead Sciences, Inc. (a) 24,300 869 Guilford Pharmaceuticals, Inc. (a) 162,500 3,839 Immunex Corp. (a) 99,100 1,623 Inhale Therapeutic Systems (a) 100,000 1,225 Myriad Genetics 4,000 134 Nature's Sunshine Products, Inc. 110,000 3,520 Protein Design Labs, Inc. (a) 155,600 4,298 Sepracor, Inc. (a) 237,900 4,431 Sequus Pharmaceuticals, Inc. (a) 100,000 1,863 Sigma Aldrich Corp. 140,000 7,350 Telor Ophthalmic Pharmaceuticals, Inc. (a) 50 - Vertex Pharmaceuticals, Inc. (a) 120,900 3,264 Watson Pharmaceuticals, Inc. (a) 136,500 6,245 116,481 MEDICAL EQUIPMENT & SUPPLIES - 2.7% ADAC Laboratories 180,000 2,542 Baxter International, Inc. 226,600 10,310 Benson Eyecare Corp. (a) 100,000 950 Biomet, Inc. (a) 145,000 2,719 Boston Scientific Corp. (a) 100,000 5,125 Coherent, Inc. (a) 60,000 2,738 Cygnus, Inc. (a) 214,800 4,484 De Rigo Spa sponsored ADR 2,400 60 Exogen, Inc. 100,000 2,125 Medisense, Inc. (a) 90,100 2,399 Nellcor, Inc. (a) 51,300 3,181 St. Jude Medical, Inc. (a) 251,150 11,082 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - CONTINUED Spacelabs Medical, Inc. (a) 15,700 $ 424 Thermo Cardiosystems, Inc. (a) 97,900 7,245 Utah Medical Products, Inc. (a) 152,000 3,173 Vital Signs, Inc. 191,400 6,053 64,610 MEDICAL FACILITIES MANAGEMENT - 2.5% Advantage Health Corp. (a) 60,600 2,818 Apria Healthcare Group, Inc. (a) 63,280 1,661 Coventry Corp. (a) 125,000 2,297 Emeritus Corp. (a) 200,000 3,600 FHP International Corp. (a) 100,000 2,887 Health Management, Inc. (a) 100,000 1,262 Lincare Holdings, Inc. (a) 150,940 4,000 Maxicare Health Plans, Inc. (a) 242,000 6,685 Meadowbrook Insurance Group, Inc. (a) 24,300 799 Medpartners/Mullikin, Inc. (a) 135,400 4,874 National Surgery Centers, Inc. 1,500 42 Pediatrix Medical Group 2,000 67 Phymatrix Corp. 61,000 1,311 Physician Corp. of America (a) 290,600 5,231 Renal Treatment Centers, Inc. (a) 46,600 2,132 Rotech Medical Corp. (a) 60,000 1,808 Sterling Healthcare Group, Inc. (a) 100,000 1,250 Sterling House Corp. 5,000 74 TheraTx, Inc. (a) 143,300 1,308 Total Renal Care Holdings, Inc. 3,000 83 United Dental Care, Inc. 2,500 101 U.S. Healthcare, Inc. 274,700 13,323 Wellcare Management Group, Inc. (a) 25,000 656 58,269 TOTAL HEALTH 239,360 HOLDING COMPANIES - 0.3% Nolato AB Class B Free shares 296,500 2,180 Partner Re Holdings 150,000 4,181 6,361 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - 4.8% ELECTRICAL EQUIPMENT - 2.4% Adtran, Inc. (a) 102,000 $ 2,805 Antec Corp. (a) 94,500 1,418 Avid Technology, Inc. (a) 39,900 718 California Microwave Corp. (a) 100,000 1,863 General Electric Co. 300,000 23,025 Glenayre Technologies, Inc. 530,850 21,234 Omnipoint Corp. 3,000 62 Omron Corp. 137,000 3,019 Pinnacle Systems (a) 13,300 226 Spectrum Control, Inc. (a) 250,000 781 Telular Corp. (a) 100,000 550 VWR Corp. 71,800 915 56,616 INDUSTRIAL MACHINERY & EQUIPMENT - 1.6% BW/IP Holdings, Inc. Class A 330,000 4,785 Brenco, Inc. 108,000 972 Duriron Co., Inc. 380,000 8,740 FSI International, Inc. (a) 50,000 775 Goulds Pumps, Inc. 69,300 1,542 Greenfield Industries, Inc. 148,200 4,224 Ionics, Inc. (a) 32,300 1,296 Park Ohio Industries, Inc. (a) 261,063 3,655 Stewart & Stevenson Services, Inc. 440,000 10,890 Strategic Distribution, Inc. 50,000 337 Watts Industries, Inc. Class A 100,000 1,737 38,953 POLLUTION CONTROL - 0.8% Allied Waste Industries, Inc. 236,000 2,095 Continental Waste Industries, Inc. 119,833 1,423 Safety Kleen Corp. 100,000 1,500 TETRA Technologies, Inc. (a) 100,000 1,575 United Waste Systems, Inc. (a) 70,200 3,027 WMX Technologies, Inc. 315,000 9,411 19,031 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 114,600 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - 4.3% BROADCASTING - 2.5% American Telecasting, Inc. (a) 170,500 $ 2,558 CAI Wireless Systems, Inc. (a) 164,010 1,640 Comcast Corp. Class A special 330,000 6,641 Heartland Wireless Communications, Inc. (a) 16,700 474 Heftel Broadcasting Corp. Class A (a) 100,000 1,775 People's Choice TV Corp. (a) 295,100 4,574 Sinclair Broadcast Group, Inc. Class A 264,800 4,766 TCA Cable TV, Inc. 185,000 5,712 TCI Group Class A 950,900 20,088 Tele-Communications Liberty Media Group Series A (a) 182,150 4,986 Telewest Communications PLC (a) 1,449,000 2,740 U.S. Satellite Broadcasting Co., Inc. Class A 3,000 103 Viacom, Inc. Class A (a) 60,000 2,400 Wireless One, Inc. 2,000 32 58,489 ENTERTAINMENT - 0.2% American Classic Voyages Co. 146,800 1,413 Anchor Gaming (a) 27,700 658 Regal Cinemas, Inc. (a) 63,300 1,836 3,907 LEISURE DURABLES & TOYS - 0.1% Arctco, Inc. 158,350 1,762 LODGING & GAMING - 0.9% Argosy Gaming Corp. (a) 50,000 387 Bristol Hotel Co. (a) 2,500 70 Casino America, Inc. (a) 150,000 937 Extended Stay America, Inc. (a) 1,500 47 Grand Casinos, Inc. (a) 100,000 2,988 Hilton Hotels Corp. 80,000 6,220 Mirage Resorts, Inc. (a) 100,000 3,900 Players International, Inc. (a) 108,950 994 Promus Hotel Corp. (a) 25,000 625 Showboat, Inc. 100,000 2,350 Station Casinos, Inc. (a) 150,000 1,847 WMS Industries, Inc. (a) 55,900 1,048 21,413 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED PUBLISHING - 0.0% World Color Press, Inc. 7,000 $ 139 RESTAURANTS - 0.6% Bertucci's, Inc. (a) 118,800 609 Buffets, Inc. (a) 165,000 2,269 Darden Restaurants, Inc. 200,000 2,300 IHOP Corp. (a) 125,300 2,725 Longhorn Steaks, Inc. (a) 172,600 3,193 Outback Steakhouse, Inc. (a) 131,800 4,003 Taco Cabana, Inc. (a) 85,000 521 15,620 TOTAL MEDIA & LEISURE 101,330 NONDURABLES - 1.0% AGRICULTURE - 0.1% Kanthal AB Class B Free shares 225,200 3,116 BEVERAGES - 0.1% LVMH (Moet-Hennessy Louis Vuitton) 8,250 1,840 Redhook Ale Brewery, Inc. 800 21 1,861 FOODS - 0.1% Tyson Foods, Inc. 104,600 2,719 HOUSEHOLD PRODUCTS - 0.1% Estee Lauder Companies, Inc. (a) 6,000 221 Helen of Troy Corp. (a) 66,900 1,330 Rubbermaid, Inc. 50,000 1,419 2,970 TOBACCO - 0.6% Philip Morris Companies, Inc. 150,000 13,950 TOTAL NONDURABLES 24,616 PRECIOUS METALS - 0.7% Ashanti Goldfields Ltd. GDR 150,000 3,525 Barrick Gold Corp. 150,000 4,396 Firstmiss Gold, Inc. (a) 142,099 3,837 Newmont Mining Corp. 100,000 5,600 17,358 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - 4.3% APPAREL STORES - 0.4% Baby Superstore, Inc. (a) 55,000 $ 2,667 Cato Corp. Class A 200,000 1,400 Gymboree Corp. (a) 82,500 1,382 Urban Outfitters, Inc. (a) 127,300 3,135 8,584 APPLIANCE STORES - 0.1% Cellstar Corp. (a) 104,600 2,275 DRUG STORES - 0.1% General Nutrition Companies, Inc. (a) 100,000 2,188 GENERAL MERCHANDISE STORES - 1.0% Casey's General Stores, Inc. 122,500 2,817 Dollar Tree Stores 114,000 4,018 Ito-Yokado Co. Ltd. 104,000 5,914 Mitsukoshi Ltd. ADR 368,000 3,285 Price/Costco, Inc. (a) 247,400 3,866 Proffitts, Inc. (a) 142,900 3,126 23,026 GROCERY STORES - 0.3% Food Lion, Inc. Class B 115,000 647 Richfood Holdings, Inc. Class A 205,000 5,202 Vons Companies, Inc. (a) 52,700 1,561 7,410 RETAIL & WHOLESALE, MISCELLANEOUS - 2.4% Amway Japan Ltd. 112,000 5,041 Bed Bath & Beyond, Inc. (a) 150,600 5,977 CDW Computer Centers, Inc. (a) 50,000 2,394 Cameron Ashley, Inc. (a) 178,000 1,780 Corporate Express (a) 157,000 4,141 Creative Computers, Inc. 36,500 447 Futures Shops Ltd. (a) 200,200 1,895 Gadzooks, Inc. 107,000 2,661 Global Directmail Corp. (a) 40,000 1,115 Good Guys, Inc. (a) 185,800 1,649 Micro Warehouse, Inc. (a) 114,300 4,286 Sodak Gaming, Inc. (a) 171,400 4,499 Sound Advice, Inc. (warrants) (a) 147 - Spiegel, Inc. Class A 191,200 1,482 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED Staples, Inc. (a) 200,000 $ 4,925 Sunglass Hut International, Inc. (a) 162,500 4,520 U.S. Office Products Co. 100,000 2,350 Viking Office Products, Inc. (a) 120,000 6,119 Zale Corp. (a) 246,500 3,405 58,686 TOTAL RETAIL & WHOLESALE 102,169 SERVICES - 1.0% ADVERTISING - 0.0% CKS Group, Inc. (a) 1,000 36 LEASING & RENTAL - 0.1% Hollywood Entertainment Corp. (a) 26,500 209 Movie Gallery, Inc. (a) 100,400 2,058 2,267 SERVICES - 0.9% AccuStaff, Inc. (a) 140,000 6,440 Borg Warner Security Corp. (a) 333,200 3,749 Career Horizons, Inc. (a) 100,000 3,950 Corestaff, Inc. 1,500 56 FYI, Inc. 2,500 48 Interim Services, Inc. (a) 10,000 372 Manpower, Inc. 32,700 879 PMT Services, Inc. (a) 100,000 2,000 Robert Half International, Inc. (a) 18,000 758 Zebra Technologies Corp. Class A (a) 65,000 2,015 20,267 TOTAL SERVICES 22,570 TECHNOLOGY - 28.0% COMMUNICATIONS EQUIPMENT - 4.0% ADC Telecommunications, Inc. (a) 193,500 7,474 Active Voice Corp. (a) 100,800 2,520 Aspect Telecommunications Corp. (a) 190,000 7,030 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMMUNICATIONS EQUIPMENT - CONTINUED Brite Voice Systems, Inc. (a) 120,600 $ 1,688 Cabletron Systems, Inc. (a) 20,000 1,543 Cisco Systems, Inc. (a) 321,400 26,757 DSC Communications Corp. (a) 71,100 2,071 Dialogic Corp. (a) 142,700 4,245 Digital Systems International, Inc. (a) 83,700 1,078 Dynatech Corp. (a) 180,100 3,602 Ericsson (L.M.) Telephone Co. Class B ADR 14,600 301 InterVoice, Inc. (a) 220,000 4,812 Microcom, Inc. (a) 100,000 2,487 Network General Corp. (a) 226,600 9,064 Octel Communications Corp. (a) 220,100 8,089 P-COM, Inc. 20,000 280 3Com Corp. (a) 189,600 8,698 U.S. Robotics Corp. 36,902 3,257 Westell Technologies, Inc. Class A (a) 1,400 33 95,029 COMPUTER SERVICES & SOFTWARE - 11.2% American Business Information, Inc. (a) 157,500 2,441 American Management Systems, Inc. (a) 375,000 8,016 Arbor Software Corp. 700 29 Ascend Communications, Inc. (a) 46,400 1,804 BMC Software, Inc. (a) 100,000 5,525 Baan Co. NV (a) 60,000 2,602 Bisys Group, Inc. (The) (a) 121,075 3,723 Black Box Corp. (a) 107,500 1,854 Boole & Babbage, Inc. (a) 135,450 3,014 Broadway & Seymour, Inc. (a) 17,700 230 Broderbund Software, Inc. (a) 289,200 14,026 CBT Group PLC sponsored ADR 33,300 1,807 C.I.S. Technologies, Inc. (a) 200,000 487 Cognos, Inc. (a) 53,400 2,100 CompUSA, Inc. (a) 429,800 15,258 Computer Management Sciences, Inc. (a) 1,100 19 Computron Software, Inc. 1,500 23 Cooper & Chyan Technology, Inc. 2,000 27 DST Systems, Inc. 111,000 3,372 Data Broadcasting Corp. (a) 190,000 2,209 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED Datastream Systems, Inc. 53,000 $ 1,020 Davidson & Associates, Inc. (a) 50,000 925 ECI Telecom Ltd. 300,000 6,450 Edmark Corp. (a) 44,300 1,584 Electronic Arts, Inc. (a) 135,000 3,240 Enterprise Systems, Inc. (a) 1,100 32 FTP Software, Inc. (a) 77,600 892 Firefox Communications, Inc. 67,000 779 GMIS, Inc. (a) 57,100 585 HPR, Inc. 900 32 HBO & Co. 80,000 6,720 Hogan Systems, Inc. (a) 245,400 2,515 IDX Systems Corp. 3,000 98 Informix Corp. (a) 148,000 4,939 Maxis, Inc. 70,000 1,873 McAfee Associates, Inc. (a) 153,550 7,676 Mecon, Inc. 1,500 26 Medic Computer Systems, Inc. (a) 110,000 6,243 Mentor Graphics Corp. (a) 130,000 1,836 Mercury Interactive Group Corp. (a) 175,300 3,637 MetaTools, Inc. (a) 2,000 44 MicroAge, Inc. (a) 100,500 961 Microsoft Corp. (a) 453,900 41,987 Open Text Corp. 1,000 17 Oracle Systems Corp. (a) 676,550 32,305 Parametric Technology Corp. (a) 54,980 3,560 Peoplesoft, Inc. (a) 94,000 4,465 Platinum Technology, Inc. (a) 67,500 915 Policy Management Systems Corp. (a) 56,300 2,674 Reuters Holdings PLC ADR Class B 100,000 5,613 SPSS, Inc. (a) 136,200 2,179 Saville Systems Ireland PLC sponsored ADR 811,400 13,895 Secure Computing Corp. 1,000 39 Shared Medical Systems Corp. 50,000 2,850 Sierra On-Line, Inc. (a) 202,000 5,025 Smith Micro Software, Inc. 1,100 8 Softdesk, Inc. (a) 121,700 1,582 Softkey International, Inc. (a) 30,000 416 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED Softquad International, Inc. 40,000 $ 473 Stratacom, Inc. (a) 71,000 5,325 SunGard Data Systems, Inc. (a) 204,500 6,084 Sybase, Inc. (a) 68,000 2,329 Symantec Corp. (a) 298,400 3,544 Technology Solutions, Inc. (a) 197,500 3,827 Vantive Corp. 800 19 Viewlogic Systems, Inc. (a) 110,000 1,169 Visio Corp. 2,000 54 Visioneer, Inc. 2,000 44 Wind River Systems, Inc. (a) 93,500 2,653 Wonderware Corp. (a) 100,000 1,600 265,324 COMPUTERS & OFFICE EQUIPMENT - 5.3% AST Research, Inc. (a) 246,869 1,944 Adaptec, Inc. (a) 103,000 4,532 Bay Networks, Inc. (a) 340,000 14,450 Canon, Inc. 611,000 11,524 Compaq Computer Corp. (a) 50,000 2,356 Dell Computer Corp. (a) 373,600 10,227 Digital Equipment Corp. (a) 195,200 14,128 Discreet Logic, Inc. 47,000 1,234 Encad, Inc. (a) 185,000 3,376 FileNet Corp. (a) 180,000 9,990 Gateway 2000, Inc. (a) 224,600 5,811 In Focus Systems, Inc. (a) 173,000 6,444 International Business Machines Corp. 30,000 3,262 MICROS Systems, Inc. (a) 100,000 4,875 Peak Technologies Group, Inc. (a) 100,000 2,500 Sandisk Corp. 1,500 29 Spacetec IMC Corp. (a) 4,600 55 Sun Microsystems, Inc. (a) 115,100 5,295 Tech Data Corp. (a) 355,500 4,844 Wang Laboratories, Inc. (a) 1,000,100 18,627 125,503 ELECTRONIC INSTRUMENTS - 0.7% Analogic Corp. 118,500 2,163 Applied Materials, Inc. (a) 110,600 4,092 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED ELECTRONIC INSTRUMENTS - CONTINUED Cognex Corp. (a) 30,000 $ 668 Credence Systems Corp. (a) 98,700 2,430 KLA Instruments Corp. (a) 215,800 6,366 Plasma & Materials Technologies, Inc. 1,600 20 Sensonor AS (a) 200,000 1,596 Wandel & Goltermann Technologies, Inc. (a) 34,700 373 17,708 ELECTRONICS - 6.6% AVX Corp. 105,600 2,772 Allgon AB Class B Free shares 200,000 2,667 Altera Corp. (a) 111,200 7,325 Analog Devices, Inc. (a) 28,200 635 Atmel Corp. (a) 91,900 2,619 Brightpoint, Inc. 105,000 1,864 C-Cube Microsystems, Inc. (a) 37,000 2,220 Cyrix Corp. (a) 100,000 2,575 DH Technology, Inc. (a) 208,100 4,682 Exar Corp. (a) 100,000 1,463 Hitachi Ltd. 361,000 3,640 Integrated Device Technology, Inc. (a) 130,000 1,706 Intel Corp. 1,571,000 86,773 Kemet Corp. (a) 190,000 5,201 Linear Technology Corp. 218,600 9,646 Maxim Integrated Products, Inc. (a) 250,400 8,889 Merix Corp. (a) 50,000 1,481 Microchip Technology, Inc. (a) 32,650 1,086 Molex, Inc. 210,937 6,803 Robinson Nugent, Inc. (b) 281,500 1,654 Sanmina Corp. (a) 8,700 459 Speedfam International, Inc. 12,000 156 Tegal Corp. 8,500 79 Zycon Corp. 6,500 76 156,471 PHOTOGRAPHIC EQUIPMENT - 0.2% Fuji Photo Film Co. Ltd. 188,000 5,301 TOTAL TECHNOLOGY 665,336 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - 3.0% AIR TRANSPORTATION - 0.7% Atlantic Southeast Airlines, Inc. 100,000 $ 1,844 Atlas Air, Inc. 7,300 157 Midwest Express Holdings, Inc. 2,000 53 Northwest Airlines Corp. Class A (a) 153,000 6,904 SkyWest, Inc. 140,000 1,820 Trans World Airlines, Inc. 400,000 4,000 Valujet, Inc. (a) 103,100 2,294 17,072 RAILROADS - 0.7% Wisconsin Central Transportation Corp. (a) 235,600 17,670 TRUCKING & FREIGHT - 1.6% Air Express International Corp. 82,900 1,782 American Freightways Corp. (a) 175,000 1,772 Arkansas Best Corp. 95,600 609 Arnold Industries, Inc. 92,500 1,347 Caliber System, Inc. 122,600 4,659 Expeditors International of Washington, Inc. 81,500 1,936 Harper Group 201,000 3,492 Hunt (J.B.) Transport Services, Inc. 210,000 3,281 Knight Transportation, Inc. (a) 75,000 1,125 Landair Services, Inc. (a) 219,100 2,848 Landstar System, Inc. (a) 150,300 3,758 M.S. Carriers, Inc. (a) 100,000 1,600 Mark VII, Inc. (a) 160,900 2,635 Roadway Express, Inc. 75,100 826 TNT Freightways Corp. 209,300 3,872 Transport Corp. of America, Inc. (a) 100,000 1,038 Werner Enterprises, Inc. 40,000 860 37,440 TOTAL TRANSPORTATION 72,182 UTILITIES - 5.7% CELLULAR - 1.6% A Plus Network, Inc. 29,200 310 Arch Communications Group, Inc. (a) 102,000 2,218 Cellular Communications, Inc. Series A (redeemable) (a) 146,400 7,228 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED CELLULAR - CONTINUED International Cabletel, Inc. (a) 109,200 $ 2,525 Metrocall, Inc. 100,000 2,000 Mobile Telecommunications Technologies, Inc. (a) 358,600 6,096 Nextel Communications, Inc. Class A (a) 50,000 688 Paging Network, Inc. (a) 250,000 6,375 Palmer Wireless, Inc. (a) 149,100 2,535 Rogers Cantel Mobile Communications, Inc. Class B (non-vtg.) (a) 63,800 1,487 Vanguard Cellular Systems, Inc. Class A (a) 276,700 5,811 37,273 TELEPHONE SERVICES - 4.1% AT&T Corp. 130,000 8,694 Frontier Corp. 100,000 2,975 Intermedia Communications of Florida, Inc. (a) 150,000 2,400 LCI International, Inc. (a) 255,400 6,066 MCI Communications Corp. 1,112,400 31,842 MFS Communications, Inc. (a) 211,200 12,778 Tel-Save Holdings, Inc. 2,000 34 Transaction Network Services, Inc. (a) 100,000 2,700 U.S. Long Distance Corp. (a) 399,200 5,738 WorldCom, Inc. (a) 701,087 25,677 98,904 TOTAL UTILITIES 136,177 TOTAL COMMON STOCKS (Cost $1,504,476) 1,929,271 NONCONVERTIBLE BONDS - 0.2% MOODY'S PRINCIPAL RATINGS AMOUNT (000S) UTILITIES - 0.2% CELLULAR - 0.2% Nextel Communications, Inc. 0%, 8/15/04 (c) (Cost $3,765) B3 $ 7,125 3,848 U.S. TREASURY OBLIGATIONS - 2.7% MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (B) AMOUNT (000S) (000S) 6 7/8%, 8/15/25 Aaa $ 45,000 $ 50,224 6 1/2% 8/15/05 Aaa 14,300 15,220 TOTAL U.S. TREASURY OBLIGATIONS (Cost $64,458) 65,444 REPURCHASE AGREEMENTS - 15.9% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88% dated 1/31/96 due 2/1/96 $ 377,174 377,112 PURCHASED OPTIONS - 0.1% AMOUNTS IN THOUSANDS EXPIRATION DATE/ UNDERLYING FACE STRIKE PRICE AMOUNT AT VALUE 3,800 Bank of America OTC Put Options on Japanese Yen July 96/100 $ 3,550 223 34,500 Bank of America OTC Put Options on Japanese Yen July 96/99.66 32,121 2,103 1,900 J. Aron and Co. OTC Put Options on Japanese Yen June 96/99.56 1,767 118 TOTAL PURCHASED OPTIONS (Cost $2,110) 2,444 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,951,921) $ 2,378,119 LEGEND (1.) Non-income producing (2.) Affiliated company (see Note 6 of Notes to Financial Statements). (3.) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. (4.) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $4,125,000 or 0.2% of net assets. INCOME TAX INFORMATION At January 31, 1996, the aggregate cost of investment securities for income tax purposes was $1,954,892,000. Net unrealized appreciation aggregated $423,227,000, of which $500,285,000 related to appreciated investment securities and $77,058,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER SHARE AMOUNTS) JANUARY 31, 1996 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 2,378,119 agreements of $377,112) (cost $1,951,921) - See accompanying schedule Receivable for investments sold 13,457 Receivable for fund shares sold 5,842 Dividends receivable 550 Interest receivable 1,848 Other receivables 982 TOTAL ASSETS 2,400,798 LIABILITIES Payable for investments purchased $ 26,118 Payable for fund shares redeemed 6,684 Accrued management fee 1,006 Other payables and accrued expenses 619 TOTAL LIABILITIES 34,427 NET ASSETS $ 2,366,371 Net Assets consist of: Paid in capital $ 1,860,090 Undistributed net investment income 1,847 Accumulated undistributed net realized gain (loss) on 78,238 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 426,196 investments and assets and liabilities in foreign currencies NET ASSETS, for 78,208 shares outstanding $ 2,366,371 NET ASSET VALUE and redemption price per share $30.26 ($2,366,371 (divided by) 78,208 shares) Maximum offering price per share (100/97.00 of $30.26) $31.20
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1996 (UNAUDITED) INVESTMENT INCOME $ 5,866 Dividends (including $17 received from affiliated issuers) Interest 6,479 TOTAL INCOME 12,345 EXPENSES Management fee $ 7,395 Basic fee Performance adjustment (1,448) Transfer agent fees 2,590 Accounting fees and expenses 382 Non-interested trustees' compensation 7 Custodian fees and expenses 56 Registration fees 91 Audit 24 Legal 7 Total expenses before reductions 9,104 Expense reductions (85) 9,019 NET INVESTMENT INCOME 3,326 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized loss of $871 168,539 on sale of investments in affiliated issuers) Foreign currency transactions (6) 168,533 Change in net unrealized appreciation (depreciation) on: Investment securities (104,791) Assets and liabilities in foreign currencies 333 (104,458) NET GAIN (LOSS) 64,075 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 67,401 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JANUARY JULY 31, 31,1996 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 3,326 $ 5,210 Net investment income Net realized gain (loss) 168,533 60,211 Change in net unrealized appreciation (depreciation) (104,458) 493,273 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 67,401 558,694 FROM OPERATIONS Distributions to shareholders (1,479) (5,090) From net investment income From net realized gain (130,433) (6,456) TOTAL DISTRIBUTIONS (131,912) (11,546) Share transactions 984,356 1,283,245 Net proceeds from sales of shares Reinvestment of distributions 129,010 11,034 Cost of shares redeemed (792,562) (961,208) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 320,804 333,071 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 256,293 880,219 NET ASSETS Beginning of period 2,110,078 1,229,859 End of period (including undistributed net investment $ 2,366,371 $ 2,110,078 income of $1,847 and $0, respectively) OTHER INFORMATION Shares Sold 31,818 50,478 Issued in reinvestment of distributions 4,239 495 Redeemed (25,712) (37,963) Net increase (decrease) 10,345 13,010
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED YEARS ENDED JULY 31, JANUARY 31, 1996 (UNAUDITED) 1995 1994 D 1993 1992 1991
SELECTED PER-SHARE DATA Net asset value, $ 31.09 $ 22.42 $ 25.90 $ 24.65 $ 24.28 $ 20.42 beginning of period Income from Investment Operations Net investment .04 .09 .12 .06 .08 .19 income Net realized and .95 8.79 (.08) 3.68 2.92 4.30 unrealized gain (loss) Total from investment .99 8.88 .04 3.74 3.00 4.49 operations Less Distributions (.02) (.09) (.12) (.25) (.12) (.05) From net investment income From net realized gain (1.80) (.12) (3.40) (2.24) (2.51) (.58) Total distributions (1.82) (.21) (3.52) (2.49) (2.63) (.63) Net asset value, $ 30.26 $ 31.09 $ 22.42 $ 25.90 $ 24.65 $ 24.28 end of period TOTAL RETURN B, C 3.22% 39.98% (.36)% 16.67 13.30 23.03 % % % RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 2,366 $ 2,110 $ 1,230 $ 1,327 $ 1,037 $ 864 period (in millions) Ratio of expenses to .81% A .82% .89% 1.08 1.17 1.29 average net assets % % % Ratio of expenses to .80% A .81% .88% 1.08 1.17 1.29 average net assets , E E E % % % after expense reductions Ratio of net investment .29% A .35% .48% .53 .59 1.00 income to average % % % net assets Portfolio turnover rate 123% A 62% 222% 213 245 198 % % %
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). D 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. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1996 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity OTC Portfolio (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities (including restricted securities) for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts and foreign currency options, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income, which includes accretion 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying U.S. Treasury or Federal Agency securities, the market value of which is required to be at least equal to the repurchase price. For term repurchase agreement transactions, the underlying securities are marked-to-market daily and maintained at a value at least equal to the repurchase price. 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. 2. OPERATING POLICIES - CONTINUED FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the stock and bond markets and to fluctuations in interest rates and currency values. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. Written options involve, to varying degrees, risk of loss in excess of the the option value reflected in the Statement of Assets and Liabilities. The underlying face amount at value is shown in the schedule of investments under the caption "Purchased Options." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $1,281,455,000 and $1,252,729,000, respectively, of which U.S. government and government agency obligations aggregated $64,458,000 and $0, 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 .35%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annualized rate of .53% of average net assets after the performance adjustment. SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an affiliate of FMR and the general distributor of the fund, received sales charges of $472,000 on sales of shares of the fund. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .23% of average net assets. ACCOUNTING FEES. FSC maintains the funds' 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 $570,000 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 $33,000 under this arrangement. In addition, the fund has entered into an arrangement with its 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 transfer agent fees were reduced by $52,000 under this arrangement. 6. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Robinson Nugent, Inc. $ - $ - $ 17 $ 1,654 Telor Ophthalmic Pharmaceuticals, Inc. - 918 - - TOTALS $ - $ 918 $ 17 $ 1,654 TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29155 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI 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 Abigail P. Johnson, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Robert H. Morrison, Manager, Security Transactions John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Export Fund Fidelity Fifty Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (REGISTERED TRADEMARK) DIVIDEND GROWTH FUND SEMIANNUAL REPORT JANUARY 31, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 21 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 25 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although the markets were fairly positive in 1995, no one can predict what lies ahead for investors. The previous year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells investments that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1996 PAST 6 PAST 1 LIFE OF MONTHS YEAR FUND Dividend Growth 8.94% 40.81% 79.28% S&P 500(registered trademark) 14.54% 38.66% 58.21% Growth Funds Average 8.29% 32.65% 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 returns to the performance of the Standard & Poor's Composite Index of 500 Stocks - a common proxy for the U.S. stock market. 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 620 growth funds with similar objectives tracked by Lipper Analytical Services over the past six months. Both benchmarks include reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1996 PAST 1 LIFE OF YEAR FUND Dividend Growth 40.81% 23.49% S&P 500(registered trademark) 38.66% 18.03% Growth Funds Average 32.65% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Fidelity Standard 04/27/93 10000 10000.00 04/30/93 10150 10155.08 05/31/93 10480 10427.23 06/30/93 10700 10457.47 07/31/93 10800 10415.64 08/31/93 11550 10810.40 09/30/93 11820 10727.16 10/31/93 12080 10949.21 11/30/93 11680 10845.19 12/31/93 12171.52 10976.42 01/31/94 12493.15 11349.62 02/28/94 12302.18 11042.04 03/31/94 11715.49 10560.61 04/30/94 11786.37 10695.78 05/31/94 11604.11 10871.20 06/30/94 11310.46 10604.85 07/31/94 11826.87 10952.69 08/31/94 12616.68 11401.75 09/30/94 12485.05 11122.41 10/31/94 13041.96 11372.66 11/30/94 12474.92 10958.47 12/31/94 12691.18 11120.98 01/31/95 12732.22 11409.35 02/28/95 13142.6 11853.97 03/31/95 13768.44 12203.78 04/30/95 14404.54 12563.19 05/31/95 14907.26 13065.34 06/30/95 15728.03 13368.84 07/31/95 16456.47 13812.15 08/31/95 16528.28 13846.82 09/30/95 16956.49 14431.16 10/31/95 16359.88 14379.64 11/30/95 17176.3 15010.91 12/31/95 17454.52 15300.02 01/31/96 17928.35 15820.83 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Dividend Growth Fund on April 27, 1993, when the fund started. As the chart shows, by January 31, 1996, the value of your investment would have grown to $17,928 - a 79.28% increase on your initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends reinvested, the same $10,000 investment would have grown to $15,821 - a 58.21% 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 Steve Wymer, Portfolio Manager of Fidelity Dividend Growth Fund Q. HOW HAS THE FUND PERFORMED, STEVE? A. The fund had a total return of 8.94% for the six months ended January 31, 1996. That was slightly better than the growth funds average, which was 8.29% for the same period, according to Lipper Analytical Services. For the 12 months ended January 31, 1996, the fund had a total return of 40.81%, compared to 32.65% for the Lipper average. Overall, I was pleased with the fund's performance. Most growth funds have underperformed because the market's advance has been concentrated in a few industries and among larger-capitalization companies. Q. WHAT HAS THE INVESTING ENVIRONMENT BEEN LIKE OVER THE PAST SIX MONTHS? A. The stock market saw a strong rally throughout 1995, one that continued through the end of the period. During the past six months, the market initially was led by the technology sector, with strength throughout the period from the finance sector, as well as large-cap and blue chip stocks - with many growth funds underperforming indexes such as the Standard & Poor's Composite Index of 500 Stocks. Q. LET'S DISCUSS TECHNOLOGY AND THE FUND'S INVESTMENTS IN THAT SECTOR, WHICH YOU'VE REDUCED OVER THE PAST SIX MONTHS FROM 21.9% TO 6.1% OF THE FUND . . . A. Although technology was one of the best performing sectors for the 12-month period, it faltered over the past six months. Last summer, technology was the place to be, driven largely by the strong performance of Intel's Pentium microchip, the Microsoft Windows 95 launch and the strong performance of Internet-related stocks. During the period, memory chip companies encountered problems with overcapacity, or too much supply. There were enough components, and shortages were ebbing. As a result, concerns arose as to whether these companies could meet earnings estimates, and this anxiety had a ripple effect throughout the technology sector. Even though the fund benefited from a strong weighting in technology early in the period, it suffered a bit, relatively speaking, because it didn't have as much invested there as other funds in its category. In the second half of the six-month period, though, the fund benefited relative to the market and its competition from my reduction in investments in the technology sector. Q. YOU INCREASED INVESTMENTS IN FINANCE AND NONDURABLES . . . A. Yes. Financial stocks were appealing as interest rates declined and there were increasing signs that the economy was slowing. Most of the strength in the nondurables sector was in large-cap, blue chip stocks. Investors anticipated potential earnings disappointments in 1996, so they shifted much of their focus to "safe" stocks - those whose earnings growth generally remains steady regardless of the economic backdrop, such as Philip Morris, the fund's largest holding at the end of the period. While the fund did increase investments in these sectors, it would have benefited from even more exposure. Q. WHAT KIND OF A STOCK-PICKING STRATEGY DID YOU PURSUE? A. As a rule, I don't focus on sector rotation or investing in a particular group of stocks. I tend to pick stocks one by one. If there's one theme I'm attracted to, it's companies that are attempting to improve earnings results through self-help measures, regardless of how the economy is doing. This can include a company breaking itself into two parts, selling off a division that isn't performing well, undergoing a restructuring or making a valuable acquisition. These are the kinds of companies that are taking positive action to enhance shareholder value. Q. WHAT ARE SOME EXAMPLES OF STOCKS THAT HELPED THE FUND BECAUSE OF THESE KINDS OF MOVES? A. Sallie Mae - the Student Loan Marketing Association - redeployed excess capital to buy back stock and cut expenses. Dole Food spun off its real estate business into a separate company, which allowed management to focus exclusively on the fruit business to drive the company's earnings and share price. Baxter International also started the process of breaking into two divisions - medical and distribution - with management doing an excellent job cutting costs, repurchasing shares and focusing on core businesses. Ultramar, an oil refiner and marketer, started a major upgrade program aiming to improve refining results regardless of industry conditions. Q. WHAT WERE THE DISAPPOINTMENTS DURING THE PAST SIX MONTHS? A. BW/IP is a company that makes pumps and valves and one of its key indicators is quotes to customers. The quotes have been high but haven't translated into orders yet. Some of this has been tied to the international power market, which has been a lot softer than expected. Another disappointment was Apple Computer, a stock I've since sold. Apple had a number of problems, which started with trouble executing the high number of backlog orders during new product cycles. Q. WHAT DO YOU SEE GOING FORWARD? A. There are a lot of opportunities in the market. The key is picking the right stocks. Poor retail sales at the end of the year indicate that perhaps the economy is still weakening. However, it's important to keep in mind that this is an election year; in the past, that has been a positive backdrop for the stock market. It's not time to give up hope on the economy. But I imagine the economy will continue to look difficult to most companies. Given that, I think there will be many companies stepping up self-help measures, creating fertile ground for me to find new investment ideas. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of companies that have the potential to increase their current dividend or begin paying a dividend START DATE: April 27, 1993 SIZE: as of January 31, 1996, more than $583 million MANAGER: Steve Wymer, since May 1995; assistant manager, Fidelity OTC Portfolio, January 1995-May 1995; manager, Fidelity Select Chemicals Portfolio, 1993-1994; assistant, Fidelity Magellan Fund, 1992- 1994; manager, Fidelity Select Automotive Portfolio, 1990- 1993; joined Fidelity in 1989 (checkmark) STEVE WYMER ON INVESTING FOR GROWTH AND DIVIDENDS: "I primarily focus on companies that are paying a dividend already. More importantly, however, I look for companies that are going to grow in the future, either increasing their existing dividend, or starting to pay a dividend and seeking to increase it in the future. Typically, you won't see the fund investing exclusively in start-up companies - such as some biotechnology stocks - or in 5% to 7% yielding utilities stocks. I'm looking more for growth stocks that pay a dividend or show the ability to pay a dividend in the near future." THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Philip Morris Companies, Inc. 2.8 2.7 Federal National Mortgage 2.7 1.8 Association Stanley Works 1.9 0.0 Student Loan Marketing Association 1.5 0.6 PepsiCo, Inc. 1.5 1.5 American Express Co. 1.5 1.4 Dole Food, Inc. 1.3 0.0 Ultramar Corp. 1.3 0.0 Smith's Food & Drug Center, Inc. 1.3 0.1 Borg Warner Security Corp. 1.2 0.8 TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Nondurables 10.2 9.2 Finance 9.3 7.7 Energy 8.6 3.7 Basic Industries 8.3 3.8 Industrial Machinery & Equipment 8.0 10.2 ASSET ALLOCATION AS OF JANUARY 31, 1996 * AS OF JULY 31, 1995 ** Row: 1, Col: 1, Value: 8.0 Row: 1, Col: 2, Value: 42.0 Row: 1, Col: 3, Value: 50.0 Row: 1, Col: 1, Value: 8.0 Row: 1, Col: 2, Value: 42.0 Row: 1, Col: 3, Value: 50.0 Stocks 92.1% Short-term Investments 7.9% FOREIGN INVESTMENTS 5.9% Stocks 92.0% Short-term Investments 8.0% FOREIGN INVESTMENTS 9.8% * ** INVESTMENTS JANUARY 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.1% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 1.8% AEROSPACE & DEFENSE - 1.4% Aviall, Inc. 100,000 $ 850,000 Boeing Co. 55,000 4,269,375 Northrop Grumman Corp. 25,000 1,600,000 Rohr Industries, Inc. (a) 91,400 1,668,050 8,387,425 DEFENSE ELECTRONICS - 0.4% Loral Corp. 50,000 2,312,500 TOTAL AEROSPACE & DEFENSE 10,699,925 BASIC INDUSTRIES - 8.3% CHEMICALS & PLASTICS - 5.1% Cytec Industries, Inc. (a) 20,000 1,525,000 Dow Chemical Co. 25,000 1,862,500 du Pont (E.I.) de Nemours & Co. 60,000 4,612,500 First Mississippi Corp. 60,500 1,489,813 Methanex Corp. 150,000 1,174,136 Minnesota Mining & Manufacturing Co. 95,000 6,127,500 Nalco Chemical Co. 60,000 1,837,500 Quaker State Corp. 155,200 2,172,800 Raychem Corp. 40,000 2,675,000 Union Carbide Corp. 150,000 6,318,750 Uniroyal Chemical Corp. 50,000 456,250 30,251,749 IRON & STEEL - 1.5% Birmingham Steel Corp. 125,000 2,062,500 Chaparral Steel Co. 60,000 945,000 Huntco, Inc. Class A 42,200 654,100 Nucor Corp. 35,000 2,034,375 Quanex Corp. 149,300 3,079,313 8,775,288 METALS & MINING - 1.1% Aluminum Co. of America 50,400 2,797,200 Oregon Metallurgical Corp. (a) 110,000 1,526,250 RMI Titanium Co. (a) 152,800 1,986,400 6,309,850 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) BASIC INDUSTRIES - CONTINUED PACKAGING & CONTAINERS - 0.4% Corning, Inc. 35,000 $ 1,093,750 Crown Cork & Seal Co., Inc. (a) 30,000 1,233,750 2,327,500 PAPER & FOREST PRODUCTS - 0.2% Mosinee Paper Corp. 45,400 1,186,075 TOTAL BASIC INDUSTRIES 48,850,462 CONGLOMERATES - 0.9% Dial Corp. (The) 70,000 2,205,000 Figgie International Holdings, Inc. Class A (a) 77,400 861,075 Hanson PLC sponsored ADR 50,000 775,000 ITT Industries, Inc. 50,000 1,300,000 5,141,075 CONSTRUCTION & REAL ESTATE - 1.4% BUILDING MATERIALS - 0.7% Fastenal Co. 50,000 1,693,750 Sherwin-Williams Co. 60,000 2,527,500 4,221,250 CONSTRUCTION - 0.5% Castle & Cooke, Inc. (a) 70,000 980,000 McDermott (J. Ray) SA 115,600 1,921,850 2,901,850 REAL ESTATE INVESTMENT TRUSTS - 0.2% Beacon Properties Corp. 50,000 1,243,750 TOTAL CONSTRUCTION & REAL ESTATE 8,366,850 DURABLES - 4.5% AUTOS, TIRES, & ACCESSORIES - 0.7% Daimler Benz AG sponsored ADR 25,000 1,384,375 SPX Corp. 185,000 2,728,750 4,113,125 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) DURABLES - CONTINUED CONSUMER ELECTRONICS - 0.4% Maytag Co. 75,000 $ 1,471,875 Newell Co. 35,000 923,125 2,395,000 HOME FURNISHINGS - 0.8% Haverty Furniture Companies, Inc. 68,100 842,738 Heilig-Meyers Co. 54,800 849,400 Maxim Group, Inc. (a) 81,100 760,313 Miller (Herman), Inc. 78,800 2,521,600 4,974,051 TEXTILES & APPAREL - 2.6% Adidas AG (a) 60,000 3,423,968 Fila Holding Spa sponsored ADR 55,000 2,667,500 NIKE, Inc. Class B 60,000 4,185,000 Springs Industries, Inc. Class A 34,900 1,396,000 Westpoint Stevens, Inc. Class A (a) 95,000 1,828,750 Wolverine World Wide, Inc. 70,000 1,776,250 15,277,468 TOTAL DURABLES 26,759,644 ENERGY - 8.6% COAL - 0.2% MAPCO, Inc. 25,000 1,409,375 ENERGY SERVICES - 0.9% Baker Hughes, Inc. 83,000 2,147,625 Dresser Industries, Inc. 39,500 1,027,000 Weatherford Enterra, Inc. (a) 74,500 2,216,375 5,391,000 OIL & GAS - 7.5% Barrett Resources Corp. (a) 59,500 1,517,250 Belden & Blake Corp. (a) 7,900 128,375 British Petroleum PLC ADR 20,546 2,005,803 Cairn Energy USA, Inc. (a) 90,000 1,260,000 Canada Occidental Petroleum Ltd. 79,700 2,546,210 Chesapeake Energy Corp. (a) 37,650 1,741,313 Cooper Cameron Corp. 35,076 1,306,581 Devon Energy Corp. 30,000 738,750 Giant Industries, Inc. 50,000 600,000 Global Natural Resources, Inc. (a) 90,000 990,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ENERGY - CONTINUED OIL & GAS - CONTINUED Louisiana Land & Exploration Co. 44,800 $ 1,926,400 Mobil Corp. 30,000 3,322,500 Pogo Producing Co. 30,000 866,250 Royal Dutch Petroleum Co. 20,000 2,780,000 Stone Energy Corp. (a) 70,400 994,400 Sun Company, Inc. 250,000 6,812,500 Tosco Corp. 61,300 2,566,938 Ultramar Corp. 275,000 7,768,750 Union Pacific Resources Group, Inc. 116,500 3,029,000 Vintage Petroleum, Inc. 75,300 1,647,188 44,548,208 TOTAL ENERGY 51,348,583 FINANCE - 9.3% BANKS - 0.8% Banc One Corp. 118,900 4,503,338 CREDIT & OTHER FINANCE - 2.0% American Express Co. 190,892 8,781,032 Equitable Companies, Inc. 59,500 1,465,188 Triad Guaranty, Inc. (a) 43,000 1,290,000 11,536,220 FEDERAL SPONSORED CREDIT - 4.3% Federal National Mortgage Association 470,000 16,215,000 Student Loan Marketing Association 124,000 9,129,500 25,344,500 INSURANCE - 1.3% Aetna Life & Casualty Co. 35,000 2,607,500 Allmerica Financial Corp. 53,400 1,421,775 Philadelphia Consolidated Holding Corp. 25,000 493,750 UNUM Corp. 35,100 2,158,650 US Facilities Corp. 55,000 1,086,250 7,767,925 SECURITIES INDUSTRY - 0.9% Franklin Resources, Inc. 40,500 2,171,813 Lehman Brothers Holdings, Inc. 90,400 2,316,500 Schwab (Charles) Corp. 45,000 1,125,000 5,613,313 TOTAL FINANCE 54,765,296 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) HEALTH - 7.5% DRUGS & PHARMACEUTICALS - 2.9% Bristol-Myers Squibb Co. 20,000 $ 1,770,000 ICN Pharmaceuticals, Inc. 9,900 196,338 Lilly (Eli) & Co. 20,000 1,150,000 Pharmacia & Upjohn, Inc. 170,500 7,139,688 Rexall Sundown, Inc. (a) 69,000 1,518,000 Schering-Plough Corp. 30,000 1,623,750 Sepracor, Inc. (a) 135,000 2,514,375 SmithKline Beecham PLC ADR 30,000 1,687,500 17,599,651 MEDICAL EQUIPMENT & SUPPLIES - 3.8% Abbott Laboratories 30,000 1,267,500 Baxter International, Inc. 151,400 6,888,700 Beckman Instruments, Inc. 30,000 1,050,000 Becton, Dickinson & Co. 34,200 2,954,025 Hillenbrand Industries, Inc. 50,000 1,662,500 McKesson Corp. 25,000 1,250,000 Medtronic, Inc. 30,000 1,713,750 Oakley, Inc. 62,700 2,304,225 St. Jude Medical, Inc. (a) 30,000 1,323,750 Steris Corp. 25,000 818,750 Sybron Corp. (a) 46,300 1,122,775 22,355,975 MEDICAL FACILITIES MANAGEMENT - 0.8% United HealthCare Corp. 40,000 2,515,000 U.S. Healthcare, Inc. 44,100 2,138,850 4,653,850 TOTAL HEALTH 44,609,476 INDUSTRIAL MACHINERY & EQUIPMENT - 8.0% ELECTRICAL EQUIPMENT - 2.4% Alcatel Alsthom sponsored ADR 78,500 1,442,438 Asea AB, Series B Free shares 15,000 1,424,906 California Amplifier, Inc. (a) 103,900 3,623,513 General Signal Corp. 85,000 2,868,750 Honeywell, Inc. 71,600 3,642,650 Pacific Scientific Co. 35,000 822,500 Roper Industries, Inc. 10,000 395,625 14,220,382 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED INDUSTRIAL MACHINERY & EQUIPMENT - 5.1% AGCO Corp. 70,000 $ 1,706,250 BW/IP Holdings, Inc. Class A 474,100 6,874,450 Caterpillar, Inc. 30,000 1,931,250 Deere & Co. 65,000 2,437,500 Ingersoll-Rand Co. 55,500 2,226,938 Stanley Works 221,000 11,381,500 Stewart & Stevenson Services, Inc. 60,100 1,487,475 Timken Co. 55,000 2,275,625 30,320,988 POLLUTION CONTROL - 0.5% WMX Technologies, Inc. 90,000 2,688,750 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 47,230,120 MEDIA & LEISURE - 5.5% BROADCASTING - 0.7% CAI Wireless Systems, Inc. (a) 56,000 560,000 Grupo Televisa SA de CV sponsored ADR 110,000 3,093,750 Heartland Wireless Communications, Inc. (a) 6,700 190,113 U.S. Satellite Broadcasting Co., Inc. Class A 1,000 27,000 3,870,863 ENTERTAINMENT - 0.2% MGM Grand, Inc. (a) 50,000 1,475,000 LEISURE DURABLES & TOYS - 0.9% Brunswick Corp. 155,000 3,506,875 Callaway Golf Co. 80,000 1,730,000 5,236,875 LODGING & GAMING - 0.9% Hilton Hotels Corp. 30,000 2,332,500 Mirage Resorts, Inc. (a) 25,000 975,000 Showboat, Inc. 76,800 1,804,800 5,112,300 PUBLISHING - 2.1% Dun & Bradstreet Corp. 80,000 5,200,000 Gannett Co., Inc. 25,000 1,587,500 Knight-Ridder, Inc. 25,000 1,659,375 Meredith Corp. 100 4,550 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDIA & LEISURE - CONTINUED PUBLISHING - CONTINUED New York Times Co. (The) Class A 30,000 $ 870,000 Scripps (E.W.) Co. Class A 29,800 1,210,625 Times Mirror Co. Class A 60,000 1,860,000 12,392,050 RESTAURANTS - 0.7% Cracker Barrel Old Country Store, Inc. 17,000 333,625 Darden Restaurants, Inc. 254,600 2,927,900 Longhorn Steaks, Inc. (a) 55,000 1,017,500 4,279,025 TOTAL MEDIA & LEISURE 32,366,113 NONDURABLES - 10.2% BEVERAGES - 1.5% PepsiCo, Inc. 150,000 8,943,750 FOODS - 3.4% Chiquita Brands International, Inc. 140,000 1,907,500 Dole Food, Inc. 210,000 7,822,500 Flowers Industries, Inc. 205,200 2,718,900 General Mills, Inc. 70,000 4,025,000 Interstate Bakeries Corp. 60,000 1,267,500 Nabisco Holdings Class A 20,000 695,000 Ralston Purina Co. 25,000 1,609,375 20,045,775 HOUSEHOLD PRODUCTS - 1.4% Clorox Co. 20,000 1,652,500 Estee Lauder Companies, Inc. (a) 26,000 958,750 Premark International, Inc. 75,000 3,881,250 Procter & Gamble Co. 25,000 2,096,875 8,589,375 TOBACCO - 3.9% Philip Morris Companies, Inc. 175,000 16,275,000 RJR Nabisco Holdings Corp. 204,440 6,644,300 22,919,300 TOTAL NONDURABLES 60,498,200 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PRECIOUS METALS - 1.9% Ashanti Goldfields Ltd. GDR 100,000 $ 2,350,000 Barrick Gold Corp. 50,000 1,465,395 Firstmiss Gold, Inc. (a) 98,692 2,664,684 Newmont Mining Corp. 90,000 5,040,000 11,520,079 RETAIL & WHOLESALE - 6.0% APPAREL STORES - 1.1% Gap, Inc. 50,000 2,356,250 Gymboree Corp. (a) 20,800 348,400 Ross Stores, Inc. 80,000 1,600,000 TJX Companies, Inc. 127,300 2,402,788 6,707,438 GENERAL MERCHANDISE STORES - 2.1% Dollar General Corp. 100,800 2,507,400 Proffitts, Inc. (a) 86,400 1,890,000 Sears, Roebuck & Co. 95,000 3,942,500 Strawbridge & Clothier Class A 60,000 1,470,000 Wal-Mart Stores, Inc. 110,000 2,241,250 12,051,150 GROCERY STORES - 1.9% Riser Foods, Inc. Class A 34,700 511,825 Rykoff-Sexton, Inc. 70,000 1,120,000 Smith's Food & Drug Center, Inc. 295,000 7,485,625 Supervalu, Inc. 70,000 2,170,000 11,287,450 RETAIL & WHOLESALE, MISCELLANEOUS - 0.9% Home Depot, Inc. (The) 35,000 1,610,000 Sports Authority, Inc. 50,000 1,000,000 Sunglass Hut International, Inc. (a) 55,000 1,529,688 Tiffany & Co., Inc. 10,000 553,750 Williams-Sonoma, Inc. (a) 55,000 838,750 5,532,188 TOTAL RETAIL & WHOLESALE 35,578,226 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 2.5% LEASING & RENTAL - 0.1% Danka Business Systems PLC sponsored ADR 10,000 $ 368,750 PRINTING - 0.3% Deluxe Corp. 56,900 1,671,438 SERVICES - 2.1% Borg Warner Security Corp. (a) 654,100 7,358,625 Iron Mountain, Inc. 50,000 800,000 Manpower, Inc. 66,100 1,776,438 Western Atlas, Inc. (a) 50,000 2,675,000 12,610,063 TOTAL SERVICES 14,650,251 TECHNOLOGY - 6.1% COMMUNICATIONS EQUIPMENT - 0.1% Dialogic Corp. (a) 20,000 595,000 COMPUTER SERVICES & SOFTWARE - 2.6% Automatic Data Processing, Inc. 50,000 1,993,750 CompuCom Systems, Inc. (a) 255,000 2,135,625 CompUSA, Inc. (a) 140,900 5,001,950 DST Systems, Inc. 97,000 2,946,375 Equifax Inc. 50,000 931,250 Hogan Systems, Inc. (a) 49,600 508,400 Policy Management Systems Corp. (a) 40,000 1,900,000 15,417,350 COMPUTERS & OFFICE EQUIPMENT - 2.9% Compaq Computer Corp. 25,000 1,178,125 Exabyte (a) 100,000 1,350,000 FileNet Corp. (a) 69,600 3,862,800 Pitney Bowes, Inc. 25,000 1,131,250 Safeguard Scientifics, Inc. (a) 66,150 3,067,706 Wang Laboratories, Inc. (a) 361,700 6,736,663 17,326,544 ELECTRONICS - 0.5% Cyrix Corp. (a) 50,000 1,287,500 Intel Corp. 25,000 1,380,859 2,668,359 TOTAL TECHNOLOGY 36,007,253 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TRANSPORTATION - 5.6% AIR TRANSPORTATION - 1.3% Delta Air Lines, Inc. 39,600 $ 2,707,650 Mesa Airlines, Inc. (a) 37,500 302,344 SkyWest, Inc. 122,700 1,595,100 Southwest Airlines Co. 73,500 1,911,000 Valujet, Inc. (a) 50,000 1,112,500 7,628,594 RAILROADS - 1.1% Bombardier, Inc. Class B 136,600 1,976,863 Canadian National Railway Co. (a)(b) 125,000 2,207,194 Railtex, Inc. (a) 107,300 2,226,475 6,410,532 TRUCKING & FREIGHT - 3.2% Airborne Freight Corp. 190,000 5,058,750 Arkansas Best Corp. 120,000 765,000 Caliber System, Inc. 85,000 3,230,000 Consolidated Freightways, Inc. 50,000 1,150,000 Hunt (J.B.) Transport Services, Inc. 100,000 1,562,500 Landstar System, Inc. (a) 56,300 1,407,500 PST Vans, Inc. 40,000 145,000 Pittston Co. Services Group 25,000 625,000 Roadway Express, Inc. 278,450 3,062,950 TNT Freightways Corp. 70,000 1,295,000 Werner Enterprises, Inc. 25,000 537,500 18,839,200 TOTAL TRANSPORTATION 32,878,326 UTILITIES - 4.0% GAS - 0.4% Aquila Gas Pipeline Corp. 120,000 1,530,000 ENSERCH Corp. 70,000 1,023,750 2,553,750 TELEPHONE SERVICES - 3.6% AT&T Corp. 100,000 6,687,500 Ameritech Corp. 35,000 2,104,375 Bell Atlantic Corp. 25,000 1,721,875 Frontier Corp. 128,200 3,813,950 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UTILITIES - CONTINUED TELEPHONE SERVICES - CONTINUED NYNEX Corp. 85,000 $ 4,558,125 SBC Communications, Inc. 25,000 1,415,615 WorldCom, Inc. (a) 20,000 732,500 21,033,940 TOTAL UTILITIES 23,587,690 TOTAL COMMON STOCKS (Cost $478,291,246) 544,857,569 REPURCHASE AGREEMENTS - 7.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88% dated 1/31/96 due 2/1/96 $ 46,552,602 46,545,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $524,836,246) $ 591,402,569 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND (1.) Non-income producing (2.) Purchased on an installment basis. Market value reflects only those payments made through January 31, 1996. The remaining installment aggregating CAD 1,343,750 is due November 26, 1996. INCOME TAX INFORMATION At January 31, 1996, the aggregate cost of investment securities for income tax purposes was $524,975,327. Net unrealized appre- ciation aggregated $66,427,242, of which $77,732,351 related to appreciated investment securities and $11,305,109 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS JANUARY 31, 1996 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 591,402,569 agreements of $46,545,000) (cost $524,836,246) - See accompanying schedule Cash 974 Receivable for investments sold 15,890,992 Receivable for fund shares sold 8,004,226 Dividends receivable 561,306 Other receivables 822 TOTAL ASSETS 615,860,889 LIABILITIES Payable for investments purchased $ 29,112,597 Payable for fund shares redeemed 2,542,121 Accrued management fee 305,045 Other payables and accrued expenses 185,848 TOTAL LIABILITIES 32,145,611 NET ASSETS $ 583,715,278 Net Assets consist of: Paid in capital $ 508,447,292 Undistributed net investment income 191,861 Accumulated undistributed net realized gain (loss) on 8,509,840 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 66,566,285 investments and assets and liabilities in foreign currencies NET ASSETS, for 35,883,563 shares outstanding $ 583,715,278 NET ASSET VALUE, offering price and redemption price per $16.27 share ($583,715,278 (divided by) 35,883,563 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1996 (UNAUDITED) INVESTMENT INCOME $ 3,559,786 Dividends Interest 1,014,021 TOTAL INCOME 4,573,807 EXPENSES Management fee $ 1,528,910 Basic fee Performance adjustment 154,982 Transfer agent fees 573,499 Accounting fees and expenses 149,237 Non-interested trustees' compensation 1,021 Custodian fees and expenses 23,907 Registration fees 103,672 Audit 5,494 Legal 1,146 Miscellaneous 1,316 Total expenses before reductions 2,543,184 Expense reductions (56,353) 2,486,831 NET INVESTMENT INCOME 2,086,976 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 32,829,653 Foreign currency transactions 9 32,829,662 Change in net unrealized appreciation (depreciation) on: Investment securities 8,643,050 Assets and liabilities in foreign currencies (67) 8,642,983 NET GAIN (LOSS) 41,472,645 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 43,559,621 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JANUARY JULY 31, 31,1996 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 2,086,976 $ 1,351,082 Net investment income Net realized gain (loss) 32,829,662 15,507,894 Change in net unrealized appreciation (depreciation) 8,642,983 55,022,479 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 43,559,621 71,881,455 FROM OPERATIONS Distributions to shareholders (2,756,784) (73,869) From net investment income From net realized gain (32,749,690) (1,106,818) TOTAL DISTRIBUTIONS (35,506,474) (1,180,687) Share transactions 381,363,259 687,747,052 Net proceeds from sales of shares Reinvestment of distributions 34,962,660 1,158,767 Cost of shares redeemed (305,516,688) (367,108,944) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 110,809,231 321,796,875 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 118,862,378 392,497,643 NET ASSETS Beginning of period 464,852,900 72,355,257 End of period (including undistributed net investment $ 583,715,278 $ 464,852,900 income of $191,861 and $1,276,016, respectively) OTHER INFORMATION Shares Sold 23,845,452 49,213,225 Issued in reinvestment of distributions 2,199,220 95,766 Redeemed (19,142,920) (26,523,159) Net increase (decrease) 6,901,752 22,785,832
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED JULY APRIL 27, 1993 ENDED JANUARY 31, (COMMENCEME 31, 1996 NT OF OPERATIONS) TO (UNAUDITED) 1995 1994 E JULY 31, 1993
SELECTED PER-SHARE DATA Net asset value, beginning of period $ 16.04 $ 11.68 $ 10.80 $ 10.00 Income from Investment Operations Net investment income .05 .05 .02 (.01) Net realized and unrealized gain 1.34 4.47 1.01 .81 (loss) Total from investment operations 1.39 4.52 1.03 .80 Less Distributions (.09) (.01) (.01) - From net investment income From net realized gain (1.07) (.15) - - In excess of net realized gain - - (.14) - Total distributions (1.16) (.16) (.15) - Net asset value, end of period $ 16.27 $ 16.04 $ 11.68 $ 10.80 TOTAL RETURN B, C 8.94% 39.14% 9.51% 8.00% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 $ 583,715 $ 464,853 $ 72,355 $ 18,457 omitted) Ratio of expenses to average net 1.01% A 1.21% 1.43% 2.50% A assets ,D Ratio of expenses to average net .99% A, 1.19% 1.40% 2.50% A assets after expense reductions F F F Ratio of net investment income to .83% A .78% .13% (.73)% average net assets A Portfolio turnover rate 172% A 162% 291% 90% A
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. E EFFECTIVE AUGUST 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1996 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Dividend Growth Fund (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying U.S. Treasury or Federal Agency securities, the market value of which is required to be at least equal to the repurchase price. For term repurchase agreement transactions, the underlying securities are marked-to-market daily and maintained at a value at least equal to the repurchase price. FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $479,490,638 and $409,245,183, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .30%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annualized rate of .67% of average net assets after the performance adjustment. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an 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 $253,045 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 $52,867 under this arrangement. In addition, the fund has entered into an arrangement with its 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 transfer agent fees were reduced by $3,486 under this arrangement. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios(registered trademark). 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29155 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH 1903 East Ninth Street Cleveland, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 2701 Drexel Drive Houston, TX 1010 Lamar Street Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 215 South State Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Robert H. Morrison, Manager, Security Transactions John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Richard J. Flynn* Phyllis Burke Davis* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Export Fund Fidelity Fifty Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (REGISTERED TRADEMARK) BLUE CHIP GROWTH FUND SEMIANNUAL REPORT JANUARY 31, 1996 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 23 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 27 Notes to the financial statements. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Although the markets were fairly positive in 1995, no one can predict what lies ahead for investors. The previous year, stocks posted below-average returns and bonds had one of the worst years in history. This downturn followed a period in which the investing environment was generally very positive. These market ups and downs are a normal part of investing, and there are some basic principles that are helpful for investors to remember in different types of markets. If you can leave your money invested over the long term, you can avoid the results of the volatility that generally accompanies the stock market in the short term. You also can help to manage some of the risks of investing through diversification. A stock fund is already diversified because it invests in many issues. You can diversify even further by placing some of your money in several different types of stock funds or in other investment categories, such as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, there is no assurance that a money market fund will achieve its goal, and it is important to remember that money market funds are not insured or guaranteed by any agency of the U.S. government. Finally, no matter what your investment horizon or portfolio diversity, it makes good sense to follow a regular investment plan - investing a certain amount of money at the same time each month or quarter - and to review your portfolio periodically. A periodic investment plan will not, of course, assure a profit or protect against a loss. If you have any questions, please call us at 1-800-544-8888. We stand ready to provide the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1996 PAST 6 PAST 1 PAST 5 LIFE OF MONTHS YEAR YEARS FUND Blue Chip Growth 3.62% 33.47% 171.28% 336.83% Blue Chip Growth (incl. 3% sales 0.51% 29.47% 163.14% 323.73% charge) S&P 500(registered trademark) 14.54% 38.66% 113.54% 230.53% Growth Funds Average 8.29% 32.65% 105.08% 205.31% 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 returns to the performance of the Standard & Poor's Composite Index of 500 Stocks - a common proxy for the U.S. stock market. 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 620 growth funds with similar objectives tracked by Lipper Analytical Services over the past six months. Both benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1996 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Blue Chip Growth 33.47% 22.09% 19.98% Blue Chip Growth (incl. 3% sales charge) 29.47% 21.35% 19.53% S&P 500(registered trademark) 38.66% 16.38% 15.92% Growth Funds Average 32.65% 15.14% 14.40% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Blue Chip Growth (3Standard 12/31/87 9700.00 10000.00 01/31/88 9767.90 10389.22 02/29/88 10185.00 10873.35 03/31/88 9816.40 10537.37 04/30/88 9797.00 10654.33 05/31/88 9797.00 10747.03 06/30/88 10359.60 11240.31 07/31/88 10155.90 11197.60 08/31/88 9729.10 10816.88 09/30/88 10165.60 11277.68 10/31/88 10146.20 11591.20 11/30/88 9961.90 11425.45 12/31/88 10272.95 11625.39 01/31/89 11031.75 12476.37 02/28/89 10700.99 12165.71 03/31/89 10953.92 12449.17 04/30/89 11702.99 13095.28 05/31/89 12461.79 13625.64 06/30/89 12024.02 13547.98 07/31/89 13191.40 14771.36 08/31/89 13512.43 15060.88 09/30/89 13846.77 14999.13 10/31/89 13640.69 14651.15 11/30/89 13876.21 14950.03 12/31/89 13995.40 15308.83 01/31/90 12823.32 14281.61 02/28/90 13170.98 14465.84 03/31/90 13826.54 14849.19 04/30/90 13697.42 14477.96 05/31/90 15246.94 15889.56 06/30/90 15594.59 15781.51 07/31/90 15227.08 15731.01 08/31/90 13915.94 14308.92 09/30/90 13258.58 13612.08 10/31/90 13178.88 13553.55 11/30/90 14015.64 14429.11 12/31/90 14485.44 14831.68 01/31/91 15619.78 15478.34 02/28/91 16824.39 16585.04 03/31/91 17667.62 16986.40 04/30/91 17476.89 17027.17 05/31/91 18400.43 17762.74 06/30/91 17476.89 16949.21 07/31/91 19012.77 17739.04 08/31/91 19845.96 18159.45 09/30/91 19534.98 17856.19 10/31/91 19926.88 18095.46 11/30/91 19504.83 17366.22 12/31/91 22424.76 19352.91 01/31/92 21719.26 18992.95 02/29/92 21820.04 19239.86 03/31/92 21225.41 18864.68 04/30/92 21507.61 19419.30 05/31/92 21951.06 19514.46 06/30/92 21316.12 19223.69 07/31/92 22192.95 20009.94 08/31/92 21961.14 19599.74 09/30/92 22252.76 19831.01 10/31/92 22561.69 19900.42 11/30/92 23745.89 20579.03 12/31/92 23808.73 20832.15 01/31/93 23860.87 21007.14 02/28/93 23704.44 21292.83 03/31/93 24851.60 21742.11 04/30/93 25247.89 21215.95 05/31/93 26572.33 21784.54 06/30/93 26822.62 21847.72 07/31/93 26822.62 21760.33 08/31/93 28491.21 22585.04 09/30/93 29084.11 22411.14 10/31/93 29409.21 22875.05 11/30/93 28515.20 22657.74 12/31/93 29642.54 22931.89 01/31/94 30819.90 23711.58 02/28/94 30844.43 23068.99 03/31/94 29875.56 22063.19 04/30/94 30758.58 22345.60 05/31/94 31151.04 22712.06 06/30/94 30071.79 22155.62 07/31/94 30832.17 22882.32 08/31/94 32500.10 23820.50 09/30/94 32403.56 23236.89 10/31/94 33899.49 23759.73 11/30/94 32131.58 22894.40 12/31/94 32562.32 23233.92 01/31/95 31746.69 23836.38 02/28/95 32800.73 24765.28 03/31/95 34181.02 25496.10 04/30/95 35448.38 26246.96 05/31/95 36238.91 27296.05 06/30/95 38246.61 27930.14 07/31/95 40894.26 28856.30 08/31/95 41320.89 28928.73 09/30/95 41775.91 30149.53 10/31/95 40723.95 30041.89 11/30/95 42130.94 31360.73 12/31/95 41802.28 31964.74 01/31/96 42372.87 33052.82 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Blue Chip Growth Fund on December 31, 1987, when the fund started, and paid a 3% sales charge. As the chart shows, by January 31, 1996, the value of your investment would have grown to $42,373 - a 323.73% increase on your initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends reinvested, the same $10,000 investment would have grown to $33,053 - a 230.53% 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 Michael Gordon, Portfolio Manager of Fidelity Blue Chip Growth Fund Q. HOW DID THE FUND PERFORM, MIKE? A. Not as well as I would have liked. For the six-month period ended January 31, 1996, the fund had a total return of 3.62% as compared to the 8.29% return for the growth funds average, as tracked by Lipper Analytical Services. For the same period, the fund's benchmark index - the S&P 500 - returned 14.54%. Q. WHY DID THE FUND UNDERPERFORM IN THE LAST SIX MONTHS? A. In the second half of 1995, as investors began to see more and more signs of the economy slowing, they began to embrace many large-capitalization, consumer-oriented stocks. Investors believed that these companies - such as pharmaceutical firms, telephone companies and beverage companies - would be able to perform well despite an economic slowdown. The fund did not own or had small positions in many of these stocks because I did not believe their high prices accurately reflected their earnings growth potential. Q. DID THE MARKET-WIDE SELL-OFF IN THE TECHNOLOGY SECTOR NEAR THE END OF 1995 - AND THE FUND'S SUBSEQUENT REDUCTION IN ITS TECHNOLOGY HOLDINGS - HURT THE FUND AS WELL? A. Yes, it certainly did. First, let me explain my thinking here. My goal is to buy stocks that have the potential for attractive earnings growth over the long term and that are trading at a discount to the companies' perceived value. I began aggressively buying technology stocks in April and May 1994. Following such a strong technology rally in 1995, I began selling technology stocks when it appeared investors' expectations had gotten too high. Unfortunately, I did not reduce the fund's technology position quickly enough and the fund gave back some previously unrealized profits. Q. SO, WHY DO YOU BELIEVE TECHNOLOGY STOCKS REVERSED COURSE AFTER BEING THE TOP PERFORMING AREA FOR MUCH OF 1995? A. It's hard to generalize. However, I think a big part of the sell-off was because the fundamentals of some of the technology companies began to deteriorate. For example, if profits are down or demand for a company's product is fading, it's often a sign that it is time to sell. That said, there are still many technology companies that are doing well - such as some of the large computer makers and software companies - and many of these companies could lead the technology sector's next rally. Q. IN THE SECOND HALF OF 1995 INVESTORS FAVORED CONSUMER-ORIENTED STOCKS. WHY THEN DID THE FUND HAVE A LARGE POSITION IN CYCLICAL STOCKS? A. As I said before, investors embraced consumer-oriented stocks based on the belief that these companies would be successful through any economic slowdown. Cyclicals - or stocks that are highly sensitive to changes in the economy - are usually favored in an economic growth phase because, as history has shown, people buy more cars and build more houses when the economy is growing. I found that certain cyclical companies' stocks were selling at attractive prices relative to their projected earnings, so I bought them. Q. ON THE OTHER HAND, IT CERTAINLY APPEARS THE FUND'S POSITION IN THE FINANCIAL AREA WAS A BRIGHT SPOT . . . A. Financial companies - banks, brokerage firms and insurance companies - and their stocks tend to perform well in a falling interest rate environment like we saw in 1995. During such times, borrowing costs are lower and, therefore, there is more money for buying and selling goods and services, as well as for investment. Q. TURNING TO THE FUND'S NON-EQUITY POSITION, WHY DOES A STOCK FUND HAVE A RELATIVELY LARGE POSITION IN U.S. TREASURY BONDS, U.S. TREASURY BILLS AND SHORT-TERM INVESTMENTS? A. First and foremost, I am committed to uncovering the most promising stocks at an attractive valuation. Therein lies my reasoning for acquiring the large bond and cash equivalent position after selling a big chunk of the fund's technology holdings. I never dash headlong into a market just for the sake of being fully invested. I prefer to take the time to look carefully at the fundamentals of prospective companies and see if they fit my buying criteria. Q. WHAT'S YOUR OUTLOOK? A. Despite a slowing economy, I think there are some positive signs for equities: inflation and interest rates are low and U.S. companies are becoming more efficient. Of course, with the stock market surpassing historically high levels, there is always the possibility of some kind of market correction when investors begin to view the market as overvalued. 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 START DATE: December 30, 1985 SIZE: as of January 31, 1996, more than $16 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 INVESTOR EXPECTATIONS FOR THE STOCK MARKET: "Investors currently are putting a lot of money into the stock market. That's typical when the market shows the kind of strength it has demonstrated over the past year. At the same time, we should see what I call a "digestion" phase, when stock valuations consolidate to reflect company prospects more accurately than they do at the moment, as valuations are high on an historical basis. Investors need to maintain the perspective that the market has averaged 12% annual growth over extended periods of time, not the more than 30% we saw last year. "Investors are best off having a consistent investment program as opposed to trying to time the market or, even worse, getting into the market after it's had a big run. Those investors who experienced the crash of 1987 and stayed in the market probably have experienced strong growth in their portfolios over the past nine years. Those who invest with a long-term view can benefit from the sharp upswings we've seen lately, and withstand the kind of "digestion" phase the market goes through from time to time. Long-term investing can reduce the risk of chasing the market on its way up, only to suffer when there is a market-wide price correction." INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO General Motors Corp. 3.4 3.7 Home Depot, Inc. (The) 2.8 0.0 Chrysler Corp. 2.4 2.4 Allstate Corp. 2.2 1.4 MGIC Investment Corp. 1.8 1.0 Philip Morris Companies, Inc. 1.7 0.0 Caterpillar, Inc. 1.6 3.0 Deere & Co. 1.5 2.0 Computer Sciences Corp. 1.3 1.5 Digital Equipment Corp. 1.2 1.0 TOP FIVE MARKET SECTORS AS OF JANUARY 31, 1996 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO Finance 17.0 20.6 Durables 11.1 10.7 Energy 8.0 0.7 Industrial Machinery & Equipment 7.3 11.5 Technology 6.6 32.9 ASSET ALLOCATION AS OF JANUARY 31, 1996 * AS OF JULY 31, 1995 ** Row: 1, Col: 1, Value: 12.0 Row: 1, Col: 2, Value: 2.0 Row: 1, Col: 3, Value: 10.0 Row: 1, Col: 4, Value: 40.0 Row: 1, Col: 5, Value: 36.0 Row: 1, Col: 1, Value: 4.0 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 4, Value: 40.0 Row: 1, Col: 5, Value: 36.0 Stocks 77.9% Bonds 9.7% Other 0.4% Short-term investments 12.0% FOREIGN INVESTMENTS 10.0% Stocks 96.7% Bonds 0.0% Other 0.0% Short-term investments 3.3% FOREIGN INVESTMENTS 10.5% * ** INVESTMENTS JANUARY 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 77.9% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 1.7% Boeing Co. 439,800 $ 34,139 C A E Industries Ltd. 1,100,000 8,310 Flightsafety International, Inc. 20,000 998 General Motors Corp. Class H 636,400 36,275 Precision Castparts Corp. 1,069,900 42,662 Rohr Industries, Inc. (a) 372,800 6,804 Sundstrand Corp. 99,400 6,859 136,047 BASIC INDUSTRIES - 4.9% CHEMICALS & PLASTICS - 3.6% du Pont (E.I.) de Nemours & Co. 986,900 75,868 Hanna (M.A.) Co. 1,042,700 28,805 PPG Industries, Inc. 131,000 6,124 PT Tri Polyta Indonesia sponsored ADR 1,296,800 18,804 Praxair, Inc. 545,300 18,540 Raychem Corp. 37,900 2,535 Rohm & Haas Co. 996,200 68,987 Sealed Air Corp. 96,700 2,841 Sekisui Chemical Co. Ltd. 1,358,000 18,259 Union Carbide Corp. 1,305,900 55,011 295,774 IRON & STEEL - 0.6% AK Steel Holding Corp. 772,700 26,851 Inland Steel Industries, Inc. 665,100 19,038 Material Sciences Corp. (a) 199,700 2,596 48,485 METALS & MINING - 0.0% Aluminum Co. of America 4,857 270 PAPER & FOREST PRODUCTS - 0.7% Albany International Corp. Class A 385,200 7,126 Champion International Corp. 154,400 6,909 Federal Paper Board Co., Inc. 797,900 43,186 57,221 TOTAL BASIC INDUSTRIES 401,750 CONGLOMERATES - 0.3% Crane Co. 364,400 14,439 ITT Industries, Inc. 250,400 6,510 20,949 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - 5.3% BUILDING MATERIALS - 3.4% Armstrong World Industries, Inc. 1,088,000 $ 63,920 Carlisle Companies, Inc. 108,800 4,325 Centex Construction Products 846,600 12,170 Lafarge Corp. 51,437 958 Lone Star Industries, Inc. 381,200 10,292 Manville Corp. (a) 833,200 10,519 Masco Corp. 2,043,100 59,761 Medusa Corp. 262,900 7,328 Owens-Corning (a) 1,333,900 60,359 Sherwin-Williams Co. 497,500 20,957 Southdown, Inc. (a) 137,100 2,931 USG Corp. 938,600 27,923 281,443 CONSTRUCTION - 1.4% Centex Corp. 748,475 24,138 Clayton Homes, Inc. 455,375 9,108 Daiwa House Industry Co. Ltd. 1,903,000 30,206 Lennar Corp. 479,900 12,537 Oakwood Homes Corp. 1,400 63 Pulte Corp. 46,600 1,538 Schuler Homes, Inc. (a) 14,000 114 Sekisui House Ltd. 996,000 12,648 Webb (Del E.) Corp. (b) 1,113,000 20,869 111,221 ENGINEERING - 0.5% Fluor Corp. 302,000 20,234 Foster Wheeler Corp. 476,100 21,008 41,242 REAL ESTATE - 0.0% Newhall Land & Farming Co. 204,800 3,635 TOTAL CONSTRUCTION & REAL ESTATE 437,541 DURABLES - 11.1% AUTOS, TIRES, & ACCESSORIES - 8.4% Chrysler Corp. 3,346,500 193,260 Dana Corp. 1,417,500 46,600 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED AUTOS, TIRES, & ACCESSORIES - CONTINUED Eaton Corp. 4,300 $ 249 Echlin, Inc. 446,500 16,465 Ford Motor Co. 7,800 231 General Motors Corp. 5,245,467 276,043 Goodyear Tire & Rubber Co. 1,133,700 54,276 Lear Seating Corp. (a) 2,394,000 70,922 Titan Wheel International, Inc. (b) 1,632,400 26,935 684,981 CONSUMER ELECTRONICS - 1.9% Black & Decker Corp. 1,596,900 54,095 Maytag Co. 3,062,700 60,105 Sony Corp. 361,000 22,078 Sunbeam-Oster, Inc. 411,700 6,587 Whirlpool Corp. 180,800 9,831 152,696 HOME FURNISHINGS - 0.5% Bassett Furniture Industries, Inc. 20,300 497 Interco, Inc. (a) 760,700 6,941 Leggett & Platt, Inc. 1,544,800 37,075 44,513 TEXTILES & APPAREL - 0.3% Liz Claiborne, Inc. 78,900 2,189 Mohawk Industries, Inc. (a) 835,300 11,381 Shaw Industries, Inc. 635,600 8,024 Warnaco Group, Inc. Class A 97,700 2,235 23,829 TOTAL DURABLES 906,019 ENERGY - 8.0% ENERGY SERVICES - 1.7% Baker Hughes, Inc. 891,300 23,062 Dresser Industries, Inc. 225,200 5,855 ENSCO International, Inc. (a) 883,800 21,101 Halliburton Co. 456,600 23,572 Hornbeck Offshore Services, Inc. (a) 106,700 2,214 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED ENERGY SERVICES - CONTINUED Schlumberger Ltd. 727,600 $ 51,023 Tidewater, Inc. 244,000 8,083 134,910 OIL & GAS - 6.3% Amoco Corp. 845,600 59,509 Apache Corp. 45,000 1,209 Atlantic Richfield Co. 347,400 39,473 British Petroleum PLC: ADR 368,500 35,975 Ord. 3,150,000 25,204 Burlington Resources, Inc. 1,047,600 39,285 Chevron Corp. 174,400 9,047 Enron Oil & Gas Co. 2,045,800 49,866 Louisiana Land & Exploration Co. 1,324,900 56,971 Noble Affiliates, Inc. 72,000 2,142 Occidental Petroleum Corp. 601,900 12,941 Petroleum Geo-Services AS sponsored ADR (a) 106,700 2,294 Phillips Petroleum Co. 821,800 26,811 Royal Dutch Petroleum Co. 121,200 16,847 Royal Dutch Petroleum Co. Ord. 395,000 54,680 Texaco, Inc. 307,400 24,861 Total SA Class B 155,000 10,611 Union Pacific Resources Group, Inc. 2,000,000 52,000 519,726 TOTAL ENERGY 654,636 FINANCE - 17.0% BANKS - 4.1% Asahi Bank Ltd. ADR 2,508,000 29,974 Dai-Ichi Kangyo Bank 1,444,000 27,100 Fuji Bank (a) 3,068,000 69,610 Industrial Bank of Japan (a) 133,000 3,688 Mitsubishi Bank of Japan 2,243,000 48,588 Mitsubishi Trust & Banking Corp. 463,000 7,176 Mitsui Trust and Banking 885,000 9,585 Sakura Bank Ltd. 4,455,000 51,164 Sanwa Bank Ltd. 801,000 15,108 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED BANKS - CONTINUED Sumitomo Bank 1,920,000 $ 36,751 Tokai Bank Ltd. 2,821,000 38,456 337,200 CREDIT & OTHER FINANCE - 1.3% Acom Co. Ltd. 97,000 3,759 American Express Co. 8,763 403 Countrywide Credit Industries, Inc. 1,824,400 42,417 Equitable Companies, Inc. 1,173,900 28,907 North American Mortgage Co. (b) 1,237,300 32,479 107,965 FEDERAL SPONSORED CREDIT - 0.8% Federal Home Loan Mortgage Corp. 149,200 12,775 Federal National Mortgage Association 1,515,200 52,274 65,049 INSURANCE - 9.6% Aetna Life & Casualty Co. 1,092,800 81,414 Allstate Corp. 4,120,900 179,774 American International Group, Inc. 865,700 83,865 CIGNA Corp. 581,600 68,992 CMAC Investments 70,500 4,054 Chubb Corp. (The) 229,400 23,800 Conseco, Inc. 415,800 27,287 Enhance Financial Services Group Corp. 35,300 856 Equitable Iowa Companies 202,900 7,507 General Re Corp. 523,600 80,111 Highlands Insurance Group, Inc. 900 17 Horace Mann Educators Corp. 130,900 4,336 ITT Hartford Group, Inc. 224,000 11,228 MGIC Investment Corp. 2,227,500 143,674 Old Republic International Corp. 755,300 26,530 PMI Group, Inc. 165,100 8,276 Provident Companies, Inc. (a) 450,900 14,260 Providian Corp. 151,600 6,651 Reliastar Financial Corp. 85,000 4,006 SAFECO Corp. 2,600 93 SunAmerica, Inc. 24,000 1,182 Torchmark Corp. 133,700 6,334 Travelers, Inc. (The) 1,566 103 784,350 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED SECURITIES INDUSTRY - 1.2% Alliance Capital Management LP 99,900 $ 2,273 Bear Stearns Companies, Inc. 49,438 1,137 Daiwa Securities Co. Ltd. 60,000 896 Edwards (A.G.), Inc. 134,298 3,374 Inter-Regional Financial Group, Inc. 129,850 2,824 Legg Mason, Inc. 187,400 5,645 Lehman Brothers Holdings, Inc. 99,640 2,553 Merrill Lynch & Co., Inc. 5,100 290 Morgan Stanley Group, Inc. 9,400 448 Nikko Securities Co. Ltd. 34,000 419 Nomura Securities Co. Ltd. 2,417,000 52,357 PaineWebber Group, Inc. 1,277,350 26,505 Quick & Reilly Group, Inc. (The) 117,234 2,726 101,447 TOTAL FINANCE 1,396,011 HEALTH - 2.9% DRUGS & PHARMACEUTICALS - 1.7% Biogen, Inc. (a) 652,500 45,838 Genentech, Inc. special (a) 762,400 41,074 Pfizer, Inc. 788,900 54,237 Takeda Chemical Industries Ltd. 24,000 379 141,528 MEDICAL EQUIPMENT & SUPPLIES - 0.4% Pall Corp. 1,324,700 35,767 MEDICAL FACILITIES MANAGEMENT - 0.8% Columbia/HCA Healthcare Corp. 761,800 42,375 Oxford Health Plans, Inc. (a) 3,600 248 Tenet Healthcare Corp. (a) 971,700 20,770 Vencor, Inc. (a) 12,700 484 63,877 TOTAL HEALTH 241,172 HOLDING COMPANIES - 0.3% Norfolk Southern Corp. 316,200 24,940 U.S. Industries, Inc. 35,000 630 25,570 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - 7.3% ELECTRICAL EQUIPMENT - 0.7% General Electric Co. 534,300 $ 41,008 Glenayre Technologies, Inc. 1,200 48 Honeywell, Inc. 36,500 1,857 Omron Corp. 432,000 9,519 Westinghouse Electric Corp. 192,400 4,016 56,448 INDUSTRIAL MACHINERY & EQUIPMENT - 6.6% Cascade Corp. 372,300 5,026 Case Corp. 1,293,800 61,294 Caterpillar, Inc. 1,991,400 128,196 Cincinnati Milacron, Inc. 701,700 16,753 Deere & Co. 3,222,250 120,834 Global Industrial Technologies, Inc. 178,300 4,056 Greenfield Industries, Inc. 338,100 9,636 Harnischfeger Industries, Inc. 800 27 IDEX Corp. 218,800 8,314 Ingersoll-Rand Co. 75,600 3,033 Kennametal, Inc. 367,245 10,558 Parker-Hannifin Corp. 160,000 5,460 Regal-Beloit Corp. 743,200 13,563 Stanley Works 830,400 42,766 Timken Co. 1,481,271 61,288 TRINOVA Corp. 615,600 18,930 UCAR International, Inc. 154,500 4,809 Varity Corp. (a) 625,200 23,132 537,675 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 594,123 MEDIA & LEISURE - 1.5% BROADCASTING - 0.1% U.S. Satellite Broadcasting Co., Inc. Class A 9,000 243 Time Warner, Inc. 218,800 9,080 9,323 LEISURE DURABLES & TOYS - 0.1% Fleetwood Enterprises, Inc. 44,800 1,142 Harley Davidson, Inc. 157,100 5,420 Namco Ltd. 200,600 6,256 12,818 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED LODGING & GAMING - 0.4% ITT Corp. 285,700 $ 15,856 Marcus Corp. 7,500 197 Mirage Resorts, Inc. (a) 339,200 13,229 29,282 PUBLISHING - 0.9% Central Newspapers, Inc. Class A 1,100 36 Dun & Bradstreet Corp. 433,000 28,145 New York Times Co. (The) Class A 936,100 27,147 Times Mirror Co. Class A 502,800 15,587 Tribune Co. 7,500 470 71,385 TOTAL MEDIA & LEISURE 122,808 NONDURABLES - 3.2% TOBACCO - 3.2% Philip Morris Companies, Inc. 1,481,200 137,752 RJR Nabisco Holdings Corp. 1,956,441 63,584 Sampoerna Hanjaya Mandala (For. Reg.) 2,762,500 33,989 UST, Inc. 717,800 24,136 259,461 PRECIOUS METALS - 0.2% Newmont Mining Corp. 326,400 18,278 RETAIL & WHOLESALE - 4.0% APPAREL STORES - 0.0% Baby Superstore, Inc. (a) 3,750 182 Limited, Inc. (The) 9,200 154 336 GENERAL MERCHANDISE STORES - 0.4% Federated Department Stores, Inc. (Del.) (a) 357,800 9,661 May Department Stores Co. (The) 66,500 2,959 Takashimaya Co. Ltd. 1,296,000 20,087 32,707 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - 3.6% Home Depot, Inc. (The) 4,948,600 $ 227,636 Lowe's Companies, Inc. 628,200 19,553 Micro Warehouse, Inc. (a) 819,000 30,713 Petsmart, Inc. 501,058 15,282 Sunglass Hut International, Inc. 33,100 921 294,105 TOTAL RETAIL & WHOLESALE 327,148 SERVICES - 0.8% PRINTING - 0.0% Valassis Communications, Inc. (a) 32,500 548 SERVICES - 0.8% Catalina Marketing Corp. 24,000 1,698 Manpower, Inc. 2,364,200 63,538 65,236 TOTAL SERVICES 65,784 TECHNOLOGY - 6.6% COMMUNICATIONS EQUIPMENT - 0.3% Cisco Systems, Inc. (a) 7,300 608 Newbridge Networks Corp. (a) 364,800 18,194 Octel Communications Corp. (a) 71,200 2,617 3Com Corp. (a) 2,052 94 21,513 COMPUTER SERVICES & SOFTWARE - 3.7% Affiliated Computer Services Class A (a) 164,500 6,416 American Business Information, Inc. (a)(b) 1,441,400 22,342 Ascend Communications, Inc. (a) 2,000 78 Automatic Data Processing, Inc. 96,200 3,836 Ceridian Corp. (a) 559,641 25,184 Computer Sciences Corp. (a) 1,374,760 104,825 Continuum Co., Inc. (a)(b) 1,174,800 46,258 Electronics for Imaging, Inc. (a) 14,000 508 GMIS, Inc. (a) 351,600 3,604 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED HBO & Co. 700 $ 59 Hogan Systems, Inc. (a) 290,800 2,981 Microsoft Corp. (a) 1,000 93 Oracle Systems Corp. (a) 1,554,200 74,213 Parametric Technology Corp. (a) 14,400 932 Peoplesoft, Inc. (a) 277,100 13,162 Stratacom, Inc. (a) 1,700 128 304,619 COMPUTERS & OFFICE EQUIPMENT - 2.0% Bay Networks, Inc. (a) 2,550 108 Canon, Inc. 3,101,000 58,488 Digital Equipment Corp. (a) 1,355,300 98,090 International Business Machines Corp. 35,700 3,882 Western Digital Corp. (a) 289,600 5,358 165,926 ELECTRONIC INSTRUMENTS - 0.4% Perkin-Elmer Corp. 649,900 30,708 ELECTRONICS - 0.0% International Rectifier Corp. (a) 1,800 37 Samsung Electronics Co. Ltd. (vtg.) 2,781 498 535 PHOTOGRAPHIC EQUIPMENT - 0.2% Fuji Photo Film Co. Ltd. 736,000 20,754 TOTAL TECHNOLOGY 544,055 TRANSPORTATION - 1.4% AIR TRANSPORTATION - 0.1% Delta Air Lines, Inc. 100 7 KLM Royal Dutch Airlines 140,890 4,368 KLM Royal Dutch Airlines Ord. 22,750 698 Midwest Express Holdings, Inc. 7,000 186 5,259 RAILROADS - 1.3% Burlington Northern Santa Fe Corp. 271,800 22,254 CSX Corp. 604,200 28,020 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - CONTINUED RAILROADS - CONTINUED Conrail, Inc. 4,900 $ 347 Illinois Central Corp., Series A 296,500 11,193 Railtex, Inc. (a) 52,900 1,098 Trinity Industries, Inc. 517,100 18,099 Union Pacific Corp. 350,700 23,365 Wisconsin Central Transportation Corp. 81,300 6,098 110,474 TOTAL TRANSPORTATION 115,733 UTILITIES - 1.4% ELECTRIC UTILITY - 0.0% American Electric Power Co., Inc. 74,400 3,292 GAS - 0.0% Sonat, Inc. 117,100 4,040 TELEPHONE SERVICES - 1.4% Ameritech Corp. 16,600 998 BellSouth Corp. 106,400 4,562 Frontier Corp. 595,400 17,713 LCI International, Inc. (a) 276,300 6,562 NYNEX Corp. 747,200 40,069 U.S. West, Inc. 1,164,900 40,917 110,821 TOTAL UTILITIES 118,153 TOTAL COMMON STOCKS (Cost $5,724,123) 6,385,238 PREFERRED STOCKS - 0.0% CONVERTIBLE PREFERRED STOCKS - 0.0% UTILITIES - 0.0% CELLULAR - 0.0% Cellular Communications, Inc. $0.01 9,155 452 PREFERRED STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONCONVERTIBLE PREFERRED STOCKS - 0.0% ENERGY - 0.0% OIL & GAS - 0.0% Gulf Canada Resources Ltd. (c) 2,315 $ 7 TOTAL PREFERRED STOCKS (Cost $317) 459 U.S. TREASURY OBLIGATIONS - 14.5% MOODY'S PRINCIPAL VALUE (NOTE 1) RATINGS (B) AMOUNT (000S) (000S) U.S. Treasury Bills, yield at date of purchase 5.03% to 5.04%, 4/25/96 $ 400,000 395,428 7 1/4%, 8/15/22 47,500 54,521 7 1/4%, 2/15/23 125,830 142,601 6 1/4%, 8/15/23 55,460 56,517 7 1/2%, 11/15/24 67,210 79,927 7 5/8%, 2/15/25 29,580 35,810 6 7/8%, 8/15/25 378,230 422,139 TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,172,875) 1,186,943 REPURCHASE AGREEMENTS - 7.2% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.88% dated 1/31/96 due 2/1/96 $ 589,904 589,808 PURCHASED OPTIONS - 0.4% AMOUNTS IN THOUSANDS EXPIRATION DATE/ UNDERLYING FACE VALUE STRIKE PRICE AMOUNT AT VALUE (NOTE 1) 365,000 Bank of America OTC Put Options on Japanese Yen June 96/96.71 $ 329,775 $ 30,478 28,000 Bank of America OTC Put Options on Japanese Yen July 96/100 26,158 1,646 35,000 Swiss Bank Corp. OTC Put Options on Japanese Yen June 96/97.52 31,887 2,730 20,000 Swiss Bank Corp. OTC Put Options on Japanese Yen July 96/100.95 18,862 1,100 TOTAL PURCHASED OPTIONS (Cost $23,521) 35,954 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $7,510,644) $ 8,198,402 LEGEND (1.) Non-income producing (2.) Affiliated company (see Note 6 of Notes to Financial Statements). (3.) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Gulf Canada Resources Ltd. 10/15/93 $ 6,000 OTHER INFORMATION Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 90.0% Japan 7.2 Others (individually less than 1%) 2.8 TOTAL 100.0% INCOME TAX INFORMATION At January 31, 1996, the aggregate cost of investment securities for income tax purposes was $7,516,517,000. Net unrealized appreciation aggregated $681,885,000, of which $756,399,000 related to appreciated investment securities and $74,514,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS(EXCEPT PER-SHARE AMOUNTS) JANUARY 31, 1996 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 8,198,402 agreements of $589,808) (cost $7,510,644) - See accompanying schedule Receivable for investments sold 195,441 Receivable for fund shares sold 42,706 Dividends receivable 5,688 Interest receivable 21,334 Other receivables 130 TOTAL ASSETS 8,463,701 LIABILITIES Payable for investments purchased $ 235,334 Payable for fund shares redeemed 52,613 Accrued management fee 4,493 Other payables and accrued expenses 2,672 TOTAL LIABILITIES 295,112 NET ASSETS $ 8,168,589 Net Assets consist of: Paid in capital $ 7,128,184 Undistributed net investment income 3,289 Accumulated undistributed net realized gain (loss) on 349,364 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 687,752 investments and assets and liabilities in foreign currencies NET ASSETS, for 261,860 shares outstanding $ 8,168,589 NET ASSET VALUE and redemption price per share $31.19 ($8,168,589 (divided by) 261,860 shares) Maximum offering price per share (100/97.00 of $31.19) $32.15
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1996 (UNAUDITED) INVESTMENT INCOME $ 38,394 Dividends (including $556 received from affiliated issuers) Interest 24,691 TOTAL INCOME 63,085 EXPENSES Management fee $ 22,117 Basic fee Performance adjustment 2,577 Transfer agent fees 9,388 Accounting fees and expenses 387 Non-interested trustees' compensation 12 Custodian fees and expenses 305 Registration fees 1,035 Audit 26 Legal 19 Miscellaneous 4 Total expenses before reductions 35,870 Expense reductions (1,120) 34,750 NET INVESTMENT INCOME 28,335 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain of $6,401 593,197 on sales of investments in affiliated issuers) Foreign currency transactions (398) 592,799 Change in net unrealized appreciation (depreciation) on: Investment securities (367,487) Assets and liabilities in foreign currencies 10,399 (357,088) NET GAIN (LOSS) 235,711 NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 264,046 FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JULY 31, JANUARY 31, 1996 1995 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 28,335 $ 9,564 Net investment income Net realized gain (loss) 592,799 348,645 Change in net unrealized appreciation (depreciation) (357,088) 936,474 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 264,046 1,294,683 FROM OPERATIONS Distributions to shareholders (28,184) - From net investment income From net realized gain (542,540) (64,196) TOTAL DISTRIBUTIONS (570,724) (64,196) Share transactions 2,621,546 4,429,317 Net proceeds from sales of shares Reinvestment of distributions 555,535 62,248 Cost of shares redeemed (1,123,220) (1,529,164) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,053,861 2,962,401 FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) IN NET ASSETS 1,747,183 4,192,888 NET ASSETS Beginning of period 6,421,406 2,228,518 End of period (including undistributed net investment $ 8,168,589 $ 6,421,406 income of $3,289 and $3,300, respectively) OTHER INFORMATION Shares Sold 83,273 162,136 Issued in reinvestment of distributions 17,420 2,477 Redeemed (35,873) (56,233) Net increase (decrease) 64,820 108,380
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED JULY 31, ENDED JANUARY 31, 1996 (UNAUDITED) 1995 1994 D 1993 1992 1991
SELECTED PER-SHARE DATA Net asset value, $ 32.59 $ 25.14 $ 25.72 $ 22.02 $ 18.94 $ 15.33 beginning of period Income from Investment Operations Net investment .12 .07 E .12 .10 .09 .12 income Net realized and 1.07 7.96 3.43 4.36 3.07 3.64 unrealized gain (loss) Total from investment 1.19 8.03 3.55 4.46 3.16 3.76 operations Less Distributions (.12) - (.01) (.14) (.08) (.15) From net investment income From net realized (2.47) (.58) (4.12) (.62) - - gain Total distributions (2.59) (.58) (4.13) (.76) (.08) (.15) Net asset value, end $ 31.19 $ 32.59 $ 25.14 $ 25.72 $ 22.02 $ 18.94 of period TOTAL RETURN B, C 3.62% 32.64% 14.95% 20.86% 16.73% 24.86% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 8,169 $ 6,421 $ 2,229 $ 788 $ 476 $ 219 period (in millions) Ratio of expenses to .98% A 1.05% 1.27% 1.25% 1.27% 1.26% average net assets Ratio of expenses to .95% A, 1.02% 1.22% 1.25% 1.27% 1.26% average net assets F F F after expense reductions Ratio of net investment .78% A .25% .21% .46% .55% .80% income to average net assets Portfolio turnover rate 235% A 182% 271% 319% 71% 99%
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 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. E NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1996 (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 maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for foreign currency transactions and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain (loss). Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying U.S. Treasury or Federal Agency securities, the market value of which is required to be at least equal to the repurchase price. For term repurchase agreement transactions, the underlying securities are marked-to-market daily and maintained at a value at least equal to the repurchase price. FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options contracts to manage its exposure to the stock and bond markets and to fluctuations in interest rates and currency values. Buying futures, writing puts, and buying calls tend to increase the fund's exposure to the underlying instrument. Selling futures, buying puts, and writing calls tend to decrease the fund's exposure to the underlying instrument, or hedge other fund investments. The underlying face amount at value is shown in the schedule of investments under the caption "Purchased Options." This amount reflects each contract's exposure to the underlying instrument at period end. Losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparties do not perform under the contracts' terms. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price. Options traded over-the-counter are valued using dealer-supplied valuations. RESTRICTED SECURITIES. The fund is permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, restricted securities (excluding 144A issues) amounted to $7,000 or 0% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $8,629,612,000 and $7,942,308,000, respectively, of which U.S. government and government agency obligations aggregated $1,016,069,000 and $241,568,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .30%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annualized rate of .68% 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 $5,642,000 and $8,000, respectively, on sales of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annualized rate of .26% 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 $3,184,000 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 $874,000 under this arrangement. In addition, the fund has entered into certain arrangements with its custodian and transfer agent whereby interest earned on univested cash balances was used to offset a portion of the fund's expenses. During the period, the fund's custody and transfer agent fees were reduced by $4,000 and $242,000, respectively, under these arrangements. 6. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Accent Software International $ 1,624 $ 1,762 $ - $ - American Business Information, Inc. 7,317 - - 22,342 Blue Range Resource Corp. Class A - 1,984 - - CMAC Investments 138 16,940 47 - Continuum Co., Inc. 4,547 4 - 46,258 GMIS, Inc. 276 8,781 - - Global Industries Ltd. - 3,436 - - Medicus Systems Corp. - 403 11 - Money Store, Inc. 8,586 12,990 120 - North American Mortgage Co. 179 6,715 90 32,479 Ply-Gem Industries, Inc. - 14,045 36 - Shared Medical Systems Corp. - 24,230 144 - Titan Wheel International, Inc. 2,609 10,303 34 26,935 Trinzic Corp. - - - - Webb (Del E.) Corp. 5,570 14,324 74 20,869 Wonderware Corp. 2,970 9,782 - - TOTALS $ 33,816 $ 125,699 $ 556 $ 148,883 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 Michael Gordon, Vice President William J. Hayes, Vice President Arthur S. Loring, Secretary Kenneth A. Rathgeber, Treasurer Robert H. Morrison, Manager, Security Transactions John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Export Fund Fidelity Fifty Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE -----END PRIVACY-ENHANCED MESSAGE-----