-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LoRaIPF75zyhtM5vOW2dt1FWEy1HhBckvi3rmNwoz5luHTY5IqmT7YdvAJpN6kTb BNihOpoBv6ST5nDldFblOA== 0000751199-94-000006.txt : 19940331 0000751199-94-000006.hdr.sgml : 19940331 ACCESSION NUMBER: 0000751199-94-000006 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940131 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY SECURITIES FUND CENTRAL INDEX KEY: 0000754510 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: 40 SEC FILE NUMBER: 811-04118 FILM NUMBER: 94518329 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: MZ ZH1 CITY: BOSTON STATE: MA ZIP: 02109 N-30B-2 1 FIDELITY (Registered trademark) BLUE CHIP GROWTH FUND SEMIANNUAL REPORT JANUARY 31, 1994 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes. 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 last six months. INVESTMENTS 10 A complete list of the fund's investments with their market value. FINANCIAL STATEMENTS 23 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 27 Footnotes 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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FDIC. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: No one wants to pay more taxes than they have to. But a recent survey of 500 U.S. households, conducted by Fidelity and Yankelovich Partners, showed that few people took steps to reduce their taxes under the new tax laws that went into effect last year. In fact, many people were not completely aware of the changes until they filed their 1993 tax returns. Whether or not you're someone whose tax bill increased as a result of these changes, it may make sense to consider ways to keep more of what you earn. First, if your employer offers a 401(k) or 403(b) retirement savings plan, consider enrolling. These plans are set up so you can make regular contributions - before taxes - to a retirement savings plan. They offer a disciplined savings strategy, the ability to accumulate earnings tax-deferred, and immediate tax savings. For example, if you earn $40,000 a year and contribute 7% of your salary to your 401(k) plan, your annual contribution is $2,800. That reduces your taxable income to $37,200 and, if you're in the 28% tax bracket, saves you $784 in federal taxes. In addition, you pay no taxes on any earnings until withdrawal. It may be a good idea to contact your benefits office as soon as possible to find out when you can enroll or increase your contribution. Most employers allow employees to make changes only a few times each year. Second, consider an IRA. Many people are eligible to make an IRA contribution (up to $2,000) that is fully tax deductible. That includes people who are not covered by company pension plans, or those within certain income brackets. Even if you don't qualify for a fully deductible contribution, any IRA earnings will grow tax-deferred until withdrawal. Third, consider tax-free investments like municipal bonds and municipal bond funds. Often these can provide higher after-tax yields than comparable taxable investments. For example, if you're in the new 36% federal income tax bracket and invest $10,000 in a taxable investment yielding 7%, you'll pay $252 in federal taxes and receive $448 in income. That same $10,000 invested in a tax-free bond fund yielding 5.5% would allow you to keep $550 in income. These are three investment strategies that could help lower your tax bill in 1994. If you're interested in learning more, please call us at 1-800-544-8888 or visit a Fidelity Investor Center. We look forward to talking with you. Best regards, Edward C. Johnson 3d, Chairman 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. Each performance figure 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 stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, PAST 6 PAST 1 PAST 5 LIFE OF 1994 MONTHS YEAR YEARS FUND Blue Chip Growth 14.90% 29.17% 179.37% 217.73% Blue Chip Growth (incl. 3% sales charge) 11.46% 25.29% 170.99% 208.20% S&P 500(Registered trademark) 8.97% 12.88% 90.05% 137.12% Average Growth Fund 10.82% 12.45% 93.26% 136.91% 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. You can compare these figures to the performance of the Standard & Poor's 500 Composite Stock Price Index - a common proxy for the U.S. stock market. You can also compare them to the average growth fund, which reflects the performance of over 493 growth funds tracked by Lipper Analytical Services. 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, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Blue Chip Growth 29.17% 22.81% 20.89% Blue Chip Growth (incl. 3% sales charge) 25.29% 22.07% 20.29% S&P 500(Registered trademark) 12.88% 13.70% 15.22% Average Growth Fund 12.45% 13.74% 14.84% 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 (312) S&P 500 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 11031.74 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 13846.76 14999.13 10/31/89 13640.68 14651.15 11/30/89 13876.20 14950.03 12/31/89 13995.40 15308.83 01/31/90 12823.32 14281.61 02/28/90 13170.97 14465.84 03/31/90 13826.54 14849.19 04/30/90 13697.41 14477.96 05/31/90 15246.94 15889.56 06/30/90 15594.59 15781.51 07/31/90 15227.07 15731.01 08/31/90 13915.94 14308.92 09/30/90 13258.57 13612.08 10/31/90 13178.88 13553.55 11/30/90 14015.63 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 18400.42 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 19534.96 17856.19 10/31/91 19926.87 18095.46 11/30/91 19504.82 17366.22 12/31/91 22424.75 19352.91 01/31/92 21719.25 18992.95 02/29/92 21820.04 19239.86 03/31/92 21225.41 18864.68 04/30/92 21507.60 19419.30 05/31/92 21951.06 19514.46 06/30/92 21316.11 19223.69 07/31/92 22192.95 20009.94 08/31/92 21961.14 19599.74 09/30/92 22252.77 19831.01 10/31/92 22561.69 19900.42 11/30/92 23745.90 20579.03 12/31/92 23808.72 20832.15 01/31/93 23860.87 21007.14 02/28/93 23704.44 21292.83 03/31/93 24851.59 21742.11 04/30/93 25247.88 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 29084.10 22411.14 10/31/93 29409.19 22875.05 11/30/93 28515.19 22657.74 12/31/93 29642.52 22931.89 01/31/94 30819.88 23711.58 $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 began, and paid a 3% sales charge. As the chart shows, by January 31, 1994, the value of your investment would have grown to $30,820 - a 208.20% 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 $23,712 - a 137.12% 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. MICHAEL, HOW HAS BLUE CHIP DONE? A. Quite well. For the six months and one year ended January 31, 1994, the fund had total returns of 14.90% and 29.17%. These beat the average growth fund, which had returns of 10.82% and 12.45% over the same periods, according to Lipper Analytical Services. The fund also came out ahead of the Standard & Poor's 500 Index, which was up 8.97% for the six-month period and 12.88% for the year. Q. WHAT HELPED THE FUND OUTDISTANCE ITS PEERS OVER THE PAST SIX MONTHS? A. Both stock selection and industry selection played a major role in the fund's success. On the stock side, I focused on stocks that aren't traditional blue chips, but which I view as the potential "blue chips of tomorrow." About 90% of the fund's investments fell under this heading. These are companies with large, high-quality operations, but they just don't fit the blue-chip mold like a Coke or Pepsi. Most of the traditional blue chips have done well for the last 10 years. However, in 1993, many of the more traditional, consumer-oriented blue chips underperformed the market. Going forward, I'll be selecting from traditional blue chips as well as the next generation of potential blue chips that may perform well over the coming decade. Q. WHAT'S AN EXAMPLE OF A BLUE CHIP STOCK OF TOMORROW? A. Lowe's, which has been one of the top performing stocks in the fund. Here's a company that started with a couple hundred, small, unimpressive home improvement stores. In the last two or three years, management has completely revamped operations. They've opened huge 100,000 square foot stores, with 60,000 items, many of them higher profit items. As a result, Lowe's has been a standout in the retail industry. Q. HAVE ANY BLUE CHIPS OF TOMORROW BECOME TODAY'S TRADITIONAL BLUE CHIPS? A. Sure. Intel, the fund's top stock, is a great example. Three or four years ago, this technology company could have been considered a blue chip of tomorrow. Now, because of its phenomenal growth, it's viewed as one of today's traditional blue-chip stocks. Plus, Intel's newly upgraded micro-chip could be an excellent performer going forward. Q. WHAT ABOUT INDUSTRY SELECTION? A. As I mentioned, industry selection was a big factor. The fund's top two sector concentrations continued to be energy and technology. Natural gas stocks, which made up the bulk of my energy investment, had terrific earnings. Right now, in North America, consumers and companies are using nearly 100% of available natural gas. In addition, because of the cold weather this winter, gas companies have had lower inventories on hand, which has increased prices. My numbers show that demand for natural gas grew by 3% in 1993. Assuming the economy is stronger in 1994, I expect there could be even more demand and growth in the next six months. Some stocks that were excellent performers over the last six months were Anadarko Petroleum and British Petroleum. As for technology, over the last six months, a large portion of my investment in this sector was in semiconductors. These stocks have done well and could continue to do so as personal computer sales increase. Q. WERE THERE OTHER SECTORS THAT LOOKED GOOD? A. Definitely. Basic industries, such as steel manufacturing and equipment production, made up the fund's fourth biggest sector at the end of January. Companies like Caterpillar and Deere were stand outs. They cut their costs and sales picked up as the economy improved. My stake in transportation - especially railroads - nearly doubled over the last six months. Railroads could continue to do well. With the industry gaining a larger market share and cutting costs, it stands to benefit from an improving economy. Q. CURRENTLY ABOUT 13% OF THE FUND IS INVESTED IN FOREIGN ISSUES. WHERE ARE YOU INVESTING? A. My biggest foreign investment was in Canadian energy stocks. I'm still very excited about their prospects even though many of these stocks went through a sharp correction over the last six months. Northstar Energy of Canada was my best performer. Its stock was up nearly 30% over the price I bought it at. I also had up to 7% of the fund in Mexican stocks - mostly cement companies. Although these stocks did well, I sold them too soon and missed a significant price increase in the fourth quarter. I also invested about 3% of the fund in European financial stocks, such as Spar Nord Holding, which did well as interest rates fell there. Q. IN HINDSIGHT, WOULD YOU HAVE MADE ANY DIFFERENT DECISIONS OVER THE LAST SIX MONTHS? A. Yes. I think most of the mistakes I made came from being overly cautious. For instance, I wish I'd owned more rapidly-growing technology stocks, such as Cisco, but I was scared away by their high prices relative to earnings. Ultimately, the high prices would have been worth it since these stocks surpassed all earnings expectations. I also wish I 'd bought a lot more stocks in Hong Kong and the emerging Asian markets. They were risky, but they could have paid off. One conservative investment that was a disappointment for me was telephone and electric utilities. They didn't perform nearly as well as I expected them to. Q. WHAT'S AHEAD FOR THE FUND? A. While it's impossible to make any predictions about the market's direction, I'm optimistic about the fund and its outlook. I still think that if you pick the best stocks in the best industries, you can outperform the market over time. I hope the fund can beat the S&P 500, and I believe that my philosophy of investing in today's blue chips as well as tomorrow's potential blue chips should help the fund toward this goal in 1994. FUND FACTS GOAL: to increase the value of the fund's shares over the long term by investing in large, successful growth companies at the top of their industries. START DATE: December 31, 1987 SIZE: as of January 31, 1994, over $1 billion MANAGER: Michael Gordon, since January 1993; manager, Fidelity Select Chemical Portfolio, August 1992-January 1993; and Fidelity Select Biotechnology Portfolio, May 1990-August 1992 (checkmark) MICHAEL GORDON ON PICKING BLUE CHIPS OF THE FUTURE: "I always have my eyes open for tomorrow's potential blue chip stocks. I look for well-managed companies with exciting products that are positioned for growth. In some cases it doesn't take long for a company to grow from a non-traditional blue chip to a traditional one. As I noted earlier, Intel, now one of the largest and most powerful technology companies around, was definitely not considered a traditional blue chip three or four years ago. "I think Lotus and CSX , which are in my top 10 stocks, have potential to be blue chips of tomorrow. Lotus is hot for two reasons - a great new product, Lotus Notes, and a strong existing product line. CSX is a railroad company that's done an incredible job cutting costs by reducing head count and improving efficiency." (bullet) The fund increased its investments in retail stocks with growth potential, such as Lowe's, Musicland, and TJX, which owns the T.J. Maxx stores. (bullet) As interest rates neared bottom and stock prices soared, the fund sold many of its finance stocks. As a result, the fund's stake in the sector fell from 8.4% on July 31, 1993 to 0.7% on January 31, 1994. (bullet) United Air Lines, the fund's second largest stock, looked good because it was more cost efficient than many other airlines. INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Intel Corp. 3.2 0.9 UAL Corp. 2.5 0.0 Lowe's Cos., Inc. 1.9 1.5 British Petroleum PLC 1.9 0.2 Unocal Corp. 1.8 0.4 CSX Corp. 1.8 0.8 Anadarko Petroleum Corp. 1.7 0.7 Lotus Development Corp. 1.6 0.1 U.S. Healthcare, Inc. 1.5 0.8 Entergy Corp. 1.3 0.0 TOP FIVE INDUSTRIES AS OF JANUARY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE INDUSTRIES 6 MONTHS AGO Energy 17.3 17.6 Technology 15.0 16.4 Utilities 11.1 3.7 Basic Industries 7.0 1.4 Transportation 6.8 3.3 ASSET ALLOCATION AS OF JANUARY 31, 1994* AS OF JULY 31, 1993* Row: 1, Col: 1, Value: 14.3 Row: 1, Col: 2, Value: 5.6 Row: 1, Col: 3, Value: 80.09999999999999 Row: 1, Col: 1, Value: 12.5 Row: 1, Col: 2, Value: 1.2 Row: 1, Col: 3, Value: 86.40000000000001 Stocks 80.1% Bonds 5.6% Short-term Investments 14.3% Stocks 86.4% Bonds 0.1% Short-term Investments 13.5% % * FOREIGN INVESTMENTS - 12.8% * FOREIGN INVESTMENTS - 19.0% INVESTMENTS JANUARY 31, 1994 (UNAUDITED) Showing Percentage of Total Value of Investments COMMON STOCKS - 80.2% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 0.1% AEROSPACE & DEFENSE - 0.1% Aviall, Inc. (a) 3,075 $ 54 05366B10 Boeing Co. 17,000 735 09702310 789 DEFENSE ELECTRONICS - 0.0% Loral Corp. 800 32 54385910 TOTAL AEROSPACE & DEFENSE 821 BASIC INDUSTRIES - 7.0% CHEMICALS & PLASTICS - 0.1% Cytec Industries, Inc. (WI) (a) 50,000 806 23282010 Indo Gulf Fertilizer and Chemicals GDR (b) 21,000 103 45577P10 909 IRON & STEEL - 0.9% Birmingham Steel Corp. 83,300 2,457 09125010 Huntco, Inc. Class A 1,000 38 44566110 Inland Steel Industries, Inc. (a) 76,200 2,676 45747210 LTV Corp. (a) 80,000 1,410 50192110 Nucor Corp. 103,300 6,095 67034610 USX-U.S. Steel Group 3,000 132 90337T10 12,808 METALS & MINING - 0.2% Alcan Aluminium Ltd. 40,000 974 01371610 Aluminum Co. of America 6,000 475 02224910 Inco Ltd. 40,000 1,102 45325840 Phelps Dodge Corp. 10,000 543 71726510 Reynolds Metals Co. 2,000 107 76176310 3,201 PAPER & FOREST PRODUCTS - 5.8% Abitibi-Price Inc. 557,100 7,074 00368010 Bowater, Inc. 387,200 9,293 10218310 Canadian Pacific Forest Products Ltd. (a) 355,400 5,415 13642N10 Cascades, Inc. 105,500 654 14690010 Domtar Inc. (a) 350,500 2,143 25756110 Georgia-Pacific Corp. 189,600 14,267 37329810 Longview Fibre Co. 14,700 318 54321310 Noranda Forest, Inc. 30,000 288 65542L10 QUNO Corp. 16,900 331 74726H10 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - CONTINUED PAPER & FOREST PRODUCTS - CONTINUED Smurfit (Jeff) Group PLC (UK) 47,600 $ 257 84699793 Stone Consolidated Corp. (a) 335,000 4,285 86158K10 Stone Container Corp. (a) 190,000 3,134 86158910 Temple-Inland, Inc. 220,000 11,550 87986810 Weyerhaeuser Co. 333,300 16,290 96216610 Willamette Industries, Inc. 48,200 2,772 96913310 78,071 TOTAL BASIC INDUSTRIES 94,989 CONGLOMERATES - 2.4% Brierley Investments Ltd. 2,850,886 2,316 10901410 Canadian Pacific Ltd. Ord. 25,000 456 13644030 Dial Corp. (The) 208,700 9,105 25247010 ITT Corp. 97,500 9,592 45067910 Litton Industries, Inc. (a) 7,700 527 53802110 United Technologies Corp. 160,000 10,780 91301710 32,776 CONSTRUCTION & REAL ESTATE - 2.7% BUILDING MATERIALS - 2.0% Armstrong World Industries, Inc. 296,900 16,701 04247610 Holnam, Inc. (a) 296,100 2,257 43642910 Lafarge Corp. 260,200 6,505 50586210 Medusa Corp. 1,100 36 58507230 Ply-Gem Industries, Inc. 1,100 24 72941610 Tecumseh Products Co. Class A 700 34 87889520 York International Corp. 30,000 1,132 98667010 26,689 CONSTRUCTION - 0.7% Centex Corp. 32,900 1,456 15231210 Clayton Homes, Inc. (a) 575 15 18419010 Kaufman & Broad Home Corp. 10,000 233 48616810 Lennar Corp. 175,700 6,193 52605710 Pulte Corp. 51,200 1,778 74586710 Schuler Homes, Inc. (a) 3,000 74 80818810 9,749 TOTAL CONSTRUCTION & REAL ESTATE 36,438 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - 1.1% AUTOS, TIRES, & ACCESSORIES - 0.4% Chrysler Corp. 11,800 $ 726 17119610 Daimler Benz AKT sponsored ADR 21,500 1,016 17119610 Federal-Mogul Corp. 2,700 98 31354910 Ford Motor Co. 4,600 308 34537010 General Motors Corp. 34,000 2,087 37044210 Smith (A.O.) Corp. Class B 19,800 695 83186520 4,930 CONSUMER ELECTRONICS - 0.7% Whirlpool Corp. 130,900 8,852 96332010 TEXTILES & APPAREL - 0.0% Fruit of the Loom, Inc. Class A (a) 2,200 56 35941610 Jones Apparel Group, Inc. (a) 900 26 48007410 82 TOTAL DURABLES 13,864 ENERGY - 17.3% ENERGY SERVICES - 0.9% BJ Services Co. (a) 69 1 05548210 Energy Service, Inc. (a) 374,400 1,404 29271910 Enterra Corp. (a) 48,400 998 29380510 Global Marine, Inc. (a) 456,500 1,826 37935240 Marine Drilling Cos., Inc. (a) 536,900 2,953 56824020 Noble Drilling Corp. (a) 265,100 2,121 65504210 Offshore Logistics, Inc. (a) 6,200 95 67625510 Rowan Companies, Inc. (a) 4,600 36 77938210 Schlumberger Ltd. 9,500 565 80685710 Tidewater, Inc. 5,000 106 88642310 Tuboscope Vetco Corp. (a) 153,800 1,019 89860010 Western Co. of North America (a) 68,100 936 95804340 12,060 OIL & GAS - 16.4% Amerada Hess Corp. 55,800 2,706 02355110 Amoco Corp. 70,000 3,763 03190510 Anadarko Petroleum Corp. 494,100 23,470 03251110 Anderson Exploration Ltd. 372,200 9,312 03390110 Apache Corp. 406,000 10,150 03741110 Atlantic Richfield Co. 55,000 6,077 04882510 Blue Range Resource Corp. Class A (a) 831,100 6,801 09579K10 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - CONTINUED British Petroleum PLC ADR 367,900 $ 25,109 11088940 Burlington Resources, Inc. 170,100 8,186 12201410 Canadian Natural Resources Ltd. (a) 513,900 7,588 13638510 Encal Energy Ltd. (a) 1,725,400 5,128 29250D10 Excel Energy, Inc. (a)(c) 765,500 3,384 30065410 Exxon Corp. 100,000 6,618 30229010 Grad & Walker Energy Corp. (a) 393,500 4,367 38391010 Jordan Petroleum Ltd. Class A (a)(c) 982,400 6,930 48076110 Murphy Oil Corp. 25,200 1,043 62671710 Noble Affiliates, Inc. 400,608 10,967 65489410 Northstar Energy Corp. (a) 447,400 9,426 66703R10 Pancanadian Petroleum Ltd. 182,200 5,517 69890020 Parker & Parsley Petroleum Co. 347,300 9,117 70101810 Petro-Canada 659,100 6,695 71644E10 Poco Petroleum Ltd. (a) 826,900 6,533 73036110 Renaissance Energy Ltd. (a) 217,200 4,903 75966610 Rio Alto Exploration Ltd. (a) 1,010,200 6,650 76689210 Royal Dutch Petroleum Co. 60,000 6,548 78025770 Unocal Corp. 835,200 24,534 91528910 221,522 TOTAL ENERGY 233,582 FINANCE - 0.6% BANKS - 0.4% Citicorp (a) 3,300 144 17303410 Leu Holdings 3,600 1,681 52699B22 Morgan (J.P.) & Co., Inc. 490 35 61688010 Spar Nord Holding (a) 58,050 2,227 84699C22 Syds-Sonderjylland Holding (a) 60,300 1,883 90399F22 5,970 CREDIT & OTHER FINANCE - 0.0% American Express Co. 3,000 99 02581610 Dean Witter Discover & Co. 4,937 189 24240V10 Household International, Inc. 5,231 173 44181510 Mercury Finance Co. 11,966 202 58939510 663 FEDERAL SPONSORED CREDIT - 0.1% Federal Home Loan Mortgage Corporation 18,500 1,078 31340030 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED INSURANCE - 0.1% Torchmark Corp. 19,000 $ 905 89102710 Travelers, Inc. (The) 2,066 87 89419010 USF&G Corp. 1,600 22 90329010 1,014 SECURITIES INDUSTRY - 0.0% Merrill Lynch & Co., Inc. 3,200 143 59018810 Paine Webber Group, Inc. 1,900 56 69562910 199 TOTAL FINANCE 8,924 HEALTH - 6.2% DRUGS & PHARMACEUTICALS - 1.4% Chiron Corp. 7,700 732 17004010 Copley Pharmaceutical, Inc. (a) 84 3 21745K10 Elan PLC: ADR (a) 367,100 16,520 28413120 (1 Advanced Therapeutic Systems Common & 1 ADR warrant) (a) 47,562 1,605 28413140 Regeneron Pharmaceuticals, Inc. (a) 1,000 16 75886F10 18,876 MEDICAL EQUIPMENT & SUPPLIES - 1.0% Cordis Corp. (a) 2,000 104 21852510 McKesson Corp. 224,500 13,105 58155610 Owens & Minor, Inc. 300 8 69073010 13,217 MEDICAL FACILITIES MANAGEMENT - 3.8% Caremark International, Inc. 278,600 5,363 14170410 Columbia Healthcare Corp. 417,685 15,820 19767910 Health Management Associates, Inc. Class A (a) 198,500 6,426 42193310 Humana, Inc. 5,100 103 44485910 HCA Hospital Corporation of America Class A (a) 110,100 4,280 40412010 U.S. Healthcare, Inc. 298,300 19,837 91191010 51,829 TOTAL HEALTH 83,922 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - 2.3% ELECTRICAL EQUIPMENT - 0.8% American Superconductor Corp. (a) 6,000 $ 192 03011110 General Electric Co. 100,500 10,829 36960410 11,021 INDUSTRIAL MACHINERY & EQUIPMENT - 1.5% Briggs & Stratton Corp. 7,600 657 10904310 Caterpillar, Inc. 117,500 12,235 14912310 Clark Equipment Co. (a) 800 47 18139610 Deere & Co. 8,300 668 24419910 Harnischfeger Industries, Inc. 186,100 4,490 41334510 Parker-Hannifin Corp. 20,000 765 70109410 TRINOVA Corp. 49,100 1,620 89667810 20,482 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 31,503 MEDIA & LEISURE - 1.5% BROADCASTING - 0.2% Capital Cities/ABC, Inc. 4,000 2,620 13985910 EZ Communications, Inc. (a) 3,000 48 26928810 Peoples Choice TV Corp. (a) 1,900 58 71084710 Preferred Entertainment, Inc. (a) 2,000 39 74036T10 Tele-Communications, Inc. Class A (a) 2,000 55 87924010 Time Warner, Inc. 2,889 115 88731510 2,935 ENTERTAINMENT - 0.1% Carnival Cruise Lines, Inc. Class A 13,100 648 14365810 Iwerks Entertainment, Inc. (a) 1,000 26 46591610 Royal Carribean Cruises Ltd. 21,200 575 78015392 1,249 LEISURE DURABLES & TOYS - 0.9% Brunswick Corp. 400,300 7,806 11704310 Fleetwood Enterprises, Inc. 194,800 4,894 33909910 Mattel, Inc. 6,250 142 57708110 12,842 LODGING & GAMING - 0.2% Boomtown, Inc. 6,700 122 09858810 Hilton Hotels Corp. 5,000 320 43284810 International Game Technology 3,000 89 45990210 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED LODGING & GAMING - CONTINUED La Quinta Motor Inns, Inc. 600 $ 18 50419510 Marcus Corp. 5,000 148 56633010 Mirage Resorts, Inc. (a) 58,100 1,445 60462E10 2,142 PUBLISHING - 0.0% Harcourt Gen Inc. 100 4 41163G10 RESTAURANTS - 0.1% Shoney's, Inc. (a) 30,000 690 82503910 TOTAL MEDIA & LEISURE 19,862 NONDURABLES - 0.5% FOODS - 0.5% Archer-Daniels-Midland Co. 261,400 6,927 03948310 PRECIOUS METALS - 0.0% American Barrick Resources Corp. 10,000 277 02451E10 Homestake Mining Co. 9,700 214 43761410 491 RETAIL & WHOLESALE - 5.4% APPAREL STORES - 0.5% Burlington Coat Factory Warehouse Corp. (a) 13,200 292 12157910 TJX Companies, Inc. 210,700 5,952 87254010 6,244 GENERAL MERCHANDISE STORES - 1.4% Consolidated Stores Corp. (a) 864,400 15,667 21014910 Dayton Hudson Corp. 1,900 125 23975310 Mercantile Stores Co., Inc. 2,300 91 58753310 Penney (J.C.) Co., Inc. 9,300 487 70816010 Price/Costco, Inc. 60,400 1,072 74143W10 Sears, Roebuck & Co. 19,800 1,087 81238710 18,529 GROCERY STORES - 0.8% Safeway, Inc. (a) 175,800 3,604 78651420 Supervalue, Inc. 176,500 6,884 86853610 10,488 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISC - 2.7% Bed Bath & Beyond, Inc. (a) 300 $ 9 07589610 Best Buy Co., Inc. (a) 4,500 208 08651610 Home Depot, Inc. (The) 2,016 79 43707610 Lowe's Companies, Inc. 424,800 25,913 54866110 Micro Warehouse, Inc. (a) 300 14 59501B10 Musicland Stores Corp. 282,000 5,323 62758B10 Spiegel, Inc. Class A 170,400 3,215 84845710 Sport Supply Group, Inc. 115,300 2,234 84891510 Sport Supply Group, Inc. (warrants) (a) 60,725 250 84891512 Tandy Corp. 1,000 48 87538210 37,293 TOTAL RETAIL & WHOLESALE 72,554 SERVICES - 0.2% LEASING & RENTAL - 0.0% Blockbuster Entertainment Corp. 1,000 28 09367610 Hollywood Entertainment Corp. (a) 2,000 31 43614110 Ryder Systems, Inc. 2,300 62 78354910 121 SERVICES - 0.2% Interim Services 3,000 75 78354910 Pittston Company Services Group 80,800 2,485 72570110 2,560 TOTAL SERVICES 2,681 TECHNOLOGY - 15.0% COMMUNICATIONS EQUIPMENT - 0.5% Cisco Systems, Inc. (a) 54,900 3,980 17275R10 DSC Communications Corp. (a) 9,200 553 23331110 Ericsson (L.M.) Telephone Co. Class B (a) 6,400 294 29482120 General Instrument Corp. (a) 1,900 112 37012110 Newbridge Networks Corp. (a) 20,000 1,340 65090110 6,279 COMPUTER SERVICES & SOFTWARE - 3.2% Adobe Systems, Inc. 148,200 4,483 00724F10 Broderbund Software, Inc. 39,000 1,424 11201410 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - CONTINUED Ceridian Corp. 180,000 $ 4,095 15677T10 Computer Associates International, Inc. 200 7 20491210 Compuware Corp. (a) 205,400 6,727 20563810 Equifax Inc. 166,000 4,129 29442910 Informix Corp. (a) 2,900 47 45677910 Learning Co. 1,500 25 52200610 Lotus Development Corp. (a) 367,300 21,395 54570010 Microsoft Corp. (a) 2,300 196 59491810 Oracle Systems Corp. (a) 11,800 379 68389X10 Sterling Software, Inc. (a) 11,900 402 85954710 Sybase, Inc. (a) 15,800 727 87113010 44,036 COMPUTERS & OFFICE EQUIPMENT - 5.8% ADAPTEC, Inc. (a) 205,000 3,946 00651F10 Apple Computer, Inc. 450,600 14,757 03783310 AST Research, Inc. (a) 56,100 1,697 00190710 Compaq Computer Corp. (a) 175,000 15,050 20449310 Cray Research, Inc. (a) 70,700 2,218 22522410 Creative Technologies, Corp. (a) 94,700 3,208 22599992 EMC Corp. (a) 1,600 33 26864810 Exabyte (a) 158,700 3,135 30061510 Hewlett-Packard Co. 93,700 8,000 42823610 International Business Machines Corp. 85,700 4,863 45920010 Seagate Technology (a) 410,700 9,908 81180410 Silicon Graphics, Inc. (a) 8,800 226 82705610 Sun Microsystems, Inc. (a) 78,000 2,067 86681010 SynOptics Communications, Inc. (a) 45,400 1,305 87160910 Xerox Corp. 88,900 8,723 98412110 79,136 ELECTRONIC INSTRUMENTS - 0.4% Applied Materials, Inc. (a) 96,600 4,262 03822210 KLA Instruments Corp. (a) 15,000 521 48248010 4,783 ELECTRONICS - 5.1% Advanced Micro Devices, Inc. (a) 500 10 00790310 Analog Devices, Inc. (a) 4,900 126 03265410 Bell Microproducts, Inc. (a) 26,700 234 07813710 Intel Corp. 664,100 43,333 45814010 LSI Logic Corp. (a) 113,700 2,118 50216110 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED ELECTRONICS - CONTINUED Micron Technology, Inc. 2,800 $ 163 59511210 Motorola, Inc. 126,500 12,460 62007610 National Semiconductor Corp. (a) 86,700 1,561 63764010 Texas Instruments, Inc. 101,200 7,109 88250810 VLSI Technology, Inc. (a) 123,700 1,392 91827010 68,506 TOTAL TECHNOLOGY 202,740 TRANSPORTATION - 6.8% AIR TRANSPORTATION - 2.6% AMR Corp. (a) 15,700 1,128 00176510 Delta Air Lines, Inc. 11,900 666 24736110 UAL Corp. (a) 227,800 33,487 90254910 35,281 RAILROADS - 3.6% CSX Corp. 261,100 23,956 12640810 Conrail, Inc. 102,900 6,689 20836810 Illinois Central Corp., Series A 127,300 4,774 45184110 Santa Fe Pacific Corp. 444,900 10,900 80218310 Southern Pacific Rail Corp. (a) 119,200 2,518 84358410 48,837 TRUCKING & FREIGHT - 0.6% Bilspedition B Free shares (a) 400,000 1,447 09011092 Celadon Group, Inc. 4,000 67 Consolidated Freightways, Inc. (a) 138,500 3,601 20923710 Federal Express Corp. (a) 6,600 502 31330910 Landstar System, Inc. 3,000 63 51509810 MS Carriers, Inc. (a) 8,700 215 55353310 Swift Transportation Co., Inc. (a) 50,500 1,143 87075610 TNT Freightways Corp. 11,150 275 87259J10 Werner Enterprises, Inc. 4,100 121 95075510 7,434 TOTAL TRANSPORTATION 91,552 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 11.1% CELLULAR - 0.0% Cellular Communications, Inc. Red. Class P 15,000 $ 704 15091793 Nextel Communications, Inc. Class A (a) 200 8 65332V10 712 ELECTRIC UTILITY - 7.2% Consolidated Edison Co. of New York, Inc. 157,000 4,887 20911110 DQE, Inc. 30,000 998 23329J10 Detroit Edison Company 160,000 4,740 25084710 Dominion Resources, Inc. (Va.) 100,000 4,325 25747010 Duke Power Co. 11,800 496 26439910 Entergy Corp. (New) 455,418 16,964 29364G10 FPL Group, Inc. 77,800 2,869 30257110 Houston Industries, Inc. 73,900 3,372 44216110 Illinois Power Co. 280,300 6,096 45209210 Long Island Lighting Co. 183,700 4,317 54267110 NIPSCO Industries, Inc. 57,100 1,827 62914010 New England Electric Systems 129,700 4,977 64400110 Niagara Mohawk Power Corp. 395,700 8,013 65352210 PSI Resources, Inc. 60,000 1,537 69363210 Pacific Gas & Electric Co. 230,000 7,791 69430810 Peco Energy Co. 185,000 5,342 69330410 Pinnacle West Capital Corp. (a) 136,800 3,061 72348410 Public Service Enterprise Group, Inc. 70,000 2,214 74457310 SCEcorp 252,400 4,922 78388210 Southern Co. 140,400 6,107 84258710 Wisconsin Energy Corp. 81,000 2,167 97665710 97,022 GAS - 0.2% Sonat, Inc. 80,000 2,490 83541510 TELEPHONE SERVICES - 3.7% Ameritech Corp. 340,000 14,280 03095410 BellSouth Corp. 156,800 9,643 07986010 NYNEX Corp. 25,000 1,025 67076810 Pacific Telesis Group 220,000 12,678 69489010 Southwestern Bell Corp. 298,600 12,504 84533310 50,130 TOTAL UTILITIES 150,354 TOTAL COMMON STOCKS (Cost $986,871) 1,083,980 PREFERRED STOCKS - 0.0% SHARES VALUE (NOTE 1) (000S) ENERGY - 0.0% OIL & GAS - 0.0% Gulf Canada Resources Ltd., Series 1, adj. rate 80,685 $ 252 40218L40 Gulf Canada Resources Ltd. (a)(b) 2,315 7 40218L92 TOTAL PREFERRED STOCKS (Cost $209) 259 U.S. TREASURY OBLIGATIONS - 5.5% PRINCIPAL AMOUNT (000S) Treasury Bills, yield at maturity 3.13%, 3/3/94 (Cost $74,829) $ 75,000 74,855 99399H5Q REPURCHASE AGREEMENTS - 14.3% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 3.19% dated 1/31/94 due 2/1/94 193,871 193,854 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,255,763) $ 1,352,948 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $110,000 or 0.0% of net assets. 3. Affiliated company (see Note 6 of Notes to Financial Statements). OTHER INFORMATION Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 87.2% Canada 8.0 United Kingdom 1.9 Ireland 1.4 Others (individually less than 1%) 1.5 TOTAL 100.0% INCOME TAX INFORMATION At January 31, 1994, the aggregate cost of investment securities for income tax purposes was $1,256,053. Net unrealized appreciation aggregated $96,895, of which $108,044 related to appreciated investment securities and $11,149 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JANUARY 31, 1994 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 1,352,948 agreements of $193,854) (cost $1,255,763) (Notes 1 and 2) - See accompanying schedule Receivable for investments sold 82,792 Receivable for fund shares sold 27,417 Dividends receivable 886 Other receivables 58 TOTAL ASSETS 1,464,101 LIABILITIES Payable for investments purchased $ 128,609 Payable for fund shares redeemed 5,175 Accrued management fee 712 Other payables and accrued expenses 732 TOTAL LIABILITIES 135,228 NET ASSETS $ 1,328,873 Net Assets consist of (Note 1): Paid in capital $ 1,172,962 Distributions in excess of net investment income (206) Accumulated undistributed net realized gain (loss) on 58,932 investments Net unrealized appreciation (depreciation) on investment 97,185 securities NET ASSETS, for 52,883 shares outstanding $ 1,328,873 NET ASSET VALUE and redemption price per share $25.13 ($1,328,873 (divided by) 52,883 shares) Maximum offering price per share (100/97.00 of $25.13) $25.91
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1994 (UNAUDITED) INVESTMENT INCOME $ 4,027 Dividends Interest 2,296 TOTAL INCOME 6,323 EXPENSES Management fee (Note 4) $ 3,105 Basic fee Performance adjustment 439 Transfer agent fees (Note 4) 2,238 Accounting fees and expenses (Note 4) 225 Non-interested trustees' compensation 3 Custodian fees and expenses 232 Registration fees 229 Audit 16 Legal 4 Miscellaneous 6 Total expenses before reductions 6,497 Expense reductions (Note 5) (272) 6,225 NET INVESTMENT INCOME 98 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 116,753 (NOTES 1 AND 3) Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on 19,543 investment securities NET GAIN (LOSS) 136,296 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 136,394 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JULY 31, JANUARY 31, 1994 1993 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 98 $ 2,728 Net investment income Net realized gain (loss) on investments 116,753 121,482 Change in net unrealized appreciation (depreciation) 19,543 (10,298) on investments NET INCREASE (DECREASE) IN NET ASSETS RESULTING 136,394 113,912 FROM OPERATIONS Distributions to shareholders: (332) (3,304) From net investment income From net realized gain (147,698) (14,111) TOTAL DISTRIBUTIONS (148,030) (17,415) Share transactions 702,688 575,637 Net proceeds from sales of shares Reinvestment of distributions from: 299 2,990 Net investment income Net realized gain 141,388 13,201 Cost of shares redeemed (291,694) (376,470) Net increase (decrease) in net assets resulting from 552,681 215,358 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS 541,045 311,855 NET ASSETS Beginning of period 787,828 475,973 End of period (including under (over) distribution of net $ 1,328,873 $ 787,828 investment income of $(206) and $770, respectively) OTHER INFORMATION Shares Sold 28,152 24,389 Issued in reinvestment of distributions from: 12 133 Net investment income Net realized gain 5,820 601 Redeemed (11,730) (16,107) Net increase (decrease) 22,254 9,016
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED JULY 31, ENDED JANUARY 31, 1994 (UNAUDITED) 1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA Net asset value, $ 25.72 $ 22.02 $ 18.94 $ 15.33 $ 13.56 $ 10.47 beginning of period Income from Investment Operations Net investment .00 .10 .09 .12 .12 .10 income Net realized and 3.54 4.36 3.07 3.64 1.94 3.02 unrealized gain (loss) on investments Total from investment 3.54 4.46 3.16 3.76 2.06 3.12 operations Less Distributions From net investment (.01) (.14) (.08) (.15) (.12) (.03) income From net realized (4.12) (.62) - - (.17) - gain Total distributions (4.13) (.76) (.08) (.15) (.29) (.03) Net asset value, end of $ 25.13 $ 25.72 $ 22.02 $ 18.94 $ 15.33 $ 13.56 period TOTAL RETURN(dagger)(double dagger) 14.90% 20.86% 16.73% 24.86% 15.43% 29.89% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 1,329 $ 788 $ 476 $ 219 $ 131 $ 54 period (in millions) Ratio of expenses to 1.24%*(diamond) 1.25% 1.27% 1.26% 1.26% 1.56% average net assets Ratio of expenses to 1.29%*(diamond) 1.25% 1.27% 1.26% 1.26% 1.56% average net assets before expense reductions Ratio of net investment .02%* .46% .55% .80% 1.14% .97% income to average net assets Portfolio turnover rate 338%* 319% 71% 99% 68% 83%
* ANNUALIZED (dagger) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. (double dagger) TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. (diamond) SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1994 (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 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 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 current exchange rate. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rate on the dates of the transactions. It is not practical to identify the portion of each amount shown in the fund's Statement of Operations under the caption "Realized and Unrealized Gain (Loss) on Investments" that arises from changes in foreign currency exchange rates. Investment income includes net realized and unrealized currency gains and losses recognized between accrual and payment dates. 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 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 where recovery of such taxes is not assured. 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. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. 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, the fund changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts as of August 1, 1993 have been reclassified to reflect an increase in paid in capital of $6,280,568, a decrease in undistributed net investment income of $685,951 and a decrease in accumulated net realized gain on investments of $5,594,617. 2. OPERATING POLICIES. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The fund's investment adviser, Fidelity Management & Research Company (FMR), is responsible for determining that the value of these underlying securities remains at least equal to the resale price. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission , the fund, along with other registered investment companies having management contracts with FMR, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Federal Agency obligations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $1,751,995,000 and $1,497,087, 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 ranging from .31% to .52% and is based on the monthly average net assets of all the mutual funds advised by FMR. The annual individual fund fee rate is .30%. The basic fee is subject to a performance adjustment (up to a maximum of + or - .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 .71% of average net assets. The Board of Trustees approved a new group fee rate schedule with rates ranging from .2850% to .5200%. Effective November 1, 1993, FMR has voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. 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 the deferred sales charge upon redemption. For the period, FDC received sales charges and deferred sales charges of $1,803,000 and $13,000, respectively, on sales of shares of the fund. TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives fees based on the type, size, number of accounts and the number of transactions made by shareholders. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING FEE. 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 $1,030,000 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 $272,000 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 with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES PURCHASE SALES DIVIDEND MARKET AFFILIATES COST COST INCOME VALUE Excel Energy, Inc. (a) $ 324 $ - $ - $ 3,384 Jordan Petroleum Ltd. Class A (a) 1,609 - - 6,930 TOTALS $ 1,933 $ - $ - $ 10,314 (a) Non-income producing 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)(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)(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. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Gary L. French, Treasurer John H. Costello, Assistant Treasurer Arthur S. Loring, Secretary Robert H. Morrison, Manager, Security Transactions BOARD OF TRUSTEES J. Gary Burkhead Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* 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 GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Fidelity Fifty Growth Company Fund Low-Priced Stock Fund Magellan(Registered trademark) Fund New Millennium(registered 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) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (Registered trademark) DIVIDEND GROWTH FUND SEMIANNUAL REPORT JANUARY 31, 1994 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy, and outlook. INVESTMENT SUMMARY 10 A summary of major shifts in the fund's investments at the end of the period. INVESTMENTS 11 A complete list of the fund's investments with their market value. FINANCIAL STATEMENTS 27 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 31 Footnotes to the financial statements. 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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FDIC. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: No one wants to pay more taxes than they have to. But a recent survey of 500 U.S. households, conducted by Fidelity and Yankelovich Partners, showed that few people took steps to reduce their taxes under the new tax laws that went into effect last year. In fact, many people were not completely aware of the changes until they filed their 1993 tax returns. Whether or not you're someone whose tax bill increased as a result of these changes, it may make sense to consider ways to keep more of what you earn. First, if your employer offers a 401(k) or 403(b) retirement savings plan, consider enrolling. These plans are set up so you can make regular contributions - before taxes - to a retirement savings plan. They offer a disciplined savings strategy, the ability to accumulate earnings tax-deferred, and immediate tax savings. For example, if you earn $40,000 a year and contribute 7% of your salary to your 401(k) plan, your annual contribution is $2,800. That reduces your taxable income to $37,200 and, if you're in the 28% tax bracket, saves you $784 in federal taxes. In addition, you pay no taxes on any earnings until withdrawal. It may be a good idea to contact your benefits office as soon as possible to find out when you can enroll or increase your contribution. Most employers allow employees to make changes only a few times each year. Second, consider an IRA. Many people are eligible to make an IRA contribution (up to $2,000) that is fully tax deductible. That includes people who are not covered by company pension plans, or those within certain income brackets. Even if you don't qualify for a fully deductible contribution, any IRA earnings will grow tax-deferred until withdrawal. Third, consider tax-free investments like municipal bonds and municipal bond funds. Often these can provide higher after-tax yields than comparable taxable investments. For example, if you're in the new 36% federal income tax bracket and invest $10,000 in a taxable investment yielding 7%, you'll pay $252 in federal taxes and receive $448 in income. That same $10,000 invested in a tax-free bond fund yielding 5.5% would allow you to keep $550 in income. These are three investment strategies that could help lower your tax bill in 1994. If you're interested in learning more, please call us at 1-800-544-8888 or visit a Fidelity Investor Center. We look forward to talking with you. Best regards, Edward C. Johnson 3d, Chairman 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. Each performance figure 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 stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1994 PAST 6 LIFE OF MONTHS FUND Dividend Growth 15.68% 24.93% S&P 500(Registered trademark) 8.97% 12.33% Average Growth Fund 10.82% 15.38% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, or since the fund started on April 28, 1993. You can compare these figures to the performance of the Standard & Poor's 500 Composite Stock Price Index - a common proxy for the U.S. stock market. You can also compare them to the average growth fund, which reflects the performance of 493 growth funds tracked by Lipper Analytical Services. Both benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS 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. In the fund's next report we'll report these numbers for the fund and the benchmarks. $10,000 OVER LIFE OF FUND 04/28/93 10000.00 10000.00 04/30/93 10150.00 10051.03 05/31/93 10480.00 10320.39 06/30/93 10700.00 10350.32 07/31/93 10800.00 10308.92 08/31/93 11550.00 10699.63 09/30/93 11820.00 10617.24 10/31/93 12080.00 10837.02 11/30/93 11680.00 10734.07 12/31/93 12171.52 10863.95 01/31/94 12493.14 11233.32 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Dividend Growth Fund on April 28, 1993, when the fund started. As the chart shows, by January 31, 1994, the value of your investment would have grown to $12,493 - a 24.93% 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 $11,233 - a 12.33% 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 Dividend Growth Fund Q. ABBY, HOW DID THE FUND PERFORM? A. Very well. The fund had a total return of 15.68% for the six months ended January 31, 1994, which compares to a 10.82% total return for the average growth fund tracked by Lipper Analytical Services. Since the fund began on April 28, 1993, it has returned 24.93%. That again tops the average growth fund, which returned 15.38% during the same period. Q. WHAT'S BEHIND THE FUND'S SUCCESS? A. The strengthening economy fueled many of the best performing stocks over the last six months. The fund took advantage by investing in these cyclical stocks, which move up and down in tandem with the economy. For example, industrial cyclicals did very well. The fund had a 6.9% stake in industrial machinery and equipment on January 31. The stocks of farm equipment manufacturers like AGCO - which was up 130% from the end of July to the end of January - and Deere - up 27% - helped the fund. In addition, larger conglomerates that have a stake in industrial cyclical businesses - like Textron (up 12%) and General Electric (up 9%) - performed well. The fact that the dividends of all four of these companies are growing only added to their attractiveness. Q. YOU BOOSTED THE FUND'S STAKE IN THE CONSTRUCTION AND REAL ESTATE AND HOME FURNISHINGS SECTORS OVER THE LAST SIX MONTHS. WAS THIS A PLAY ON THE IMPROVING ECONOMY AS WELL? A. Yes. The lowest mortgage rates in decades helped trigger a housing boom in many parts of the country. The fund benefited from a jump in the stocks of several home builders, including Lennar, Pulte and Schuler. To construct homes you need raw materials; concrete companies like Lafarge and Medusa as well as gypsum manufacturer Republic Gypsum all helped the fund. Once families move into new or existing homes they often buy new furniture and appliances. So I looked for opportunities in these areas as well. Q. WHAT DID YOU FIND? A. Two of the fund's top ten investments at the end of January were Rowe Furniture and Leggett & Platt; both companies are experiencing dividend growth. Rowe's orders are booming, which stems, in part, from its guarantee to deliver custom-ordered upholstered furniture in 30 days or less. Leggett & Platt is a couple of steps back in the furniture manufacturing cycle. The company produces components that it sells to furniture makers, items like movements for easy chairs. Both stocks have benefited from rising home sales, and both have helped the fund. The fund's home furnishing stocks fall under the durables group, which I increased from 2.9% of the fund six months ago to 10.2% on January 31. Q. WHAT OTHER SECTORS DID YOU FAVOR? A. Many technology stocks - 6.7% of the fund on January 31 - had a strong last six months, though they were volatile. Investors speculated about the roles these companies will play in the building of the information superhighway we've been hearing so much about lately. Scientific Atlanta and General Instruments make converter boxes and infrastructure equipment for cable TV companies. Both stocks helped the fund before they got very expensive and I cut back on our stake in them. Glenayre Technologies makes paging systems; many paging networks are being upgraded here in the U.S. This is also a growing business overseas, especially in foreign countries that don't have good telephone networks. Motorola is another company that's cashing in on this trend, and both stocks helped the fund. Other sectors where I found some winners included energy and health care, although both groups had their share of problems last year. Q. ANY EXAMPLES? A. On the energy side, I focused on natural gas stocks, like Burlington Resources, and on exploration and production companies that are showing signs of growth. I found many of these small "E and P" companies in Canada, and several performed well. As for health care, uncertainty over reform hurt many stocks. But health maintenance organizations, or HMOs, such as U.S. Healthcare and United Healthcare, helped the fund immensely. Some people say regional cooperatives will eventually replace HMOs once Congress finishes with health-care reform, but I don't agree. I think if there's a health delivery vehicle in the private sector that works, as many of these HMOs do, lawmakers will stick with them rather than create a new level of bureaucracy. Q. SIX MONTHS AGO, FINANCE WAS THE FUND'S LARGEST SECTOR INVESTMENT AT 13.6%. BY JANUARY 31, THAT INVESTMENT HAD FALLEN TO 6.7%. WHAT HAPPENED? A. For some time, falling interest rates helped the profit margins of banks and other financial companies. However, by late summer, investors had driven up the prices on many of these stocks to levels that were quite high, and it appeared that rates might be bottoming out. Fortunately, I sold some of the fund's financial stocks before they took a plunge in October. The fund still has investments in what I would call special situations; Citicorp is an example. The company recovered more slowly than many of its competitors, and I think there's still some performance left in it. Citicorp's stock is up 32% over the last six months. This sector is an example of how Wall Street turned into a stock picker's market over the past six months. It was as important to steer clear of the losers as it was to find the winners. Q. BROADLY SPEAKING, WHAT DID YOU AVOID? A. Consumer non-durables, retail and electric utilities were three big areas I tried to sidestep. Fortunately, the fund had a lower percentage in these sectors than the Standard & Poor's 500 index, which helped performance. All three of these sectors were among market laggards over the past six months. Q. THAT SAID, YOU STILL INCREASED THE FUND'S STAKE IN ALL UTILITIES, FROM 9.6% TO 10.1% OVER THE PAST SIX MONTHS. WHAT WERE YOU BUYING? A. The stocks of telephone companies, mostly. Many of these stocks have been very mediocre performers lately, which has been disappointing. But I'm looking for improved performance going forward because of their prospects for superior revenue and earnings growth. For example, the addition of new telephone lines helps boost revenues. And line growth at the regional bell companies has been up 2-4%, while call volumes have been up over 5%. In addition, many of those companies have successfully restructured and cut costs. Even after dividends and capital spending, the telephone companies still have had leftover cash. Q. DESPITE THE FUND'S STRONG SHOWING, WERE THERE ANY DISAPPOINTMENTS? A. Sure. I mentioned how well industrial machinery and technology companies performed, and I should have invested more heavily in these areas. I'm conservative about the technology sector because few companies pay dividends, and their stocks can be so volatile. But there were some missed opportunities; Compaq Computer comes to mind as a stock I wish I had bought for the fund. Also, the fund's largest investment, Home Shopping Network, has been a little disappointing so far. Q. WHY? A. HSN's stock price was essentially flat over the last six months, and when one stock makes up more than 4% of the fund, as this one does, it hurts performance. However, I look at the stock as a long-term investment. There is a regulatory issue brewing in the Senate that investors have worried might be detrimental to the company, but I'm not too concerned. HSN is a turnaround story, and I feel the company's new management will be very good for business. The company has good earnings potential and the opportunity to join with merchandisers and retailers to broaden the audience for its programming. Q. IN FACT, MEDIA AND LEISURE IS NOW THE FUND'S LARGEST SECTOR, AT 13.8%. WHERE HAVE YOU FOUND OPPORTUNITIES? A. The strengthening economy is helping the profit margins of many broadcasting companies. Advertisers are willing to spend more money than they did during the recession, and that's boosted broadcasters' revenues. As consumers begin to spend more, some of the entertainment companies are benefiting. Carnival Cruise Lines has seen a solid jump in demand for their vacation packages; Carnival's stock has helped the fund. An increase in travelers has also meant higher occupancy rates for hotels and motels. The fund is invested in Hilton Hotels, La Quinta Motor Inns, and Marriott International, among others. FUND FACTS GOAL: to increase the value of the fund's shares by investing in companies that have the potential to increase their dividends or begin paying dividends START DATE: April 28, 1993 SIZE: as of January 31, 1994, over $82 million MANAGER: Abigail Johnson, since April 1993; manager, Fidelity's Select Developing Communications Portfolio, June 1991-February 1993; Select Telecommunications Portfolio, September 1991-May 1992; Select Automation & Machinery, Capital Goods and Industrial Technology Portfolios, October 1988-July 1992 (checkmark) ABIGAIL JOHNSON ON THE INFORMATION SUPERHIGHWAY: "The fund has benefited so far from investing in companies that could be major players in the building of the information superhighway - the vast communications system that is meshing the technologies of computers, telephones and televisions to bring us an array of services in our homes. But the investing landscape is changing. The prices of many of these stocks have risen on the promise of good things to come; now it's about time to see results. I'm cautious, and I'll be looking to separate the speculation surrounding the information superhighway from the reality of what these companies can deliver." (bullet) The fund had a 9.0% stake in foreign stocks on January 31. That's up from six months ago, when the fund had a 3.6% stake overseas. (bullet) Premark International was one of the fund's top five investments on January 31, and a company with strong dividend growth. Premark manufactures Tupperware, which is selling strongly in Europe, Asia and Latin America. Tupperware sales in the United States haven't been as impressive, but are improving. DISTRIBUTIONS The Board of Trustees of Dividend Growth Fund voted to pay on March 7, 1994, to shareholders of record at the opening of business on March 4, 1994, a distribution of $.09 derived from capital gains realized from sales of portfolio securities. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. I'm cautiously optimistic. The economy is still growing, and I feel good about the business prospects of the stocks the fund owns, but there's always that potential for a significant market correction. Stock valuations - - yardsticks like price-to-earnings and dividend ratios - are very high. It's been a successful nine months so far, but it would be misleading to expect the fund to continue to deliver returns of this caliber indefinitely. INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Home Shopping Network, Inc. 4.1 2.8 Rowe Furniture Corp. 2.5 0.0 General Electric Co. 2.1 1.9 Premark International, Inc. 1.5 1.4 Travelers, Inc. (The) 1.0 0.0 BIC Corp. 1.0 1.2 Leggett & Platt, Inc. 0.8 0.4 Santa Fe Pacific Corp. 0.8 0.6 Textron, Inc. 0.8 1.7 Ford Motor Co. 0.8 0.5 TOP FIVE INDUSTRIES AS OF JANUARY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE INDUSTRIES 6 MONTHS AGO Media & Leisure 13.8 10.6 Durables 10.2 2.9 Utilities 10.1 9.6 Energy 7.2 3.7 Industrial Machinery & 6.9 8.2 Equipment ASSET ALLOCATION AS OF JANUARY 31, 1994* AS OF JULY 31, 1993** Row: 1, Col: 1, Value: 5.8 Row: 1, Col: 2, Value: 1.7 Row: 1, Col: 3, Value: 92.5 Row: 1, Col: 1, Value: 11.8 Row: 1, Col: 2, Value: 1.0 Row: 1, Col: 3, Value: 87.5 Stocks 92.5% Bonds 1.7% Short-term Investments 5.8% Stocks 87.5% Bonds 0.7% Short-term Investments 11.8% * FOREIGN INVESTMENTS - 9.0% ** FOREIGN INVESTMENTS - 3.6% INVESTMENTS JANUARY 31, 1994 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.9% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 1.2% AEROSPACE & DEFENSE - 0.5% Flightsafety International, Inc. 2,200 $ 76,450 33942310 Martin Marietta Corp. 3,360 150,780 57290010 McDonnell Douglas Corp. 2,000 228,500 58016910 455,730 DEFENSE ELECTRONICS - 0.7% General Motors Corp. Class H 3,380 132,665 37044250 Loral Corp. 11,800 470,525 54385910 603,190 TOTAL AEROSPACE & DEFENSE 1,058,920 BASIC INDUSTRIES - 2.8% CHEMICALS & PLASTICS - 0.8% Akzo NV Ord. 1,500 162,515 01019910 du Pont (E.I.) de Nemours & Co. 600 33,600 26353410 GEON 8,900 240,300 37246W10 Grace (W.R.) & Co. 2,000 91,250 38388310 Imperial Chemical Industries PLC ADR 500 24,375 45270450 Quaker State Corp. 10,200 133,875 74741010 685,915 IRON & STEEL - 0.8% Nucor Corp. 5,000 295,000 67034610 Schnitzer Steel, Inc. Class A 5,000 155,000 80688210 TriMas Corp. 10,000 238,750 89621510 688,750 METALS & MINING - 0.7% Belden, Inc. (a) 13,000 251,875 07745910 Castle AM & Co. 10,000 190,000 14841110 Foster LB Co. Class A (a) 25,000 84,375 35006010 526,250 PAPER & FOREST PRODUCTS - 0.5% Albany International Corp. Class A 9,000 169,875 01234810 Pentair, Inc. 3,905 141,068 70963110 Temple-Inland, Inc. 2,000 105,000 87986810 415,943 TOTAL BASIC INDUSTRIES 2,316,858 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONGLOMERATES - 2.0% Grupo Carso SA de CV Class A-1 (a) 28,000 $ 323,736 40099594 Lancaster Colony Corp. 6,400 292,800 51384710 Litton Industries, Inc. (a) 3,500 239,750 53802110 Textron, Inc. 11,275 666,634 88320310 Whitman Corp. 10,450 165,882 96647K10 1,688,802 CONSTRUCTION & REAL ESTATE - 4.4% BUILDING MATERIALS - 2.4% Armstrong World Industries, Inc. 7,000 393,750 04247610 Cemex SA, Series B (a) 9,000 287,826 15299293 Lafarge Corp. 20,800 520,000 50586210 Medusa Corp. 12,000 390,000 58507230 Republic Gypsum Co. 18,500 268,250 76047310 Shaw Group (a) 100 2,450 82028010 USG Corp. (a) 4,200 133,350 90329340 1,995,626 CONSTRUCTION - 0.8% Lennar Corp. 4,000 141,000 52605710 Pulte Corp. 6,800 236,300 74586710 Redman Industries (a) 8,100 200,475 75764210 Schuler Homes, Inc. (a) 4,000 98,000 80818810 675,775 ENGINEERING - 0.6% Glenayre Technologies, Inc. 11,800 498,550 37789910 REAL ESTATE INVESTMENT TRUSTS - 0.6% Equity Residential Properties Trust (SBI) 4,000 116,500 29476L10 Manufactured Home Community 8,700 376,275 56468210 492,775 TOTAL CONSTRUCTION & REAL ESTATE 3,662,726 DURABLES - 10.0% AUTOS, TIRES, & ACCESSORIES - 2.7% Armor All Products Corp. 2,000 43,500 04225610 Chrysler Corp. 8,400 516,600 17119610 Ford Motor Co. 9,900 663,300 34537010 General Motors Corp. 1,000 61,375 37044210 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED AUTOS, TIRES, & ACCESSORIES - CONTINUED Goodyear Tire & Rubber Co. 11,000 $ 532,125 38255010 Valeo SA 2,000 495,966 91899010 2,312,866 CONSUMER ELECTRONICS - 1.3% Fedders USA, Inc. (a) 60,100 435,725 31313510 Sunbeam-Oster, Inc. 21,300 449,963 86707110 Whirlpool Corp. 3,700 250,213 96332010 1,135,901 HOME FURNISHINGS - 5.0% Bassett Furniture Industries, Inc. 8,800 302,500 07020310 LADD Furniture, Inc. 28,200 289,050 50573910 Leggett & Platt, Inc. 14,780 687,270 52466010 O'Sullivan Industries Holdings, Inc. (a) 500 12,063 68860910 Pulaski Furniture Corp. 16,000 416,000 74555310 River Oaks Furniture, Inc. 2,000 39,500 76828210 Rowe Furniture Corp. 122,250 2,078,250 77952810 Stanley Furniture (a) 26,000 383,500 85430520 4,208,133 TEXTILES & APPAREL - 1.0% Dyersburg Corp. 4,600 36,800 26757510 Hartmarx Corp. (a) 41,500 280,125 41711910 Pillowtex Corp. (a) 13,000 245,375 72150110 Quaker Fabric Corp. (a) 12,000 180,000 74739910 Westpoint Stevens, Inc. Class A (a) 2,900 56,550 96123810 798,850 TOTAL DURABLES 8,455,750 ENERGY - 7.1% COAL - 0.2% Pittston Co. Minerals Group 5,440 148,240 72570120 ENERGY SERVICES - 0.0% Tuboscope Vetco Corp. (a) 3,800 25,175 89860010 OIL & GAS - 6.9% Amerada Hess Corp. 9,400 455,900 02355110 Apache Corp. 9,500 237,500 03741110 Archer Resources Ltd. (a) 12,600 161,168 03950K10 British Petroleum PLC ADR 9,000 614,250 11088940 Brown Tom, Inc. (a) 14,100 167,438 11566020 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - CONTINUED Burlington Resources, Inc. 10,000 $ 481,250 12201410 Cabre Exploration Ltd. (a) 11,000 101,388 12690610 Canadian Natural Resources Ltd. (a) 17,000 251,025 13638510 Chevron Corp. 4,900 457,538 16675110 Cross Timbers Oil Co. 2,500 36,250 22757310 Encal Energy Ltd. (a) 38,000 112,938 29250D10 Enterprise Oil PLC 14,000 98,242 29399110 Grad & Walker Energy Corp. 7,500 83,236 38391010 Kerr-McGee Corp. 3,500 161,000 49238610 Louis Dreyfus Natural Gas Corp. (a) 2,000 41,000 54601110 Murphy Oil Corp. 4,100 169,638 62671710 Newfield Exploration Co. (a) 500 10,500 65129010 Northstar Energy Corp. (a) 6,500 136,940 66703R10 Nuevo Energy Corporation (a) 7,600 165,300 67050910 Paramount Resources Ltd. 12,100 200,293 69932010 Poco Petroleums Ltd. (a) 18,000 142,207 73036110 Prima Energy Corp. (a) 13,000 208,000 74190120 Renaissance Energy Ltd. (a) 3,700 83,518 75966610 Repsol SA sponsored ADR 5,200 177,450 76026T20 Rio Alto Exploration Ltd. (a) 21,900 144,182 76689210 Snyder Oil Corp. 7,200 134,100 83348210 Tarragon Oil & Gas Ltd. (a) 12,700 155,280 87629E20 Total Compagnie Francaise des Petroles Class B (a) 2,000 110,675 20434510 Total SA sponsored ADR 4,000 110,000 89151E10 Unocal Corp. 6,500 190,938 91528910 Vintage Petroleum, Inc. 10,600 186,825 92746010 5,785,969 TOTAL ENERGY 5,959,384 FINANCE - 6.7% BANKS - 1.7% Bank of Boston Corp. 6,000 153,750 06071610 Citicorp (a) 14,700 643,125 17303410 Mellon Bank Corp. 9,300 519,638 58550910 TR Financial Corp. (a) 8,900 112,363 87263010 1,428,876 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED CREDIT & OTHER FINANCE - 0.7% Dean Witter Discover & Co. 4,000 $ 153,500 24240V10 GFC Financial Corp. 12,315 381,765 36160910 Partner Re Holdings (a) 2,000 39,500 70299522 574,765 FEDERAL SPONSORED CREDIT - 1.0% Federal Home Loan Mortgage Corporation 8,280 482,310 31340030 Federal National Mortgage Association 4,000 349,500 31358610 831,810 INSURANCE - 2.5% American Bankers Insurance Group, Inc. 4,560 120,270 02445610 American Income Holding, Inc. 12,660 330,743 02672810 Life Partners Group, Inc. 7,050 121,613 53215710 Penncorp. Financial Group, Inc. 15,750 273,656 70809410 Protective Life Corp. 4,580 197,513 74367410 St. Paul Companies, Inc. (The) 3,100 273,963 79286010 Travelers, Inc. (The) 19,966 841,068 89419010 2,158,826 SAVINGS & LOANS - 0.6% Bay View Capital, Inc. 11,800 259,600 07262L10 Golden West Financial Corp. 4,200 186,375 38131710 Great Western Financial Corp. 1,700 32,938 39144210 Haven Bancorp, Inc. (a) 1,400 17,675 41935210 496,588 SECURITIES INDUSTRY - 0.2% Nomura Securities Co. Ltd. 5,000 106,716 65536130 Paine Webber Group, Inc. 1,280 37,920 69562910 144,636 TOTAL FINANCE 5,635,501 HEALTH - 6.9% DRUGS & PHARMACEUTICALS - 3.7% Allergan, Inc. 7,400 172,050 01849010 Amgen, Inc. (a) 3,200 156,000 03116210 Biogen, Inc. (a) 3,000 156,375 09059710 Bristol-Myers Squibb Co. 4,000 231,500 11012210 IMCERA Group, Inc. 7,900 299,213 45245410 Merck & Co., Inc. 11,300 412,450 58933110 Pfizer, Inc. 8,040 519,585 71708110 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED Rhone Poulenc Rorer, Inc. 4,665 $ 167,357 76242T10 Schering-Plough Corp. 9,400 592,200 80660510 SmithKline Beecham PLC ADR 2,000 59,000 83237840 Warner-Lambert Co. 5,000 325,625 93448810 3,091,355 MEDICAL EQUIPMENT & SUPPLIES - 1.5% Johnson & Johnson 10,200 432,225 47816010 Medtronic, Inc. 3,700 310,800 58505510 Mentor Corp. 31,500 496,125 58718810 1,239,150 MEDICAL FACILITIES MANAGEMENT - 1.7% Columbia Healthcare Corp. 15,500 587,063 19767910 U.S. Healthcare, Inc. 8,660 575,890 91191010 United HealthCare Corp. 3,265 279,158 91058110 1,442,111 TOTAL HEALTH 5,772,616 INDUSTRIAL MACHINERY & EQUIPMENT - 6.7% ELECTRICAL EQUIPMENT - 4.0% Alcatel Alsthom CGE 2,000 266,327 01390492 California Amplifier, Inc. (a) 38,400 316,800 12990010 General Electric Co. 16,100 1,734,775 36960410 Genlyte Group, Inc. (a) 5,000 22,500 37230210 Itel Corp. (a) 10,600 303,425 46564210 Roper Industries, Inc. 4,900 123,725 77669610 Scientific-Atlanta, Inc. 12,270 348,161 80865510 Star Paging International Holdings Ltd. 563,000 220,510 85599692 3,336,223 INDUSTRIAL MACHINERY & EQUIPMENT - 2.5% AGCO Corp. 9,100 361,725 00108410 Applied Power, Inc. Class A 4,400 83,050 03822510 Briggs & Stratton Corp. 2,000 173,000 10904310 CMI Corp. Oklahoma Class A 14,500 121,438 12576130 Deere & Co. 2,380 191,590 24419910 Joy Technologies, Inc. Class A (a) 54,400 646,000 48120610 Park-Ohio Industries, Inc. (a) 12,000 175,500 70067710 Stewart & Stevenson Services, Inc. 4,200 199,500 86034210 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED Watts Industries, Inc. Class A 800 $ 42,600 94274910 Welbilt Corporation (a) 5,000 101,250 94908710 2,095,653 POLLUTION CONTROL - 0.2% WMX Technologies, Inc. 7,080 207,975 92929Q10 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 5,639,851 MEDIA & LEISURE - 13.8% BROADCASTING - 6.4% BET Holdings, Inc. Class A (a) 30,800 612,150 08658510 Clear Channel Communications, Inc. (a) 8,400 334,950 18450210 Gaylord Entertainment Co. Class A 3,800 107,350 36790110 Home Shopping Network, Inc. 244,600 3,485,550 43735110 Jacor Communications, Inc. Class A 15,000 206,250 46985840 Peoples Choice TV Corp. (a) 2,000 61,500 71084710 Scandinavian Broadcasting Corp. (a) 3,000 82,500 80699E92 Silver King Communications, Inc. (a) 4,000 43,000 82774010 TCA Cable TV, Inc. 6,200 160,425 87224110 Tele-Communications, Inc. Class A (a) 11,000 299,751 87924010 5,393,426 ENTERTAINMENT - 2.2% All American Communications 20,000 170,000 01648020 Carnival Cruise Lines, Inc. Class A 11,800 584,100 14365810 Disney (Walt) Co. 9,600 453,600 25468710 Paramount Communications, Inc. 2,400 191,100 69921610 Players International, Inc. 4,000 103,000 72790310 Royal Carribean Cruises Ltd. 9,600 260,400 78015392 Savoy Pictures Entertainment, Inc. (a) 4,000 73,000 80537510 1,835,200 LEISURE DURABLES & TOYS - 1.4% ARCTCO, Inc. 4,000 94,000 03966510 Brunswick Corp. 6,000 117,000 11704310 Callaway Golf Co. 2,000 138,750 13119310 Coachmen Industries, Inc. 11,800 187,325 18987310 Cobra Industries, Inc. (a) 14,000 119,000 19104E10 Fleetwood Enterprises, Inc. 5,945 149,368 33909910 Outboard Marine Corp. 17,100 412,538 69002010 1,217,981 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED LODGING & GAMING - 2.5% Argosy Gaming Corp. 2,100 $ 43,575 04022810 Aztar Corp. (a) 4,900 35,525 05480210 Boyd Gaming Corp. (a) 7,000 128,625 10330410 Four Seasons Hotels, Inc. 15,500 134,118 35100E10 Hilton Hotels Corp. 3,000 192,000 43284810 Hospitality Franchise Systems, Inc. (a) 4,400 243,650 44091210 La Quinta Motor Inns, Inc. 7,250 221,125 50419510 Marriott International, Inc. 6,000 176,250 57190010 Mirage Resorts, Inc. (a) 14,250 354,469 60462E10 President Riverboat Casinos, Inc. (a) 4,650 84,863 74084810 Promus Companies, Inc. (a) 3,000 151,875 74342A10 Sholodge, Inc. 3,000 72,750 82503410 Station Casinos, Inc. 3,000 55,500 85768910 WMS Industries, Inc. (a) 7,300 181,588 92929710 2,075,913 PUBLISHING - 0.7% American Greetings Corp. Class A 15,350 466,256 02637510 Banta Corp. 3,900 139,913 06682110 MaClean Hunter Ltd. 2,200 23,381 55474980 629,550 RESTAURANTS - 0.6% McDonald's Corp. 8,000 486,000 58013510 TOTAL MEDIA & LEISURE 11,638,070 NONDURABLES - 3.5% AGRICULTURE - 0.3% Pioneer Hi-Bred International, Inc. 5,439 213,481 72368610 BEVERAGES - 0.7% Coca-Cola Femsa SA de CV sponsored ADR (a) 2,000 69,500 19124110 Dr. Pepper/Seven-Up Companies, Inc. (a) 22,800 544,350 25613130 613,850 HOUSEHOLD PRODUCTS - 2.3% First Brands Corp. 6,000 216,750 31935610 Maybelline, Inc. 5,000 126,875 57787510 Premark International, Inc. 14,765 1,271,636 74045910 Procter & Gamble Co. 6,000 357,000 74271810 1,972,261 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED TOBACCO - 0.2% Philip Morris Companies, Inc. 3,000 $ 180,750 71815410 TOTAL NONDURABLES 2,980,342 RETAIL & WHOLESALE - 3.7% APPAREL STORES - 0.2% TJX Companies, Inc. 6,500 183,625 87254010 DRUG STORES - 0.1% Rite Aid Corporation 3,600 67,050 76775410 GENERAL MERCHANDISE STORES - 1.5% Dayton Hudson Corp. 2,430 159,773 23975310 Dillard Department Stores, Inc. Class A 1,900 68,163 25406310 Federated Department Stores, Inc. (a) 9,700 212,188 31410J10 Freds, Inc. Class A 7,500 103,125 35610810 May Department Stores Co. (The) 8,700 343,650 57777810 Penney (J.C.) Co., Inc. 6,800 356,150 70816010 1,243,049 GROCERY STORES - 0.5% Promodes SA Ord. (a) 1,500 277,962 74699692 Safeway, Inc. (a) 7,700 157,850 78651420 435,812 RETAIL & WHOLESALE, MISCELLANEOUS - 1.4% CML Group, Inc. 14,850 269,156 12582010 Futures Shops Ltd. 10,600 225,311 36091310 Home Depot, Inc. (The) 2,000 78,000 43707610 Little Switzerland, Inc. 8,800 63,800 53752810 Redoute (LA) 1,900 335,626 75799492 Sodak Gaming, Inc. 5,500 149,875 83377710 Tiffany & Company, Inc. 1,500 43,875 88654710 1,165,643 TOTAL RETAIL & WHOLESALE 3,095,179 SERVICES - 1.4% ADVERTISING - 0.2% ADVO-Systems, Inc. 8,000 145,000 00758510 LEASING & RENTAL - 0.2% Blockbuster Entertainment Corp. 7,500 207,188 09367610 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - CONTINUED PRINTING - 0.3% Reynolds & Reynolds Co. Class A 4,865 $ 217,101 76169510 SERVICES - 0.7% Chemed Corp. 8,900 283,688 16359610 Interim Services 500 12,563 16359610 Oroamerica, Inc. (a) 4,000 56,000 68702710 Pittston Company Services Group 7,700 236,775 72570110 589,026 TOTAL SERVICES 1,158,315 TECHNOLOGY - 6.7% COMMUNICATIONS EQUIPMENT - 1.4% Digital Link Corp. 500 7,000 22599992 General Instrument Corp. (a) 2,000 117,500 37012110 Keptel, Inc. (a) 21,800 277,950 49205610 MB Communications, Inc. 14,000 266,000 55262M10 Nokia AB free shares 5,900 347,795 65599992 Porta Systems Corp. 14,800 168,350 73564710 1,184,595 COMPUTER SERVICES & SOFTWARE - 0.3% Electronics For Imaging Incorporated 14,600 237,250 28608210 COMPUTERS & OFFICE EQUIPMENT - 2.3% BIC Corp. 26,900 807,000 08873410 Creative Technologies, Corp. (a) 3,500 118,563 22599992 Hewlett-Packard Co. 3,850 328,694 42823610 International Business Machines Corp. 5,000 283,750 45920010 Merisel, Inc. (a) 12,900 237,038 58984910 Xerox Corp. 2,000 196,250 98412110 1,971,295 ELECTRONIC INSTRUMENTS - 0.7% Applied Materials, Inc. (a) 12,600 555,975 03822210 ELECTRONICS - 2.0% Intel Corp. 8,380 546,795 45814010 Linear Technology Corp. 1,600 69,200 53567810 Micron Technology, Inc. 7,270 424,386 59511210 Motorola, Inc. 6,600 650,100 62007610 1,690,481 TOTAL TECHNOLOGY 5,639,596 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - 6.1% AIR TRANSPORTATION - 1.2% AMR Corp. (a) 5,680 $ 408,250 00176510 Atlantic Coast Airlines, Inc. (a) 23,000 186,875 04839610 Mesa Airlines, Inc. (a) 9,100 163,800 59048110 UAL Corp. (a) 1,500 220,500 90254910 979,425 RAILROADS - 2.7% Burlington Northern, Inc. 2,100 135,713 12189710 CSX Corp. 1,000 91,750 12640810 Chicago & North Western Holdings Corp. (a) 8,700 232,725 16715510 Illinois Central Corp., Series A 12,325 462,188 45184110 Kansas City Southern Industries, Inc. 10,290 474,626 48517010 Santa Fe Pacific Corp. 27,400 671,300 80218310 Southern Pacific Rail Corp. (a) 8,200 173,225 84358410 2,241,527 TRUCKING & FREIGHT - 2.2% Airborne Freight Corp. 5,000 174,375 00926610 Arkansas Best Corp. 17,400 256,650 04079010 Builders Transport, Inc. (a) 9,100 155,838 12008410 Celadon Group, Inc. (a) 1,000 16,625 15083810 Landair Services, Inc. 7,000 155,750 51475910 Landstar System, Inc. 21,000 438,375 51509810 MS Carriers, Inc. (a) 15,000 371,250 55353310 Roadway Services, Inc. 700 49,000 76974810 TNT Freightways Corp. 6,350 157,163 87259J10 Werner Enterprises, Inc. 3,400 100,300 95075510 1,875,326 TOTAL TRANSPORTATION 5,096,278 UTILITIES - 8.9% CELLULAR - 1.0% Cellular Communications Puerto Rico, Inc. (a) 12,000 288,000 15091910 Cencall Communications Corp. (a) 4,400 135,300 15129710 Dial Page, Inc. (a) 1,400 67,200 25247P10 Mobile Telecommunications Technologies, Inc. (a) 7,800 155,025 60740610 Pactel Corp. (a) 3,000 75,750 69525210 Rogers Communications, Inc. Class B (a) 8,100 137,128 77510920 858,403 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED ELECTRIC UTILITY - 1.2% CMS Energy Corp. 5,000 $ 121,250 12589610 Commonwealth Edison Co. 4,500 127,688 20279510 Entergy Corp. 17,480 651,130 29364G10 Illinois Power Co. 3,000 65,250 45209210 965,318 GAS - 0.6% Enron Corp. 15,670 515,151 29356110 TELEPHONE SERVICES - 6.1% ALC Communications Corp (a) 2,400 76,800 00157530 ALLTEL Corp. 8,770 244,464 02003910 Ameritech Corp. 11,400 478,800 03095410 Bell Atlantic Corp. 2,600 147,550 07785310 BellSouth Corp. 2,800 172,200 07986010 Comsat Corp., Series 1 17,520 475,230 20564D10 GTE Corp. 2,000 68,750 36232010 LCI International, Inc. (a) 5,400 201,150 50181310 LDDS Communications, Inc. (a) 17,618 484,495 50182L10 MCI Communications Corp. 8,100 223,763 55267310 NYNEX Corp. 7,860 322,260 67076810 Pacific Telesis Group 6,900 397,613 69489010 Precision Systems, Inc. (a) 40,000 140,000 74032910 Southwestern Bell Corp. 13,760 576,200 84533310 Telebras PN (Pfd. Reg.) 6,000,000 285,180 95499792 Telefonos de Mexico SA sponsored ADR representing shares Ord. Class L 4,000 295,500 87940378 Telesp PN (Pfd. Reg.) 600,000 248,550 87999B93 U.S. West, Inc. 7,200 315,000 91288910 5,153,505 TOTAL UTILITIES 7,492,377 TOTAL COMMON STOCKS (Cost $70,769,455) 77,290,565 CONVERTIBLE PREFERRED STOCKS - 0.6% SHARES VALUE (NOTE 1) (000S) DURABLES - 0.0% AUTOS, TIRES, & ACCESSORIES - 0.0% Chrysler Corp., Series A, $4.625 (b) 40 $ 6,880 17119670 ENERGY - 0.2% OIL & GAS - 0.2% Snyder Oil $6.00 6,500 178,750 83348240 INDUSTRIAL MACHINERY & EQUIPMENT - 0.0% AGCO Corp., depositary shares representing 1/10 share $1.625 100 5,250 00108420 SERVICES - 0.1% SERVICES - 0.1% Pittston Co. $3.125 (b) 1,000 52,500 72570140 UTILITIES - 0.3% CELLULAR - 0.2% Mobile Telecommunications Technologies Corp. $2.25 (a)(b) 6,000 198,000 60740620 TELEPHONE SERVICES - 0.1% LCI International $1.25 (a) 2,000 59,000 50181320 TOTAL UTILITIES 257,000 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $605,188) 500,380 CORPORATE BONDS - 1.5% MOODY'S RATINGS PRINCIPAL AMOUNT CONVERTIBLE BONDS - 0.5% CONSTRUCTION & REAL ESTATE - 0.0% REAL ESTATE - 0.0% Mid-Atlantic Realty Trust 7 5/8%, 9/15/03 - $ 10,000 9,800 595232AA RETAIL & WHOLESALE - 0.2% RETAIL & WHOLESALE, MISCELLANEOUS - 0.2% Intertan, Inc. 9%, 8/30/00 - 150,000 152,364 461120AA CORPORATE BONDS - CONTINUED PRINCIPAL AMOUNT (000S) TECHNOLOGY - 0.2% COMMUNICATIONS EQUIPMENT - 0.2% Porta Systems Corp. euro 6%, 7/1/02 - $ 200,000 $ 152,500 7356479A UTILITIES - 0.1% CELLULAR - 0.1% Cellular Communications Puerto Rico., Inc. 8 1/4%, 8/1/00 Caa 30,000 53,100 150919AA Mobile Telecommunications Technologies Corp. 6 3/4%, 5/15/02 - 35,000 65,100 607406AA 118,200 TOTAL CONVERTIBLE BONDS 432,864 NONCONVERTIBLE BONDS - 1.0% INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% Joy Technologies, Inc. 10 1/4%, 9/1/03 B1 200,000 210,500 481206AD UTILITIES - 0.8% CELLULAR - 0.8% Horizon Cellular Telephone Corp. 0%, 10/1/00 Caa 300,000 219,000 440415AA Pagemart, Inc. 0%, 11/1/00 (b) - 7,000 427,000 695534AA 646,000 TOTAL NONCONVERTIBLE BONDS 856,500 TOTAL CORPORATE BONDS (Cost $1,240,823) 1,289,364 FOREIGN GOVERNMENT OBLIGATIONS - 0.2% French Government OAT 8 1/2%, 4/25/03 Aaa FRF 600,000 122,069 351996AQ Spanish Government 10.9%, 8/30/03 Aa2 ESP 7,000,000 60,035 84699AAL TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $174,804) 182,104 REPURCHASE AGREEMENTS - 5.8% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 3.19% dated 1/31/94 due 2/1/94 $4,897,434 $ 4,897,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $77,687,270) $ 84,159,413 FORWARD FOREIGN CURRENCY CONTRACTS SETTLEMENT UNREALIZED DATE(S) VALUE GAIN/(LOSS) CONTRACTS TO SELL 244,870 FRF 2/9/94 $ 41,556 $ 295 10,163,000 ESP 2/9/94 72,433 2,827 TOTAL CONTRACTS TO SELL (Receivable amount $117,111) $ 113,989 $ 3,122 THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 0.1% CURRENCY TYPE ABBREVIATIONS FRF - French franc ESP - Spanish peseta LEGEND 7. Non-income producing 8. 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 $684,380 or 0.8% of net assets. INCOME TAX INFORMATION At January 31,1994, the aggregate cost of investment securities for income tax purposes was $77,695,106. Net unrealized appreciation aggregated $6,464,307, of which $8,703,932 related to appreciated investment securities and $2,239,625 related to depreciated investment securities. The fund hereby designates $330,000 as a capital gain dividend for the purpose of the dividend paid deduction. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1994 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 84,159,413 agreements of $4,897,000) (cost $77,687,205) (Notes 1 and 2) - See accompanying schedule Short foreign currency contracts (Note 2) $ (113,989) Contracts held, at value Receivable for contracts held 117,111 3,122 Cash 955 Receivable for investments sold 2,758,978 Receivable for fund shares sold 918,612 Dividends receivable 78,632 Interest receivable 29,779 TOTAL ASSETS 87,949,491 LIABILITIES Payable for investments purchased 2,688,300 Payable for fund shares redeemed 2,563,961 Accrued management fee 43,738 Other payables and accrued expenses 80,939 TOTAL LIABILITIES 5,376,938 NET ASSETS $ 82,572,553 Net Assets consist of (Note 1): Paid in capital $ 75,247,093 Undistributed net investment income (Note 1) (6,618) Accumulated undistributed net realized gain (loss) on 856,748 investments Net unrealized appreciation (depreciation) on: Investment securities 6,472,208 Foreign currency contracts 3,122 NET ASSETS, for 6,643,123 shares outstanding $ 82,572,553 NET ASSET VALUE, offering price and redemption price per $12.43 share ($82,572,553 (divided by) 6,643,123 shares)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1994 (UNAUDITED) INVESTMENT INCOME $ 434,849 Dividends Interest 118,763 TOTAL INCOME 553,612 EXPENSES Management fee (Note 4) $ 218,544 Transfer agent fees (Note 4) 186,457 Accounting fees and expenses (Note 6) 25,067 Non-interested trustees' compensation 173 Custodian fees and expenses 34,550 Registration fees 41,338 Audit 8,825 Legal 113 Interest (Note 6) 2,541 Miscellaneous 148 Total expenses before reductions 517,756 Expense reductions (Note 5) (6,176) 511,580 NET INVESTMENT INCOME 42,032 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1, 2 AND 3) Net realized gain (loss) on: Investment securities 1,277,829 Foreign currency contracts (8,794) 1,269,035 Change in net unrealized appreciation (depreciation) on: Investment securities 5,858,970 Foreign currency contracts 3,122 5,862,092 NET GAIN (LOSS) 7,131,127 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 7,173,159 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS APRIL 28, 1993 ENDED (COMMENCEMENT JANUARY 31, OF OPERATIONS) TO 1994 JULY 31,1993 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 42,032 $ (17,672) Net investment income (loss) Net realized gain (loss) on investments 1,269,035 1,020 Change in net unrealized appreciation (depreciation) 5,862,092 613,238 on investments NET INCREASE (DECREASE) IN NET ASSETS RESULTING 7,173,159 596,586 FROM OPERATIONS Distributions to shareholders (22,184) - From net investment income From net realized gain (422,101) - TOTAL DISTRIBUTIONS (444,285) - Share transactions 152,484,894 20,226,698 Net proceeds from sales of shares Reinvestment of distributions 438,271 - Cost of shares redeemed (95,536,168) (2,366,602) Net increase (decrease) in net assets resulting from 57,386,997 17,860,096 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS 64,115,871 18,456,682 NET ASSETS Beginning of period 18,456,682 - End of period (including undistributed net investment $ 82,572,553 $ 18,456,682 income of $(6,618) and $17,672, respectively) OTHER INFORMATION Shares Sold 12,950,235 1,934,498 Issued in reinvestment of distributions 37,111 - Redeemed (8,052,866) (225,855) Net increase (decrease) 4,934,480 1,708,643
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED APRIL 28, 1993 JANUARY 31, (COMMENCEMENT 1994 OF OPERATIONS) TO (UNAUDITED) JULY 31, 1993 SELECTED PER-SHARE DATA Net asset value, beginning of period $ 10.80 $ 10.00 Income from Investment Operations Net investment income .02 (.01) Net realized and unrealized gain (loss) on investments 1.67 .81 Total from investment operations 1.69 .80 Less Distributions From net investment income (.01) - From net realized gain (.05) - Total distributions (.06) - Net asset value, end of period $ 12.43 $ 10.80 TOTAL RETURN(dagger)(double dagger) 15.68% 8.00% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 82,573 $ 18,457 Ratio of expenses to average net assets 1.45%*(dagger)(dagger) 2.50%*# Ratio of expenses to average net assets before 1.47%*(dagger)(dagger) 4.18%*# expense reductions Ratio of net investment income to average net assets .12%* (.73)%* Portfolio turnover rate 126%* 90%*
* ANNUALIZED (dagger) THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. (double dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. (dagger)(dagger) SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. # EXPENSES LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1993 (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 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 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 current exchange rate. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rate on the dates of the transactions. It is not practical to identify the portion of each amount shown in the fund's Statement of Operations under the caption "Realized and Unrealized Gain (Loss) on Investments" that arises from changes in foreign currency exchange rates. Investment income includes net realized and unrealized currency gains and losses recognized between accrual and payment dates. INCOME TAXES. The fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. By so qualifying, the fund will not be subject to income taxes to the extent that it distributes all of its taxable income for its tax year ended January 31, 1994. 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 where recovery of such taxes is not assured. 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. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 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 are primarily due to differing treatments for foreign currency transactions, partnerships and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income includes temporary book and tax basis differences which will reverse in a subsequent period. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign currency contracts. These contracts involve market risk in excess of the amount reflected in the fund's Statement of Assets and Liabilities. The face or contract amount in U.S. dollars reflects the total exposure the fund has in that particular currency contract. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The fund's investment adviser, Fidelity Management & Research Company (FMR), is responsible for determining that the value of these underlying securities remains at least equal to the resale price. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management contracts with FMR, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Federal Agency obligations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $96,146,713 and $41,421,424, 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 ranging from .30% to .52% and is based on the monthly average net assets of all the mutual funds advised by FMR. The annual individual fund fee rate is .30%. The basic fee is subject to a performance adjustment (up to a maximum of + or - .20%) based on the fund's investment performance as compared to the appropriate index over a specified period of time. The fund's performance adjustment will not take effect until April 1994. For the period, the management fee was equivalent to an annualized rate of .62% of average net assets. The Board of Trustees approved a new group fee rate schedule with rates ranging from .2850% to .5200%. Effective November 1, 1993, FMR has voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives fees based on the type, size, number of accounts and the number of transactions made by shareholders. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. 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 $48,883 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 $6,176 under this arrangement. 6. BANK BORROWINGS. The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, the fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $3,237,000 and $2,532,600, respectively. The weighted average interest rate was 3.625%. Interest expense includes $2,541 paid under the bank borrowing program. 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)(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)(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. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO WRITE FIDELITY 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. Please send ALL correspondence about retirement accounts to Dallas. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 2269 Boston, MA 02107-2269 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30280 Salt Lake City, UT 84130-0280 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments Additional Payments P.O. Box 2656 Boston, MA 02293-0656 Fidelity Investments Additional Payments P.O. Box 620024 Dallas, TX 75262-0024 Fidelity Investments Additional Payments P.O. Box 31455 Salt Lake City, UT 84131-0455 OVERNIGHT EXPRESS Fidelity Investments Additional Payments World Trade Center 164 Northern Avenue Boston, MA 02210 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02103-0878 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02101-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 620024 Dallas, TX 75262-0024 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Gary L. French, Treasurer John H. Costello, Assistant Treasurer Arthur S. Loring, Secretary Robert H. Morrison, Manager, Security Transactions BOARD OF TRUSTEES J. Gary Burkhead Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* 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 GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Fidelity Fifty Fund Growth Company Fund Low-Priced Stock Fund Magellan(Registered trademark) Fund New Millennium(registered 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) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (Registered trademark) OTC PORTFOLIO SEMIANNUAL REPORT JANUARY 31, 1994 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes. 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 last six months. INVESTMENTS 10 A complete list of the fund's investments with their market value. FINANCIAL STATEMENTS 19 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 23 Footnotes 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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FDIC. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: Once the new year begins, many people start reviewing their finances and calculating their tax bills. No one wants to pay more taxes than they have to. But a recent survey of 500 U.S. households, conducted by Fidelity and Yankelovich Partners, showed that few people have taken steps to reduce their taxes under the new legislation. Many were not even aware that the new tax laws were retroactive to January 1993. Whether or not you're someone whose tax bill will increase as a result of these changes, it may make sense to consider ways to keep more of what you earn. First, if your employer offers a 401(k) or 403(b) retirement savings plan, consider enrolling. These plans are set up so you can make regular contributions - before taxes - to a retirement savings plan. They offer a disciplined savings strategy, the ability to accumulate earnings tax-deferred, and immediate tax savings. For example, if you earn $40,000 a year and contribute 7% of your salary to your 401(k) plan, your annual contribution is $2,800. That reduces your taxable income to $37,200 and, if you're in the 28% tax bracket, saves you $784 in federal taxes. In addition, you pay no taxes on any earnings until withdrawal. It may be a good idea to contact your benefits office as soon as possible to find out when you can enroll or increase your contribution. Most employers allow employees to make changes only a few times each year. Second, consider an IRA. Many people are eligible to make an IRA contribution (up to $2,000) that is fully tax deductible. That includes people who are not covered by company pension plans, or those within certain income brackets. Even if you don't qualify for a fully deductible contribution, any IRA earnings will grow tax-deferred until withdrawal. Third, consider tax-free investments like municipal bonds and municipal bond funds. Often these can provide higher after-tax yields than comparable taxable investments. For example, if you're in the new 36% federal income tax bracket and invest $10,000 in a taxable investment yielding 7%, you'll pay $252 in federal taxes and receive $448 in income. That same $10,000 invested in a tax-free bond fund yielding 5.5% would allow you to keep $550 in income. These are three investment strategies that could help lower your tax bill in 1994. If you're interested in learning more, please call us at 1-800-544-8888 or visit a Fidelity Investor Center. Best regards, Edward C. Johnson 3d, Chairman FUND TALK: THE MANAGER'S OVERVIEW An interview with Alan Radlo, Portfolio Manager of Fidelity OTC Portfolio Q. ALAN, HOW HAS THE FUND DONE? A. Not as well as I would have liked. For the six months and one year ended January 31, 1994, the fund had total returns of 10.18% and 10.52%. Over the same period, the NASDAQ Composite Index had returns of 13.59% and 14.95%. Q. WHY DID THE FUND LAG THE NASDAQ INDEX? A. There were a couple reasons. First, over 30% of the NASDAQ is made up of technology and telecommunication stocks - far more than the fund. These stocks ended up increasing in value, mostly because there were several big takeovers. For instance, AT&T took over McCaw Cellular, whose stock price soared as a result. Since this stock made up about 2% of the index, the NASDAQ profited handsomely. Second, the fund also lagged the index because it was heavily invested in finance and health care, sectors that didn't perform as well as I had hoped. A third drag on performance was the fund's large amount of cash. Over the past six months, I've made some significant changes in my strategy to address these issues. As a result, the fund's performance has improved. Q. WHAT CHANGES HAVE YOU MADE? A. To start, I've increased the fund's stake in my top 10 stocks. As a result, my top 10 investments now make up about 22% of the fund - up from 14% six months ago. This approach can be unsuccessful if a particular stock fails, but more rewarding if a stock performs well. It also allows my top stocks to add more to the fund's performance. To be more in line with the NASDAQ's strategy, I also increased my technology investments. Plus, I dramatically cut the fund's stake in banks and repositioned my investment in health care. Finally, I added more cyclical stocks - those that tend to move in tandem with the economy - and shifted about 15% of the fund into non-OTC stocks. All of these changes are well in line with the fund's directive. Q. WHAT DO YOU MEAN BY NON-0TC STOCKS? A. Non-OTC stocks are listed on the New York Stock Exchange or the American Stock Exchange, or bought on foreign markets. With the exception of foreign non-OTC stocks, non-OTC stocks are typically larger and more established than stocks that trade on the NASDAQ. However, many of the non-OTC stocks I own are similar in size to my OTC stocks. It's worth noting that I can never have more than 35% of the fund's investments in non-OTC stocks at any one time. In the past the fund had almost no non-OTC stocks. Now Boston Scientific, which I bought on the NYSE, is one of my top 10 investments. Over the past two years, this stock has grown at a rate of 30%. I've also purchased a number of non-OTC foreign stocks, boosting my stake in foreign investments from about 6% to 9% of the fund. One of the foreign stocks I've invested in is Riverside, a small Canadian lumber company that recently doubled in price. Q. WHAT HAVE YOU DONE TO INCREASE THE FUND'S STAKE IN TECHNOLOGY? A. Technology has grown from 9% of the fund's investments last July to 12% on January 31. Now I have about the same amount in technology as the average OTC fund. I've focused on top-performing companies like Intel and Microsoft, key stocks for any OTC fund. I also like Cisco, one of the largest networking companies around, and Newbridge Networks, a fast-growing telecommunication company. I've chosen my investments very carefully because traditionally this is a high-risk sector. Even the top companies can have wildly different performance. For instance, Newbridge was unrecognized three years ago. Now it's the tenth biggest company on the NASDAQ. Q. YOU SAID EARLIER THAT YOU CUT YOUR FINANCIAL STOCKS DRAMATICALLY. WHAT DOES THAT MEAN? A. It means dramatically. Over the last six months, I decreased my financial investments from 29% of the fund to about 10%. The survivors of this cut were the banks with high service income such as State Street, Northern Trust, and Fifth Third. High service income means these banks earn their money primarily through selling mutual fund and data processing services to the mutual fund and securities industries. Companies like these have done very well during much of the period. Q. WHAT ABOUT HEALTH CARE? A. I still have a large stake - about 16% of the fund - in health care. In fact, on January 31 it was the fund's largest sector. I've repositioned the fund to include more companies that I think are well positioned for the health-care changes coming out of Washington, such as HMOs, rehabilitation hospitals, and generic drug companies. U.S. Healthcare, an HMO in the Northeast, has been an excellent stock, and it's positioned to do well no matter what's in store for health care in the U.S. Ultimately, I think the companies that provide alternative medical services at a low cost could be major winners. Q. OVER THE LAST SIX MONTHS, YOU'VE INCREASED YOUR STAKE IN THE MEDIA AND LEISURE SECTOR FROM 1.6% TO 11.1%. WHAT'S BEHIND THIS MOVE? A. This sector has done very well in the last six months. This is largely because gaming stocks have paid off as more state and local governments across the U.S. have legalized gambling as a way to raise revenues. One stock that's been a great bet is International Game Technology, the leading manufacturer of gaming machines. Another sector leader was the broadcasting industry. I owned companies that made excellent gains as telephone utilities, cellular companies and entertainment firms formed strategic alliances. My largest stake in this industry - one of my top 10 stocks - is a cable company called Tele-Communications. Q. WHAT CAN SHAREHOLDERS EXPECT IN THE NEXT SIX MONTHS? A. As we've discussed, I've taken a number of steps to try to improve the fund's performance. Over the next six months, I may make some additional changes to the fund as the market shifts. For instance, if there's a market correction, a period when stock prices fall, I'll take advantage of it by buying good stocks that are usually expensive. In general, we'll probably see more modest returns over the next six months. The dramatic gains of the late 80's and early 90's could be more difficult to come by if we settle into a slow growth economy. FUND FACTS GOAL: to increase the value of the fund's shares by investing in large and small companies traded in the over-the-counter market START DATE: December 31, 1984 SIZE: as of January 31, 1994, over $1.3 billion MANAGER: Alan Radlo, since May 1990; manager, Fidelity U.S. pension accounts and Canadian mutual funds, 1985-1990 (checkmark) ALAN RADLO ON CYCLICAL STOCKS: "There's been a major shift to cyclical stocks over the last six months. Cyclical stocks are stocks that usually increase in value when the economy improves or decrease in value when the economy performs poorly. For instance, travel-related companies do well in an improving economy because more people take business trips. I've chosen cyclicals with good long-term track records and high-growth potential, such as manufacturing companies. I've also focused on transportation stocks. Regional airlines have done well because they've gained access to routes that the major airlines have shed. As a result, my two top airline investments, Mesa Airlines and Comair have been excellent performers over the last six months." (bullet) The fund had success with franchises offering a unique product that dominated their markets. For example, Duty Free International, the border crossing company that leads its industry, grew about 30% over the last six months. (bullet) Cash and other short-term investments made up 21% of the fund on January 31, 1994. The fund is looking for opportunities to spend, but continues to hold on to cash when top-performing stocks are too expensive. INVESTMENT CHANGES TOP TEN STOCKS AS OF JANUARY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Mesa Airlines, Inc. 2.9 1.6 U.S. Healthcare, Inc. 2.8 0.9 Intel Corp. 2.6 1.9 Duty Free International, Inc. 2.5 0.4 Comair Holdings, Inc. 2.1 0.2 Tele-Communications, Inc. Class 2.0 0.0 A Boston Scientific Corp. 1.9 0.4 Microsoft Corp. 1.9 1.5 Orbital Sciences Corporation 1.8 1.2 Callaway Golf Co. 1.7 0.0 TOP FIVE INDUSTRIES AS OF JANUARY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE INDUSTRIES 6 MONTHS AGO Health 15.6 13.5 Technology 12.0 9.0 Media & Leisure 11.1 1.6 Finance 10.3 29.0 Transportation 9.7 5.5 ASSET ALLOCATION AS OF JANUARY 31, 1994 * AS OF JULY 31, 1993 ** Row: 1, Col: 1, Value: 21.0 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 39.0 Row: 1, Col: 4, Value: 40.0 Row: 1, Col: 1, Value: 23.3 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 36.7 Row: 1, Col: 4, Value: 20.0 Row: 1, Col: 5, Value: 20.0 Stocks 76.7% Bonds 0.0% Short-term Investments 23.3% Stocks 79.0% Bonds 0.0% Short-term Investments 21.0% * FOREIGN INVESTMENTS 9.0% ** FOREIGN INVESTMENTS 5.8% INVESTMENTS JANUARY 31, 1994 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 79.0% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 1.8% Orbital Sciences Corporation (a)(b) 1,291,100 $ 24,531 68556410 BASIC INDUSTRIES - 3.0% CHEMICALS & PLASTICS - 0.6% Petrolite Corporation 258,300 8,266 71672310 IRON & STEEL - 1.8% Atchison Casting Corp. (a)(b) 298,700 5,750 04661310 Gibraltar Steel Corp. (a) 205,000 3,126 37476F10 Kentucky Electric Steel, Inc. (a) 154,400 2,220 49127B10 Schnitzer Steel, Inc. Class A 162,000 5,022 80688210 Shiloh Industries, Inc. 300,000 3,937 82454310 Steel Technologies, Inc. 201,500 3,904 85814710 23,959 PAPER & FOREST PRODUCTS - 0.6% Riverside Forest Products 257,800 5,237 76890410 Timberwest Forest Ltd. (a)(c) 220,000 2,607 88690820 7,844 TOTAL BASIC INDUSTRIES 40,069 CONSTRUCTION & REAL ESTATE - 2.7% BUILDING MATERIALS - 0.8% Lilly Industrial Coatings, Inc. Class A 10,700 257 53249110 Tecumseh Products Co. Class A 206,300 10,108 87889520 10,365 CONSTRUCTION - 1.4% Redman Industries (a) 94,800 2,346 75764210 Schuler Homes, Inc. (a) 380,400 9,320 80818810 Southern Energy Homes, Inc. (a) 376,000 6,204 84281410 Sundance Homes, Inc. (a) 128,700 1,400 86724Q10 19,270 ENGINEERING - 0.5% Glenayre Technologies, Inc. 149,300 6,308 37789910 TOTAL CONSTRUCTION & REAL ESTATE 35,943 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - 2.6% AUTOS, TIRES, & ACCESSORIES - 1.9% Deflectashield Corp. 91,500 $ 1,556 24476410 Hayes-Dana, Inc. 221,000 3,055 42077610 Spartan Motors, Inc. 282,600 4,345 84681910 Titan Wheel International, Inc. 234,300 6,502 88832810 Wabash National Corp. 200,800 7,731 92956610 Williams Controls, Inc. (a)(b) 967,600 2,600 96946510 25,789 TEXTILES & APPAREL - 0.7% Galey & Lord, Inc. (a) 199,400 3,240 36352K10 Justin Industries, Inc. 400,900 6,415 48217110 9,655 TOTAL DURABLES 35,444 ENERGY - 0.7% ENERGY SERVICES - 0.4% Canadian Fracmaster Ltd. (a) 500,000 5,032 13591310 OIL & GAS - 0.3% Arakis Energy Corp. (a) 400,000 2,446 03852L10 Canadian Foremost Ltd. (a)(b) 327,500 2,279 13570830 4,725 TOTAL ENERGY 9,757 FINANCE - 10.3% BANKS - 8.2% Bancfirst Corp. 61,900 897 05945F10 Bank of New Hampshire Corp. 110,000 1,980 06385410 Bok Financial (a) 20,000 520 05561Q20 CPB, Inc. 175,300 4,645 12590310 Chittenden Corp. 281,875 5,426 17022810 Colonial BancGroup, Inc. Class A 77,000 1,463 19549320 Commerce Bank, Virginia Beach (b) 233,887 5,964 20056M10 Compass Bancshares, Inc. 152,750 3,399 20449H10 Deposit Guaranty Corp. 100,000 2,850 24955510 Fifth Third Bancorp 308,800 15,517 31677310 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED BANKS - CONTINUED First Citizens Bancshares, Inc. (N.C.) 118,898 $ 5,291 31946M10 First Commerce Bancshares, Inc.: Class A 125,600 1,853 31977710 Class B 472,900 5,911 31977720 First Commerce Corp. 5,379 141 31977910 First Commercial Corp. 1,406 30 31982510 First Western Bancorp 256,675 7,893 33750510 Hancock Holding Co. 229,400 7,111 41012010 Huntington Bancshares, Inc. 2,253 54 44615010 Intercontinental Bank Miami, Fla 60,500 1,150 45853L10 Northern Trust Corp. 267,850 11,518 66585910 One Valley Bancorp West Virginia, Inc. 120,560 3,436 68241910 State Street Boston Corp. 561,600 21,341 85747310 Sterling Bancshares, Inc. 33,800 608 85890710 Trico Bancshares 72,552 1,596 89609510 110,594 CREDIT & OTHER FINANCE - 0.4% Arbor National Holdings, Inc. (a) 131,000 2,227 03876110 Nolato AB B Free shares 11,500 394 65599J22 Sydostinvest AB B Free shares (a) 1,000,000 3,365 88799B22 5,986 INSURANCE - 0.7% Allied Group, Inc. 195,300 5,176 01922010 Phoenix Re Corp. 155,500 4,004 71912310 9,180 SAVINGS & LOANS - 0.6% Charter One Financial Corp. 200,400 3,932 16090310 Conservative Savings Corp. (b) 152,600 1,946 20848210 Maryland Federal Bancorp, Inc. 67,500 1,772 57406110 7,650 SECURITIES INDUSTRY - 0.4% Midland Walwyn, Inc. (a) 500,000 5,502 59780110 TOTAL FINANCE 138,912 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - 15.6% DRUGS & PHARMACEUTICALS - 6.5% Alpha-Beta Technology, Inc. (a) 149,500 $ 4,336 02071K10 Amgen, Inc. (a) 319,200 15,561 03116210 Astra A Free shares 440,000 10,558 04632292 Biogen, Inc. (a) 109,500 5,708 09059710 Cell Genesys, Inc. (a) 220,000 4,070 15092110 Copley Pharmaceutical, Inc. (a) 113,800 3,471 21745K10 Gilead Sciences, Inc. (b) 1,107,400 14,119 37555810 Sepracor, Inc. (a) 675,000 5,738 81731510 Sigma Aldrich Corp. 91,200 4,526 82655210 Somatix Therapy Corp. (a) 368,900 3,043 83444710 Telor Ophthalmic Pharmaceuticals, Inc. (a)(b) 500,000 1,875 87969G10 Teva Pharmaceutical Industries Ltd. ADR 145,900 4,632 88162420 Vertex Pharmaceuticals, Inc. (a) 150,000 2,850 92532F10 Watson Pharmaceuticals, Inc. (a) 121,400 3,369 94268310 Zenith Laboratories, Inc. (a) 289,200 4,627 98936520 88,483 MEDICAL EQUIPMENT & SUPPLIES - 5.2% AMBU International AS Class B 6,500 1,131 02399992 Boston Scientific Corp. (a) 1,688,800 25,754 10113710 Cardinal Distribution, Inc. 449,800 19,791 14148710 Mitek Surgical Products, Inc. (a)(b) 422,400 7,286 60671F10 SciMed Life Systems, Inc. (a) 150,100 6,379 80861410 Sofamor/Danek Group, Inc. (a) 126,100 4,477 83400510 Zoll Medical Corp. (a) 151,700 5,461 98992210 70,279 MEDICAL FACILITIES MANAGEMENT - 3.9% Advantage Health Corp. (a)(b) 566,100 8,916 00755P10 Homedco Group, Inc. (a) 110,000 3,932 43739A10 Syncor International Corp. (a) 102,700 2,465 87157J10 U.S. Healthcare, Inc. 561,200 37,320 91191010 52,633 TOTAL HEALTH 211,395 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - 1.5% ELECTRICAL EQUIPMENT - 0.3% Holophane Corp. 162,200 $ 2,798 43645B10 Spectrum Control, Inc. (a) 250,000 1,187 84761510 3,985 INDUSTRIAL MACHINERY & EQUIPMENT - 1.2% ATS Automation (b) 500,000 4,515 00194010 Bearings, Inc. 44,000 1,425 07400520 Brenco, Inc. 85,000 733 10706110 Enerflex Systems Ltd. 318,400 3,773 29265B10 Hallmark Technologies, Inc. (b) 500,000 1,975 40626R10 JLG Industries, Inc. 142,300 3,895 46621010 16,316 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 20,301 MEDIA & LEISURE - 11.1% BROADCASTING - 3.7% Multimedia, Inc. (a) 313,000 10,955 62545K10 Tele-Communications, Inc. Class A (a) 1,000,000 27,250 87924010 Viacom, Inc. (non-vtg.) (a) 328,900 11,429 92552430 49,634 ENTERTAINMENT - 0.2% Players International, Inc. 128,500 3,309 72790310 LEISURE DURABLES & TOYS - 2.7% Brio AB B Free shares 22,700 331 10999722 Callaway Golf Co. 337,300 23,400 13119310 Canstar Sports, Inc. 200,000 1,768 13790710 Coastcast Corp. (a) 290,600 9,263 19057T10 Kompan International AS Class B 6,780 1,633 50099C92 36,395 LODGING & GAMING - 4.2% Circus Circus Enterprises, Inc. (a) 405,000 14,985 17290910 Four Seasons Hotels, Inc. 250,000 2,163 35100E10 International Game Technology 551,000 16,255 45990210 President Riverboat Casinos, Inc. (a) 490,800 8,957 74084810 Primadonna Resorts, Inc. 231,000 5,688 74154810 Station Casinos, Inc. 458,100 8,475 85768910 56,523 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED PUBLISHING - 0.2% Steck-Vaughn Publishing Corp. (a) 254,500 $ 2,545 85804510 RESTAURANTS - 0.1% Bertucci's, Inc. (a) 121,700 2,191 08606310 TOTAL MEDIA & LEISURE 150,597 NONDURABLES - 2.0% AGRICULTURE - 0.4% Delta & Pine Land Co. (a) 151,200 2,721 24735710 Kanthal AB B Free shares (a) 150,000 2,057 48899E22 4,778 BEVERAGES - 0.3% Mondavi Robert Corp. Class A (a) 521,000 4,624 60920010 FOODS - 1.3% Brothers Gourmet Coffees, Inc. (a)(b) 970,500 16,499 11482210 Odwalla, Inc. 82,000 984 67611110 17,483 TOTAL NONDURABLES 26,885 RETAIL & WHOLESALE - 4.9% APPAREL STORES - 0.3% Designs, Inc. (a) 283,400 3,613 25057L10 GENERAL MERCHANDISE STORES - 0.3% Younkers, Inc. (a) 216,200 4,378 98776710 RETAIL & WHOLESALE, MISC - 4.3% Duty Free International, Inc. (b) 1,881,800 34,108 26708410 Futures Shops Ltd. 128,800 2,738 36091310 Green Forest Lumber Corp. (sub. voting) 268,100 2,421 39290010 Grossman's, Inc. (a) 432,000 1,728 39921510 Rex Stores Corp. (a) 83,200 1,695 76162410 Tiffany & Company, Inc. 531,800 15,555 88654710 58,245 TOTAL RETAIL & WHOLESALE 66,236 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - 0.0% Zebra Technologies Corp. Class A (a) 15,000 $ 704 98920710 TECHNOLOGY - 12.0% COMMUNICATIONS EQUIPMENT - 2.1% Cisco Systems, Inc. (a) 99,000 7,177 17275R10 DSC Communications Corp. (a) 180,000 10,823 23331110 Digital Link Corp. 2 28 23331110 Newbridge Networks Corp. (a) 160,000 10,720 65090110 28,748 COMPUTER SERVICES & SOFTWARE - 3.1% Crosscommunications Corp. (a) 54,800 1,106 22757K10 EICON Technology Corp. (a) 150,000 1,665 28248F10 Electronics For Imaging, Inc. (a) 164,000 2,665 28608210 Microsoft Corp. (a) 296,600 25,248 59491810 Parametric Technology Corp. (a) 162,880 5,436 69917310 Rand A Technology Corp. (b) 559,500 5,210 75190810 41,330 COMPUTERS & OFFICE EQUIPMENT - 1.1% Beamscope Canada (a)(b) 598,800 5,406 07391710 Norand Corp. (a) 243,700 7,159 65542110 Tseng Laboratories, Inc. (a) 194,000 2,183 89852810 14,748 ELECTRONIC INSTRUMENTS - 1.4% Analogic Corp. (a) 188,500 3,063 03265720 Cognex Corp. (a) 790,800 14,432 19242210 Sensonor AS 300,000 1,631 81799E22 19,126 ELECTRONICS - 4.3% Allgon AB B Free shares 200,000 5,713 01899822 Benefon Oy (a)(b) 25,000 6,122 08199822 Intel Corp. 529,100 34,524 45814010 Maxim Integrated Products, Inc. (a) 71,200 3,542 57772K10 Methode Electronics, Inc. Class A 404,100 6,062 59152020 Robinson Nugent, Inc. (b) 301,500 2,487 77081010 58,450 TOTAL TECHNOLOGY 162,402 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - 9.7% AIR TRANSPORTATION - 5.9% Amtran, Inc. (b) 587,100 $ 6,311 03234G10 Comair Holdings, Inc. (b) 1,107,350 28,237 19978910 Great Lakes Aviation (a) 196,500 2,555 39054K10 Mesa Airlines, Inc. (a)(b) 2,207,874 39,742 59048110 Tower Air, Inc. 180,000 3,060 89169710 79,905 RAILROADS - 1.5% Johnstown America Industries, Inc. (a) 291,000 7,493 47947710 Wisconsin Central Transportation Corp. (a) 205,700 12,445 97659210 19,938 TRUCKING & FREIGHT - 2.3% Arnold Industries, Inc. 325,000 6,622 04259510 Builders Transport, Inc. (a) 246,200 4,216 12008410 Landair Services, Inc. 85,300 1,898 51475910 Landstar System, Inc. 101,300 2,115 51509810 Linjebuss AB Class A 300,000 9,141 53599422 MNX, Inc. (a) 160,900 2,172 55311410 Werner Enterprises, Inc. 153,900 4,540 95075510 30,704 TOTAL TRANSPORTATION 130,547 UTILITIES - 1.1% CELLULAR - 0.9% IDB Communications Group, Inc. (a) 141,900 7,751 44935510 Mobile Telecommunications Technologies, Inc. (a) 202,900 4,033 60740610 11,784 TELEPHONE SERVICES - 0.2% ABL CDA, Inc. 200,000 1,091 00095110 Doro Telefoni AB (a)(b) 100,000 1,714 25899922 2,805 TOTAL UTILITIES 14,589 TOTAL COMMON STOCKS (Cost $939,183) 1,068,312 U.S. TREASURY OBLIGATIONS - 14.8% U.S. Treasury Bills, yields at date of purchase 2.79%-2.97%, 2/3/94-2/17/94 (Cost $199,844) $200,000 $ 199,857 912794H7 REPURCHASE AGREEMENTS - 6.2% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 3.19% dated 1/31/94 due 2/1/94 $84,616 84,609 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,223,636) $ 1,352,778 LEGEND 7. Non-income producing 8. Affiliated company (see Note 6 of Notes to Financial Statements). 9. 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 this security amounted to $2,607,000 or 0.2% of net assets. INCOME TAX INFORMATION At January 31, 1994, the aggregate cost of investment securities for income tax purposes was $1,225,053,000. Net unrealized appreciation aggregated $127,725,000 of which $159,779,000 related to appreciated investment securities and $32,054,000 related to depreciated investment securities. FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED JANUARY 31, 1994 YEARS ENDED JULY 31, (UNAUDITED) 1993 1992 1991 1990 1989 SELECTED PER-SHARE DATA Net asset value, $ 25.90 $ 24.65 $ 24.28 $ 20.42 $ 22.36 $ 17.95 beginning of period Income from Investment Operations Net investment .07 .06 .08 .19 .51 .50 income Net realized and 2.34 3.68 2.92 4.30 .47 4.21 unrealized gain (loss) on investments Total from investment 2.41 3.74 3.00 4.49 .98 4.71 operations Less Distributions From net investment (.10) (.25) (.12) (.05) (.51) (.30) income From net realized (3.42) (2.24) (2.51) (.58) (2.41) - gain Total distributions (3.52) (2.49) (2.63) (.63) (2.92) (.30) Net asset value, end of $ 24.79 $ 25.90 $ 24.65 $ 24.28 $ 20.42 $ 22.36 period TOTAL RETURN (dagger) (double dagger) 10.18% 16.67% 13.30% 23.03% 4.53% 26.72% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 1,372 $ 1,327 $ 1,037 $ 864 $ 697 $ 772 period (in millions) Ratio of expenses to .87%* 1.08% 1.17% 1.29% 1.35% 1.32% average net assets Ratio of expenses to .88%* 1.08% 1.17% 1.29% 1.35% 1.32% average net assets before expense reductions Ratio of net investment .50%* .53% .59% 1.00% 2.30% 2.02% income to average net assets Portfolio turnover rate 255%* 213% 245% 198% 212% 118%
* ANNUALIZED (dagger) TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. (double dagger) THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS). NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1994 (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 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 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 current exchange rate. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rate on the dates of the transactions. 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 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. Dividend and interest income is recorded net of foreign taxes where recovery of such taxes is not assured. 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 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 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. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 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. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. 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, the fund changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts as of July 31, 1993 have been reclassified to reflect an increase in paid in capital of $97,714,000, a decrease in undistributed net investment income of $14,971,000 and a decrease in accumulated net realized gain on investments of $82,743,000. 2. OPERATING POLICIES. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The fund's investment adviser, Fidelity Management & Research Company (FMR), is responsible for determining that the value of these underlying securities remains at least equal to the resale price. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management contracts with FMR, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Federal Agency obligations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $1,317,505,000 and $1,388,609,000, 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 ranging from .31% to .52% and is based on the monthly average net assets of all the mutual funds advised by FMR. The annual individual fund fee rate is .35%. The basic fee is subject to a performance adjustment (up to a maximum of + or - .20%) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED management fee was equivalent to an annualized rate of .51% of average net assets after the performance adjustment. The Board of Trustees approved a new group fee rate schedule with rates ranging from .2850% to .5200%. Effective November 1, 1993, FMR has voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. SALES LOAD. For the period, Fidelity Distributors Corporation , an affiliate of FMR and the general distributor of the fund, received sales charges of $531,000 on sales of shares of the fund. TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives fees based on the type, size, number of accounts and the number of transactions made by shareholders. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING FEE. 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 $95,000 for the period. 5. BANK BORROWINGS. The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, the fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $99,837,000 and $35,204,000, respectively. The weighted average interest rate was 5.33%. 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 with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS PURCHASES SALES DIVIDEND MARKET AFFILIATES COST COST INCOME VALUE ATS Automation $ 121 $ - $ - $ 4,515 Advantage Health Corp. (a) 388 623 - 8,916 Amtran, Inc. 357 763 - 6,311 SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES - CONTINUED AMOUNTS IN THOUSANDS PURCHASES SALES DIVIDEND MARKET AFFILIATES COST COST INCOME VALUE Atchison Casting Corp. (a) $ 2,145 $ 1,698 $ - $ 5,750 Beamscope Canada (a) 1,779 - - 5,406 Benefon Oy (a) 900 - - 6,122 Brothers Gourmet Coffees, Inc. (a) 7,910 - - 16,499 Canadian Foremost Ltd. (a) 602 - - 2,279 Coastal Banc Savings Association - 1,582 - - Cognex Corp. (a) 2,966 4,080 - - Comair Holdings, Inc. 2,571 4,127 28,237 Commerce Bank, Virginia Beach 1,213 - 58 5,964 Conservative Savings Corp. - - - 1,946 Doro Telefoni AB (a) - - - 1,714 Duty Free International, Inc. 8,807 - 90 34,108 Gilead Sciences, Inc. 1,837 - - 14,119 Hallmark Technologies, Inc. 402 - - 1,975 Irwin Financial Corp. - 1,098 - - Longhorn Steaks 100 1,268 - - Mesa Airlines, Inc. (a) 9,406 2,610 - 39,742 Metropolitan Bancorp - 1,499 - - Mitek Surgical Products, Inc. (a) 443 - - 7,286 Orbital Sciences Corporation (a) 2,941 1,008 - 24,531 PDA Engineering - 965 - - Rand A Technology Corp. 1,436 - 5,210 Riverside Forest Products - 1,842 - - Robinson Nugent, Inc. 130 - 8 2,487 Sterling Bancshares, Inc. - 1,130 15 - Summit Bancorp, Inc. - 610 - - Telor Opthalmic Pharmaceuticals, Inc. (a) 169 - - 1,875 Total Pharmaceutical Care, Inc. - 3,618 - - Williams Controls, Inc. (a) 545 - - 2,600 TOTALS $ 47,168 $ 28,521 $ 171 $ 227,592 (a) NON-INCOME PRODUCING 7. EXPENSE REDUCTIONS. FMR has directed certain portfolio trades to brokers who paid a portion of the fund's expenses. For the period, the fund's expenses were reduced by $57,000 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)(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)(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. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO WRITE FIDELITY 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. Please send ALL correspondence about retirement accounts to Dallas. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 2269 Boston, MA 02107-2269 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30280 Salt Lake City, UT 84130-0280 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments Additional Payments P.O. Box 2656 Boston, MA 02293-0656 Fidelity Investments Additional Payments P.O. Box 620024 Dallas, TX 75262-0024 Fidelity Investments Additional Payments P.O. Box 31455 Salt Lake City, UT 84131-0455 OVERNIGHT EXPRESS Fidelity Investments Additional Payments World Trade Center 164 Northern Avenue Boston, MA 02210 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02103-0878 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02101-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 620024 Dallas, TX 75262-0024 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Alan Radlo, Vice President Gary L. French, Treasurer John H. Costello, Assistant Treasurer Arthur S. Loring, Secretary Robert H. Morrison, Manager, Security Transactions 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 GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Fidelity Fifty Growth Company Fund Low-Priced Stock Fund Magellan(Registered trademark) Fund New Millennium(registered 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) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (Registered trademark) GROWTH & INCOME PORTFOLIO SEMIANNUAL REPORT JANUARY 31, 1994 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on minimizing taxes. 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 last six months. INVESTMENTS 10 A complete list of the fund's investments with their market value. FINANCIAL STATEMENTS 35 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 39 Footnotes 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. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK, AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FDIC. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: No one wants to pay more taxes than they have to. But a recent survey of 500 U.S. households, conducted by Fidelity and Yankelovich Partners, showed that few people took steps to reduce their taxes under the new tax laws that went into effect last year. In fact, many people were not completely aware of the changes until they filed their 1993 tax returns. Whether or not you're someone whose tax bill increased as a result of these changes, it may make sense to consider ways to keep more of what you earn. First, if your employer offers a 401(k) or 403(b) retirement savings plan, consider enrolling. These plans are set up so you can make regular contributions - before taxes - to a retirement savings plan. They offer a disciplined savings strategy, the ability to accumulate earnings tax-deferred, and immediate tax savings. For example, if you earn $40,000 a year and contribute 7% of your salary to your 401(k) plan, your annual contribution is $2,800. That reduces your taxable income to $37,200 and, if you're in the 28% tax bracket, saves you $784 in federal taxes. In addition, you pay no taxes on any earnings until withdrawal. It may be a good idea to contact your benefits office as soon as possible to find out when you can enroll or increase your contribution. Most employers allow employees to make changes only a few times each year. Second, consider an IRA. Many people are eligible to make an IRA contribution (up to $2,000) that is fully tax deductible. That includes people who are not covered by company pension plans, or those within certain income brackets. Even if you don't qualify for a fully deductible contribution, any IRA earnings will grow tax-deferred until withdrawal. Third, consider tax-free investments like municipal bonds and municipal bond funds. Often these can provide higher after-tax yields than comparable taxable investments. For example, if you're in the new 36% federal income tax bracket and invest $10,000 in a taxable investment yielding 7%, you'll pay $252 in federal taxes and receive $448 in income. That same $10,000 invested in a tax-free bond fund yielding 5.5% would allow you to keep $550 in income. These are three investment strategies that could help lower your tax bill in 1994. If you're interested in learning more, please call us at 1-800-544-8888 or visit a Fidelity Investor Center. We look forward to talking with you. Best regards, Edward C. Johnson 3d, Chairman 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. Each performance figure 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 stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JANUARY 31, 1994 PAST 6 PAST 1 PAST 5 LIFE OF MONTHS YEAR YEARS FUND Growth & Income 10.38% 20.68% 123.09% 316.00% Growth & Income 7.07% 17.06% 116.39% 303.52% (incl. 3% sales charge) S&P 500(Registered trademark) 8.97% 12.88% 90.05% 199.55% Average Growth & Income 9.19% 13.62% 82.14% n/a Fund 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 30, 1985. For comparison, you can look at the performance of the Standard & Poor's 500 Composite Stock Price Index - a common proxy for the U.S. stock market. You can also look at the average growth & income fund, which reflects the performance of over 331 growth & income funds tracked by Lipper Analytical Services. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JANUARY 31, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Growth & Income 20.68% 17.41% 19.25% Growth & Income (incl. 3% sales 17.06% 16.69% 18.81% charge) S&P 500(Registered trademark) 12.88% 13.70% 14.51% Average Growth & Income Fund 13.62% 12.57% 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 Growth & Income (027) S&P 500 12/30/85 9700.00 10000.00 12/31/85 9700.00 10081.75 01/31/86 10252.90 10138.21 02/28/86 11232.60 10896.55 03/31/86 12580.90 11504.57 04/30/86 12697.30 11374.57 05/31/86 13104.70 11979.70 06/30/86 13444.20 12182.15 07/31/86 12861.59 11501.17 08/31/86 13552.86 12354.56 09/30/86 12686.33 11332.84 10/31/86 13301.34 11986.74 11/30/86 13340.43 12278.02 12/31/86 13086.06 11964.93 01/31/87 14666.60 13576.61 02/28/87 15363.61 14112.88 03/31/87 15825.00 14520.74 04/30/87 15805.98 14391.51 05/31/87 15865.22 14516.72 06/30/87 16447.70 15249.81 07/31/87 17359.64 16022.98 08/31/87 17708.02 16620.63 09/30/87 17568.67 16256.64 10/31/87 13908.03 12754.96 11/30/87 13164.69 11703.95 12/31/87 13841.69 12594.62 01/31/88 14709.54 13124.86 02/29/88 15489.51 13736.47 03/31/88 15156.86 13312.02 04/30/88 15400.97 13459.78 05/31/88 15600.69 13576.88 06/30/88 16321.81 14200.06 07/31/88 16310.61 14146.10 08/31/88 16120.17 13665.13 09/30/88 16703.97 14247.27 10/31/88 17031.94 14643.34 11/30/88 16783.13 14433.94 12/31/88 17022.17 14686.53 01/31/89 18088.20 15761.59 02/28/89 17893.34 15369.13 03/31/89 18446.32 15727.23 04/30/89 19232.74 16543.47 05/31/89 20134.82 17213.48 06/30/89 20273.23 17115.36 07/31/89 21637.21 18660.88 08/31/89 22103.53 19026.63 09/30/89 21984.84 18948.62 10/31/89 21290.20 18509.02 11/30/89 21643.61 18886.60 12/31/89 22060.99 19339.88 01/31/90 20904.62 18042.17 02/28/90 21225.84 18274.92 03/31/90 21598.67 18759.20 04/30/90 21041.53 18290.22 05/31/90 22596.33 20073.52 06/30/90 22491.32 19937.02 07/31/90 22334.58 19873.22 08/31/90 20427.65 18076.68 09/30/90 19249.75 17196.35 10/31/90 19209.64 17122.40 11/30/90 20158.76 18228.51 12/31/90 20561.64 18737.08 01/31/91 22439.48 19554.02 02/28/91 24330.83 20952.13 03/31/91 25671.08 21459.18 04/30/91 26024.60 21510.68 05/31/91 27520.27 22439.94 06/30/91 25651.14 21412.19 07/31/91 27222.73 22410.00 08/31/91 28015.36 22941.12 09/30/91 27768.26 22558.00 10/31/91 28264.89 22860.28 11/30/91 26789.21 21939.01 12/31/91 29164.99 24448.83 01/31/92 29862.45 23994.08 02/29/92 30517.20 24306.00 03/31/92 29890.36 23832.04 04/30/92 30562.54 24532.70 05/31/92 30676.95 24652.91 06/30/92 30074.10 24285.58 07/31/92 30692.55 25278.86 08/31/92 30376.14 24760.64 09/30/92 30687.27 25052.82 10/31/92 30930.31 25140.50 11/30/92 31886.24 25997.80 12/31/92 32529.60 26317.57 01/31/93 33437.33 26538.64 02/28/93 33816.92 26899.56 03/31/93 35058.06 27467.14 04/30/93 35008.26 26802.44 05/31/93 35738.64 27520.74 06/30/93 36288.93 27600.55 07/31/93 36556.01 27490.15 08/31/93 37991.54 28532.03 09/30/93 38198.34 28312.33 10/31/93 38625.81 28898.40 11/30/93 37753.78 28623.86 12/31/93 38882.40 28970.21 01/31/94 40352.30 29955.20 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Growth & Income Portfolio on December 30, 1985, when the fund started, and paid a 3% sales charge. As the chart shows, by January 31, 1994, the value of your investment would have grown to $40,352 - a 303.52% 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 $29,955 - a 199.55% 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 Steve Kaye, Portfolio Manager of Fidelity Growth & Income Portfolio Q. STEVE, HOW HAS THE FUND PERFORMED? A. The fund returned 10.38% and 20.68% for the six months and year ended January 31, 1994. That compared to 9.19% and 13.62% for the average growth and income fund, which Lipper Analytical Services tracks. During the same periods, the S&P 500 returned 8.97% and 12.88%. Q. WHAT TYPES OF STOCKS HELPED THE FUND COME OUT AHEAD OVER THE PAST SIX MONTHS? A. The fund is broadly diversified, so its gains came from a variety of sources. For example, among the fund's top investments were automobile manufacturers such as Chrysler and Ford. Their stocks performed well as the economy grew stronger and the firms continued to pick up market share from foreign competitors. We also owned shares of railroad companies such as CSX, Santa Fe Pacific and Kansas City Southern that have done a good job of taking business away from truckers. Q. WHAT WERE THE DISAPPOINTMENTS DURING THE PERIOD? A. Energy stocks, for one, which accounted for around 7% of the fund's total investments. That sector has been weak in recent months because of falling oil prices. But I'm still optimistic that companies such as British Petroleum and Royal Dutch Petroleum will benefit from cost-cutting and higher profit margins in their refining businesses. So I've maintained a 6% investment in that sector. Q. WHAT SIGNIFICANT CHANGES HAVE YOU MADE IN THE FUND SINCE JULY? A. I cut back its stake in financial stocks from around 17% of total investments six months ago to about 12% at the end of January. Most of this came from selling regional banks whose stock prices had climbed to reflect the improvement in their loan portfolios, and the effect of falling interest rates, which improved their profit margins. Some of the money from the sale of financial stocks went into consumer stocks such as Philip Morris. Those stocks have been unpopular with investors for the last few years because of the perception that consumer loyalty to major brand names is dead. But at their recent prices, the shares look attractive even based on their more modest earnings prospects. In addition, many of these stocks provide attractive yields. Q. DESPITE THAT SHIFT, FINANCIAL STOCKS STILL MAKE UP THE FUND'S LARGEST SECTOR. WHAT ARE YOU FOCUSING ON NOW? A. I've shifted more money into stocks of financial companies that don't rely on improving balance sheets or falling interest rates to boost their earnings. For example, one of the fund's largest investments at the end of January was the Federal National Mortgage Association, which buys mortgages and holds them or repackages them as securities. It's attractive because its management has done such a good job of increasing its share of the growing mortgage market. The fund also continues to hold Citicorp, which posted sizable gains during the past six months. I believe the stock will continue to rise as investors realize that the firm has recovered from its financial problems and has tremendous growth potential in international markets. Q. HEALTH-CARE STOCKS WERE ABOUT 7% OF THE FUND'S INVESTMENTS. AREN'T YOU CONCERNED THAT HEALTH-CARE REFORM WILL CURTAIL THEIR PROFITS? A. Not really. Everyone assumes that health-care reform will be the end of the world for these firms. But there are still plenty of opportunities for well-managed companies to make money. Many of the larger hospital companies are merging so that they have the size and clout to dominate their markets and keep costs low, which should help them prosper in the coming environment. For example, the fund owned shares of HCA - Hospital Corp. of America - and Columbia Hospital, which will merge - in early February to form Columbia Healthcare, a company with more than $10 billion in annual sales. Q. WHAT'S YOUR OUTLOOK ON CYCLICALS - STOCKS WHOSE EARNINGS ARE CLOSELY LINKED TO THE ECONOMY? A. I still have a significant investment in auto stocks. They're pretty far along in their current upswing, but I expect they'll benefit further as the European economies turn around and boost car sales overseas. The fund also owns shares of industrial firms that will do well as the U.S. economy gains momentum. They include chemical companies such as Union Carbide and Monsanto. I sold some of the fund's stake in retail stocks during the past several months after their prices rose, but the fund still has 4% of its investments in that sector, which should do well as consumer confidence recovers further. And the fund's largest investment, General Electric, has extremely broad exposure to various sectors of the U.S. and overseas economies, so it should prosper from economic growth here and abroad. Q. IS THE FUND'S SIZABLE STAKE IN UTILITIES DESIGNED TO BOOST ITS YIELD? A. I try to maintain a dividend yield on the fund that is equal to or greater than the yield on the S&P 500, about 2.69% on average during January. But the utilities in the fund, which make up about 10% of its investments, are also chosen for their potential to grow earnings. They include regional bell operating companies (RBOCs) such as Ameritech and Southwestern Bell that have cut costs to improve their profits. These firms also will play an important role in emerging businesses such as cable and wireless communication. Late last summer, I sold off some of the RBOCs because they'd gotten expensive. But since then their shares have declined in price, so I've recently built up my stake in the group again. Q. OVER THE PAST SIX MONTHS YOU INCREASED YOUR CASH POSITION FROM AROUND 8% TO 14%. DOES THAT MEAN YOU SEE PROBLEMS AHEAD FOR THE STOCK MARKET? A. Not necessarily. Lately, it has simply become more difficult to find cheap stocks to replace the ones I sell. That suggests to me that a market correction would be healthy, because it would remind investors that there are risks associated with investing in stocks. But I don't like to make stock market predictions. I would prefer to keep calling companies and coming up with good stocks for the fund. FUND FACTS GOAL: to increase the fund's share price over the long-term and provide some current income START DATE: December 30, 1985 SIZE: as of January 31, 1994, over $8 billion MANAGER: Steven Kaye, since January 1993; manager, Fidelity Blue Chip Fund, October 1990-December 1992; Fidelity Select Energy Services, Biotechnology, and Health Care Portfolios, 1986-1990 (checkmark) STEVE KAYE ON HIS INVESTMENT STRATEGY: "My basic approach to stock-picking is to talk to hundreds of companies a year. I don't base my investments on a particular view about what will happen in the economy or the markets. Instead, I look at individual companies whose shares provide good value at reasonable risk. The fund isn't limited to a single approach. I like to buy earnings growth cheaply, but if I see an attractive situation where earnings growth has been poor I'll buy the stock as long as I think the firm will likely develop some decent earnings momentum over the next year or so. "I try very hard to avoid stocks trading at extremely high levels that can suffer big losses if they suddenly become unpopular. That 's exactly what happened to health-care stocks and food, beverage and tobacco companies, which were once on just about everyone's list of favorites. Now that investors have lost interest in those sectors, the stocks are less risky, so I've been adding them to the fund's investments. Meanwhile, the shares pay very attractive dividend yields." (bullet) The fund's top sector concentrations on January 31, 1994 included a 12% stake in finance, 10% in utilities and 7% in healthcare. (bullet) At the end of January, about 13% of the fund's investments were overseas. INVESTMENT CHANGES TOP TEN INVESTMENTS AS OF JANUARY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO General Electric Co. 2.9 3.1 Chrysler Corp., Series A, $4.625 1.5 1.1 Citicorp 1.4 1.4 HCA - Hospital Corporation of America Class A 1.2 0.7 Federal National Mortgage Association 1.1 1.1 Philip Morris Companies, Inc. 1.0 0.3 Entergy Corp. 1.0 1.0 Ameritech Corp. 1.0 0.9 British Petroleum PLC ADR 1.0 0.4 Southwestern Bell Corp. 1.0 0.9 TOP FIVE INDUSTRIES AS OF JANUARY 31, 1994* % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS 6 MONTHS AGO Finance 11.5 17.0 Utilities 10.1 12.4 Energy 7.4 7.9 Health 7.0 4.6 Durables 6.5 5.2 * EXCLUDES SECURITIES WITH MATURITIES OF LESS THAN ONE YEAR ASSET ALLOCATION AS OF JANUARY 31, 1994* AS OF JULY 31, 1993** Row: 1, Col: 1, Value: 13.6 Row: 1, Col: 2, Value: 6.3 Row: 1, Col: 3, Value: 6.8 Row: 1, Col: 4, Value: 73.3 Stocks 72.2% Bonds 10.0% Convertibles 9.5% Other securities and short-term investments 8.3% Stocks 73.3% Bonds 6.8% Convertibles 6.4% Other securities and short-term investments 13.5% Row: 1, Col: 1, Value: 8.300000000000001 Row: 1, Col: 2, Value: 9.5 Row: 1, Col: 3, Value: 10.0 Row: 1, Col: 4, Value: 72.2 * FOREIGN INVESTMENTS 13.0% ** FOREIGN INVESTMENTS 12.3% INVESTMENTS JANUARY 31, 1994 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 73.2% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 1.9% AEROSPACE & DEFENSE - 0.7% Flightsafety International, Inc. 482,600 $ 16,770 33942310 Grumman Corp. 124,700 5,097 40018110 Martin Marietta Corp. 453,600 20,355 57290010 McDonnell Douglas Corp. 112,400 12,842 58016910 Thiokol Corp. 194,900 5,262 88410310 60,326 DEFENSE ELECTRONICS - 1.2% General Motors Corp. Class H 484,500 19,017 37044250 Loral Corp. 1,095,000 43,663 54385910 Raytheon Co. 503,200 34,092 75511110 96,772 TOTAL AEROSPACE & DEFENSE 157,098 BASIC INDUSTRIES - 4.9% CHEMICALS & PLASTICS - 2.7% Akzo NV: Ord. 322,000 34,887 01019910 sponsored ADR 9,100 494 01019930 American Pacific Corp. (b) 50,000 731 02874010 Cabot Corp. 261,100 13,708 12705510 Ferro Corp. 87,000 3,045 31540510 GEON 1,018,200 27,491 37246W10 Georgia Gulf Corp. (b) 387,200 9,390 37320020 IMC Fertilizer Group, Inc. 39,900 1,741 44966910 Imperial Chemical Industries PLC: ADR 355,000 17,306 45270450 Ord. 1,576,400 18,848 45270440 Lyondell Petrochemical Co. 154,000 3,504 55207810 Monsanto Co. 316,000 24,372 61166210 Morton International, Inc. 51,100 5,487 61933110 Olin Corp. 275,900 13,554 68066520 Scotts Co. Class A 247,000 4,600 81018610 Union Carbide Corp. 1,773,600 45,227 90558110 224,385 IRON & STEEL - 0.3% Allegheny Ludlum Industries, Inc. 994,100 22,119 01690010 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - CONTINUED METALS & MINING - 0.6% Alumax, Inc. 98,100 $ 2,624 02219710 Noranda, Inc. 522,200 10,461 65542210 Reynolds Metals Co. 548,200 29,260 76176310 Wolverine Tube, Inc. (b) 374,200 8,560 97809310 50,905 PACKAGING & CONTAINERS - 0.1% Owens-Illinois, Inc. (b) 444,900 5,172 69076840 PAPER & FOREST PRODUCTS - 1.2% Abitibi-Price, Inc. 695,000 8,824 00368010 Abitibi Price, Inc. (institutional receipts) (i) 139,800 657 00368070 Bowater, Inc. 146,500 3,516 10218310 Georgia-Pacific Corp. 100,600 7,570 37329810 International Paper Co. 407,300 30,598 46014610 QUNO Corp. 164,200 3,212 74726H10 Repola OY 558,300 11,747 75999A92 Temple-Inland, Inc. 417,500 21,919 87986810 Willamette Industries, Inc. 118,600 6,820 96913310 94,863 TOTAL BASIC INDUSTRIES 397,444 CONGLOMERATES - 3.8% Allied-Signal, Inc. 89,500 7,037 01951210 Canadian Pacific Ltd. Ord. 2,149,500 39,220 13644030 Dial Corp. (The) 1,226,700 53,515 25247010 Grupo Carso SA de CV Class A-1 (b) 270,000 3,122 40099594 Hanson Trust PLC: Ord. 1,618,364 7,031 41135210 sponsored ADR 771,200 16,677 41135230 ITT Corp. 642,100 63,167 45067910 Litton Industries, Inc. (b) 376,200 25,770 53802110 Mark IV Industries, Inc. 454,350 9,371 57038710 Textron, Inc. 817,500 48,335 88320310 United Technologies Corp. 305,900 20,610 91301710 Whitman Corp. 1,272,700 20,204 96647K10 314,059 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - 2.4% BUILDING MATERIALS - 0.7% Cemex SA, Series B (b) 215,000 $ 6,876 15299293 Lafarge Corp. 1,639,600 40,990 50586210 Medusa Corp. 402,550 13,083 58507230 60,949 CONSTRUCTION - 0.1% Hopewell Holdings Ltd. 1,872,000 2,133 44099999 Pulte Corp. 146,700 5,098 74586710 7,231 REAL ESTATE INVESTMENT TRUSTS - 1.6% Avalon Properties, Inc. 653,650 14,217 05346910 CBL & Associates Properties, Inc. 491,300 9,458 12483010 Chelsea GCA Realty, Inc. (b) 160,900 4,545 16326210 Crown American Realty Trust (SBI) 1,016,700 14,488 22818610 Developers Diversified Realty Corp. 267,500 7,590 25159110 Duke Realty Investors, Inc. 130,100 2,992 26441150 Equity Residential Properties Trust (SBI) 691,200 20,131 29476L10 Federal Realty Investment Trust (SBI) 100,000 2,412 31374720 Manufactured Home Communities, Inc. 186,000 8,045 56468210 Oasis Residential, Inc. 60,000 1,530 67421610 Simon Properties Group, Inc. (b) 847,000 20,752 82880510 Urban Shopping Centers, Inc. (b) 621,800 13,757 91706010 Vornado Realty Trust 319,000 11,165 92904210 131,082 TOTAL CONSTRUCTION & REAL ESTATE 199,262 DURABLES - 3.7% AUTOS, TIRES, & ACCESSORIES - 2.4% Echlin, Inc. 577,900 20,082 27874910 Federal-Mogul Corp. 280,000 10,115 31354910 General Motors Corp. 535,000 32,836 37044210 Goodyear Tire & Rubber Co. 824,100 39,866 38255010 Honda Motor Co. Ltd. 563,000 9,012 43812810 Magna International, Inc. Class A 200,000 10,064 55922240 Snap-on Tools Corp. 329,900 14,144 83303410 Suzuki Motor Corp. 1,387,000 15,950 86958592 TRW, Inc. 341,900 25,557 87264910 Toyota Motor Corporation 849,000 15,309 89399999 192,935 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED CONSUMER ELECTRONICS - 0.9% Aktiebolaget Electrolux (b) 207,500 $ 9,563 01019810 Matsushita Electric Industrial Co. Ltd. 500,000 7,987 57687910 Newell Co. 418,500 17,525 65119210 Sony Corp. 345,000 20,218 83569999 Whirlpool Corp. 233,500 15,790 96332010 71,083 HOME FURNISHINGS - 0.3% Leggett & Platt, Inc. 456,000 21,204 52466010 TEXTILES & APPAREL - 0.1% Guilford Mills, Inc. 30,200 672 40179410 Unifi, Inc. 360,700 8,927 90467710 9,599 TOTAL DURABLES 294,821 ENERGY - 7.0% ENERGY SERVICES - 1.1% Enterra Corp. (b) 240,200 4,954 29380510 Halliburton Co. 655,100 21,127 40621610 Helmerich & Payne, Inc. 638,200 17,630 42345210 Schlumberger Ltd. 494,500 29,361 80685710 Smith International, Inc. (b) 803,100 7,931 83211010 Tidewater, Inc. 519,800 11,046 88642310 92,049 OIL & GAS - 5.9% Amerada Hess Corp. 864,700 41,938 02355110 Anadarko Petroleum Corp. 160,400 7,619 03251110 Anderson Exploration Ltd. (b) 324,600 8,121 03390110 Apache Corp. 833,308 20,833 03741110 British Petroleum PLC: ADR 1,155,300 78,849 11088940 Ord. 3,873,700 22,049 11088910 Burlington Resources, Inc. 351,300 16,906 12201410 Canadian Natural Resources Ltd. (b) 137,800 2,035 13638510 Chevron Corp. 600,200 56,043 16675110 Inverness Petroleum Ltd. (b) 709,400 5,605 46190810 Kerr-McGee Corp. 570,500 26,243 49238610 Louisiana Land & Exploration Co. 190,100 7,913 54626810 Murphy Oil Corp. 774,300 32,037 62671710 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - CONTINUED Occidental Petroleum Corp. 469,100 $ 8,444 67459910 Renaissance Energy Ltd. (b) 328,400 7,413 75966610 Repsol SA sponsored ADR 913,000 31,156 76026T20 Royal Dutch Petroleum Co. 702,700 77,297 78025770 Unocal Corp. 1,188,900 34,924 91528910 485,425 TOTAL ENERGY 577,474 FINANCE - 10.2% BANKS - 3.9% BNP CI Ord. 220,300 10,649 05599996 Banc One Corp. 500,000 18,750 05943810 BankAmerica Corp. 525,000 24,412 06605010 Citicorp 2,605,100 113,973 17303410 First Fidelity Bancorporation 72,914 3,217 32019510 First Interstate Bancorp 637,300 44,691 32054810 First Union Corp. 53,506 153 33735810 Mellon Bank Corp. 851,263 47,564 58550910 NationsBank Corp. 202,563 10,280 63858510 Shawmut National Corp. 355,300 8,483 82048410 Signet Banking Corp. 399,990 15,350 82668110 State Street Boston Corp. 451,000 17,138 85747310 Wells Fargo & Co. 58,000 7,953 94974010 322,613 CLOSED END INVESTMENT COMPANY - 0.0% ASA Ltd. 57,000 2,879 00205010 CREDIT & OTHER FINANCE - 1.8% American Express Co. 1,337,400 43,800 02581610 Argentaria Corp. Bancaria de Esp. 62,200 2,957 21991392 Beneficial Corp. 866,200 34,323 08172110 Dean Witter Discover & Co. 397,616 15,259 24240V10 Household International, Inc. 982,455 32,544 44181510 Student Loan Corp. 32,200 628 86390210 Triarc Companies, Inc. Class A (b) 732,700 15,204 89592710 144,715 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED FEDERAL SPONSORED CREDIT - 1.8% Federal Home Loan Mortgage Corporation 883,800 $ 51,481 31340030 Federal National Mortgage Association 999,100 87,296 31358610 Student Loan Marketing Association 255,400 12,483 86387150 151,260 INSURANCE - 1.9% Allstate Corp. 993,900 28,326 02000210 American Bankers Insurance Group, Inc. 314,600 8,298 02445610 American Income Holding, Inc. 584,200 15,262 02672810 Capital Holding Corp. 364,200 13,202 14018610 Exel Ltd. 256,000 11,168 30161610 General Re Corp. 44,400 5,067 37056310 Loews Corp. 114,100 11,310 54042410 Midocean Reinsurance Ord. (b) 900,000 17,381 59899993 Penncorp Financial Group, Inc. 741,800 12,889 70809410 Travelers, Inc. (The) 708,866 29,861 89419010 152,764 SAVINGS & LOANS - 0.3% Ahmanson (H.F.) & Co. 1,395,600 26,167 00867710 SECURITIES INDUSTRY - 0.5% Daiwa Securities 1,125,000 18,526 23499010 Nikko Securities 900,000 11,674 65399010 Nomura Securities Co. Ltd. 159,000 3,395 65536130 PaineWebber Group, Inc. 248,000 7,347 69562910 40,942 TOTAL FINANCE 841,340 HEALTH - 6.5% DRUGS & PHARMACEUTICALS - 3.5% Allergan, Inc. 504,700 11,734 01849010 Astra A Free shares 400,000 9,598 04632292 COR Therapeutics, Inc. (b) 512,000 8,064 21775310 Cephalon, Inc. (b) 648,500 11,835 15670810 Chiron Corp. (b) 253,600 24,124 17004010 Genentech, Inc. (redeemable) (b) 363,800 18,326 36871020 Immulogic Pharmaceutical Corp. (b) 125,000 1,656 45252R10 Immune Response Corp. (b) 435,000 5,764 45252T10 Magainin Pharmaceuticals, Inc. (b) 220,900 3,921 55903610 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED Merck & Co., Inc. 1,369,327 $ 49,980 58933110 Pfizer, Inc. 1,199,400 77,511 71708110 Schering-Plough Corp. 974,600 61,400 80660510 Scios, Inc. (b) 395,000 3,703 80890510 287,616 MEDICAL EQUIPMENT & SUPPLIES - 0.8% Bausch & Lomb, Inc. 303,900 15,993 07170710 Johnson & Johnson 570,000 24,154 47816010 Medtronic, Inc. 261,000 21,924 58505510 62,071 MEDICAL FACILITIES MANAGEMENT - 2.2% Columbia Healthcare Corp. 1,353,132 51,250 19767910 HCA - Hospital Corporation of America Class A (b) 2,583,000 100,414 40412010 Medical Care America, Inc. (b) 480,700 11,777 58450C10 National Medical Enterprises, Inc. 1,194,800 18,967 63688610 182,408 TOTAL HEALTH 532,095 INDUSTRIAL MACHINERY & EQUIPMENT - 5.1% ELECTRICAL EQUIPMENT - 3.6% Duracell International, Inc. 260,600 10,359 26633L10 General Electric Co. 2,241,000 241,468 36960410 Itel Corp. (b) 484,883 13,880 46564210 Murata Manufacturing Co. 341,000 13,803 62699110 Philips Electronics 619,500 15,624 71833799 Scientific-Atlanta, Inc. 50,000 1,425 80865510 296,559 INDUSTRIAL MACHINERY & EQUIPMENT - 1.5% Caterpillar, Inc. 422,000 43,941 14912310 Deere & Co. 234,100 18,845 24419910 Indresco, Inc. (b) 175,000 2,450 45590510 Parker-Hannifin Corp. 399,700 15,289 70109410 TRINOVA Corp. 574,800 18,968 89667810 Tenneco, Inc. 198,800 11,431 88037010 Watts Industries, Inc. Class A 166,100 8,845 94274910 119,769 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED POLLUTION CONTROL - 0.0% Attwoods PLC ADR 142,200 $ 1,671 04987020 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 417,999 MEDIA & LEISURE - 3.2% BROADCASTING - 0.5% Grupo Televisa GDS (b)(f) 123,500 8,768 40049J20 Home Shopping Network, Inc. 2,186,500 31,158 43735110 Infinity Broadcasting Corp. (b) 308,125 10,014 45662610 49,940 ENTERTAINMENT - 0.3% Carnival Cruise Lines, Inc. Class A 446,300 22,092 14365810 LODGING & GAMING - 1.4% Aztar Corp. (b) 1,018,100 7,381 05480210 Boomtown, Inc. 340,100 6,207 09858810 La Quinta Motor Inns, Inc. 126,150 3,848 50419510 Marriott International, Inc. 864,700 25,401 57190010 Mirage Resorts, Inc. (b) 1,303,650 32,428 60462E10 President Riverboat Casinos, Inc. (b) 1,064,900 19,434 74084810 Promus Companies, Inc. (b) 335,000 16,959 74342A10 111,658 PUBLISHING - 0.3% American Greetings Corp. Class A 253,000 7,685 02637510 Houghton Mifflin Co. 75,000 3,375 44156010 Times Mirror Co., Series A 312,700 11,335 88736010 22,395 RESTAURANTS - 0.7% McDonald's Corp. 981,200 59,608 58013510 TOTAL MEDIA & LEISURE 265,693 NONDURABLES - 4.2% BEVERAGES - 0.4% Dr. Pepper/Seven-Up Companies, Inc. (b) 1,354,000 32,327 25613130 FOODS - 1.1% CPC International, Inc. 582,100 28,450 12614910 ConAgra, Inc. 826,200 21,791 20588710 Dean Foods Co. 263,500 8,564 24236110 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED FOODS - CONTINUED Dole Food, Inc. 249,700 $ 7,273 25660510 IBP, Inc. 79,000 1,965 44922310 Ralston Continental Baking Group 363,400 3,271 75126210 Ralston Purina Co. 354,800 15,611 75127730 86,925 HOUSEHOLD PRODUCTS - 1.2% First Brands Corp. 198,300 7,164 31935610 Orkla AS: Class A Free shares 103,000 4,037 39299193 Class B (non-vtg.) 358,950 13,924 39299192 Premark International, Inc. 443,300 38,179 74045910 Procter & Gamble Co. 600,000 35,700 74271810 99,004 TOBACCO - 1.5% Philip Morris Companies, Inc. 1,415,000 85,254 71815410 RJR Nabisco Holdings Corp. (b) 3,742,500 28,069 74960K10 UST, Inc. 230,800 6,578 90291110 119,901 TOTAL NONDURABLES 338,157 RETAIL & WHOLESALE - 3.5% DRUG STORES - 0.3% Revco (D.S.), Inc. (b) 1,291,400 20,340 76133910 Rite Aid Corporation 428,600 7,983 76775410 28,323 GENERAL MERCHANDISE STORES - 1.5% Carter Hawley Hale Stores, Inc. (b) 1,674,100 16,322 14622730 Consolidated Stores Corp. (b) 713,400 12,930 21014910 May Department Stores Co. (The) 431,600 17,048 57777810 Penney (J.C.) Co., Inc. 702,600 36,799 70816010 Sears, Roebuck & Co. 678,200 37,216 81238710 120,315 GROCERY STORES - 1.1% Food Lion, Inc. Class A 1,354,900 9,061 34477520 Kroger Co. (The) (b) 490,000 10,964 50104410 Safeway, Inc. (b) 1,890,100 38,747 78651420 Starbucks Corp. (b) 120,000 2,880 85524410 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED GROCERY STORES - CONTINUED Stop & Shop Companies, Inc. (b) 910,300 $ 21,164 86209910 Supervalu, Inc. 292,000 11,388 86853610 94,204 RETAIL & WHOLESALE, MISCELLANEOUS - 0.6% Circuit City Stores, Inc. 200,000 3,900 17273710 Home Depot, Inc. (The) 306,900 11,969 43707610 Lowe's Companies, Inc. 130,200 7,942 54866110 Office Depot, Inc. (b) 324,400 11,800 67622010 Toys "R" Us, Inc. (b) 402,700 14,699 89233510 50,310 TOTAL RETAIL & WHOLESALE 293,152 SERVICES - 0.4% PRINTING - 0.2% Reynolds & Reynolds Co. Class A 341,700 15,248 76169510 SERVICES - 0.2% ADT Ltd. 1,297,800 12,978 00091530 Chemed Corp. 123,300 3,930 16359610 Kelly Services, Inc. Class A 101,100 3,008 48815220 19,916 TOTAL SERVICES 35,164 TECHNOLOGY - 2.8% COMMUNICATIONS EQUIPMENT - 0.9% ADC Telecommunications, Inc. (b) 97,500 3,583 00088610 Cabletron Systems, Inc. (b) 253,500 30,452 12692010 Cisco Systems, Inc. (b) 311,500 22,584 17275R10 DSC Communications Corp. (b) 184,000 11,063 23331110 Digital Link 11,000 154 Newbridge Networks Corp. (b) 78,200 5,239 65090110 73,075 COMPUTER SERVICES & SOFTWARE - 0.2% BancTec, Inc. (b) 456,050 10,261 05978410 Cheyenne Software, Inc. 182,100 6,852 16688810 Microsoft Corp. (b) 40,300 3,431 59491810 20,544 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - 1.2% Canon, Inc. 200,000 $ 3,036 13780199 Hewlett-Packard Co. 161,500 13,788 42823610 International Business Machines Corp. 90,800 5,153 45920010 Merisel, Inc. (b) 518,400 9,526 58984910 SynOptics Communications, Inc. (b) 284,000 8,165 87160910 Xerox Corp. 572,300 56,157 98412110 95,825 ELECTRONICS - 0.5% AMP, Inc. 417,200 26,075 03189710 Intel Corp. 25,000 1,631 45814010 Motorola, Inc. 48,200 4,748 62007610 Texas Instruments, Inc. 107,900 7,580 88250810 40,034 TOTAL TECHNOLOGY 229,478 TRANSPORTATION - 3.8% AIR TRANSPORTATION - 0.3% AMR Corp. (b) 229,000 16,459 00176510 UAL Corp. (b) 73,700 10,834 90254910 27,293 RAILROADS - 2.8% Burlington Northern, Inc. 100,000 6,462 12189710 CSX Corp. 791,500 72,620 12640810 Chicago & North Western Holdings Corp. (b) 925,100 24,746 16715510 Conrail, Inc. 256,500 16,672 20836810 Illinois Central Corp., Series A 889,200 33,345 45184110 Kansas City Southern Industries, Inc. 241,600 11,144 48517010 Santa Fe Pacific Corp. 2,006,600 49,162 80218310 Trinity Industries, Inc. 366,350 16,074 89652210 230,225 TRUCKING & FREIGHT - 0.7% Airborne Freight Corp. 363,900 12,691 00926610 Rollins Truck Leasing Corp. 277,750 5,520 77574110 TNT Freightways Corp. 1,179,350 29,189 87259J10 Werner Enterprises, Inc. 110,700 3,266 95075510 XTRA Corp. 102,800 5,024 98413810 55,690 TOTAL TRANSPORTATION 313,208 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 9.8% CELLULAR - 0.5% Pactel Corp. (b) 100,000 $ 2,525 69525210 Rogers Communications, Inc. Class B (b) 620,000 10,496 77510920 Vodafone Group PLC sponsored ADR 282,900 25,037 92857T10 38,058 ELECTRIC UTILITY - 3.5% Central & South West Corp. 145,800 4,338 15235710 DPL, Inc. 260,850 5,543 23329310 DQE, Inc. 412,400 13,712 23329J10 Duke Power Co. 295,600 12,415 26439910 Eastern Utilities Associates 133,584 3,607 27717310 Entergy Corp. 2,255,400 84,014 29364G10 Houston Industries, Inc. 268,100 12,232 44216110 Illinois Power Co. 522,500 11,364 45209210 Long Island Lighting Co. 1,148,700 26,994 54267110 NIPSCO Industries, Inc. 289,500 9,264 62914010 Niagara Mohawk Power Corp. 295,600 5,986 65352210 PSI Resources, Inc. 893,800 22,904 69363210 Peco Energy Co. 450,400 13,005 69330410 Pinnacle West Capital Corp. (b) 1,434,400 32,095 72348410 Portland General Corp. 488,800 9,715 73650610 Public Service Co. of New Mexico (b) 528,600 7,004 74449910 Southern Co. 100,000 4,350 84258710 Texas Utilities Co. 47,700 1,842 88284810 Union Electric Co. 165,000 6,353 90654810 286,737 GAS - 0.7% Enron Corp. 425,000 13,972 29356110 MCN Corp. 200,000 7,375 55267J10 ONEOK, Inc. 374,700 7,400 68267810 Panhandle Eastern Corp. 199,600 5,015 69846210 Sonat, Inc. 457,200 14,230 83541510 UGI Corporation 445,715 10,307 90268110 58,299 TELEPHONE SERVICES - 5.1% ALC Communications Corp. (b) 756,500 24,208 00157530 Ameritech Corp. 1,948,500 81,837 03095410 Bell Atlantic Corp. 177,500 10,073 07785310 BellSouth Corp. 260,500 16,021 07986010 Comsat Corp., Series 1 532,000 14,431 20564D10 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - CONTINUED GTE Corp. 225,000 $ 7,734 36232010 LCI International, Inc. (b) 187,900 6,999 50181310 LDDS Communications, Inc. (b) 1,456,740 40,060 50182L10 MCI Communications Corp. 1,179,900 32,595 55267310 Pacific Telesis Group 617,200 35,566 69489010 Southwestern Bell Corp. 1,869,200 78,273 84533310 Sprint Corporation 768,000 27,840 85206110 Telefonos de Mexico SA sponsored ADR representing shares Ord. Class L 425,000 31,397 87940378 U.S. West, Inc. 292,000 12,775 91288910 419,809 TOTAL UTILITIES 802,903 TOTAL COMMON STOCKS (Cost $4,980,046) 6,009,347 PREFERRED STOCKS - 4.1% CONVERTIBLE PREFERRED STOCKS - 4.0% BASIC INDUSTRIES - 0.3% IRON & STEEL - 0.1% Inland Steel Industries, Inc., Series G, exchangeable $4.625 66,600 4,329 45747250 METALS & MINING - 0.2% Reynolds Metals Co. $3.31 361,800 19,899 76176350 TOTAL BASIC INDUSTRIES 24,228 CONSTRUCTION & REAL ESTATE - 0.2% REAL ESTATE - 0.2% Rouse Co., Series A 245,900 12,664 77927320 DURABLES - 2.5% AUTOS, TIRES, & ACCESSORIES - 2.5% Chrysler Corp., Series A, $4.625 (f) 696,300 119,764 17119670 Ford Motor Co. (Del.), Series A, $4.20 674,800 75,493 34537020 Masotech, Inc. $1.20 250,000 5,937 57467030 201,194 PREFERRED STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONVERTIBLE PREFERRED STOCKS - CONTINUED ENERGY - 0.1% OIL & GAS - 0.1% Diamond Shamrock, Inc. 5% (f) 89,000 $ 5,318 25274730 FINANCE - 0.3% BANKS - 0.2% Bank of New York Co., Inc. 7 3/4% 172,300 8,680 06405787 Chemical Banking Corp. $5.00 (b)(f) 60,000 4,815 16372285 Norwest Corp., Series B, $3.50 (g) 57,400 4,448 66938080 17,943 CREDIT & OTHER FINANCE - 0.1% American Express Co. 6 1/4% 272,000 11,798 02581613 SAVINGS & LOANS - 0.0% Ahmanson (H.F.) & Co., Series D, $3.00 18,400 927 00867770 TOTAL FINANCE 30,668 MEDIA & LEISURE - 0.5% BROADCASTING - 0.5% CBS, Inc., Series B, $10.00 (g) 190,000 41,990 12484593 Evergreen Media Corp. exchangeable $3.00 32,500 1,580 30024820 43,570 UTILITIES - 0.1% TELEPHONE SERVICES - 0.1% LCI International, Inc. $1.25 344,700 10,169 50181320 TOTAL CONVERTIBLE PREFERRED STOCKS 327,811 NONCONVERTIBLE PREFERRED STOCKS - 0.1% UTILITIES - 0.1% TELEPHONE SERVICES - 0.1% SIP (Societa Ital Per L'Eser) Spa Di Risp N/C Ord. 1,549,900 3,395 78401796 Stet Societa Finanziaria Telefonica Spa 3,500,000 7,937 85982592 TOTAL NONCONVERTIBLE PREFERRED STOCKS 11,332 TOTAL PREFERRED STOCKS (Cost $251,271) 339,143 CORPORATE BONDS - 4.2% PRINCIPAL AMOUNT (000S) CONVERTIBLE BONDS - 2.4% BASIC INDUSTRIES - 0.0% PACKAGING & CONTAINERS - 0.0% Polly Peck International PLC euro 7 1/4%, 1/4/05 (c) - $ 7,500 $ 1,425 731991AA CONGLOMERATES - 0.1% Mark IV Industries, Inc. 6 1/4%, 2/15/07 B1 4,800 6,816 570387AF CONSTRUCTION & REAL ESTATE - 0.0% REAL ESTATE INVESTMENT TRUST- 0.0% Mid-Atlantic Realty Trust 7 5/8%, 9/15/03 - 1,080 1,058 595232AA DURABLES - 0.3% AUTOS, TIRES, & ACCESSORIES - 0.3% Magna Intenational, Inc. 10%, 5/1/01 (f) - 4,550 26,754 559222AC TEXTILES & APPAREL - 0.0% Unifi, Inc. 6%, 3/15/02 Baa1 2,250 2,385 904677AC TOTAL DURABLES 29,139 ENERGY - 0.1% INDEPENDENT POWER - 0.1% California Energy, Inc. 5%, 7/31/00 (f) Ba3 6,200 6,448 130190AB FINANCE - 0.4% BANKS - 0.4% Bank of New York Co., Inc. 7 1/2%, 8/15/01 Baa1 21,972 33,507 064057AK HEALTH - 0.5% DRUGS & PHARMACEUTICALS - 0.2% Astra AB 9 1/4%, 8/30/94 - SEK 11,112 6,800 0463229A IVAX Corp. 6 1/2%, 11/15/01 (f) - 6,100 6,893 465823AA 13,693 CORPORATE BONDS - CONTINUED PRINCIPAL AMOUNT (000S) CONVERTIBLE BONDS - CONTINUED HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - 0.3% Medco Containment Services, Inc.: 6%, 9/1/01 (f) AAA $ 14,750 $ 21,166 583905AC 6%, 9/1/01 Aaa 650 933 583905AB 22,099 TOTAL HEALTH 35,792 INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% ELECTRICAL EQUIPMENT - 0.2% Sensormatic Electronics Corp. 7%, 5/15/01 (g) Ba2 6,533 13,883 817265AC MEDIA & LEISURE - 0.4% BROADCASTING - 0.2% Time Warner, Inc. liquid yield option 0%, 6/22/13 Ba1 38,520 15,264 887315AS ENTERTAINMENT - 0.0% Discovery Zone, Inc. liquid yield option 0%, 10/14/13 B3 7,000 2,573 25468BAA PUBLISHING - 0.2% News America Holdings, Inc. gtd. exchangeable 0%, 3/31/02 (g) Ba3 15,600 13,572 652478AC TOTAL MEDIA & LEISURE 31,409 NONDURABLES - 0.0% FOODS - 0.0% Sysco Corp. liquid yield option 0%, 10/12/04 A2 5,136 3,470 871829AA RETAIL & WHOLESALE - 0.2% GROCERY STORES - 0.2% Food Lion, Inc. 5%, 6/1/03 (f) A3 6,700 7,236 344775AA Kroger Co. 6 3/8%, 12/1/99 B3 3,800 4,959 501044BE Starbucks Corp. 4 1/2%, 8/1/03 B2 2,000 1,955 855244AA 14,150 CORPORATE BONDS - CONTINUED PRINCIPAL AMOUNT (000S) CONVERTIBLE BONDS - CONTINUED TECHNOLOGY - 0.2% COMMUNICATIONS EQUIPMENT - 0.1% General Instrument Corp. 5%, 6/15/00 (g) B1 $ 6,500 $ 9,051 370121AA ELECTRONICS - 0.1% Motorola, Inc. liquid yield option 0%, 9/27/13 A1 6,750 4,674 620076AJ TOTAL TECHNOLOGY 13,725 TOTAL CONVERTIBLE BONDS 190,822 NONCONVERTIBLE BONDS - 1.8% BASIC INDUSTRIES - 0.1% IRON & STEEL - 0.1% Inland Steel Industries, Inc. 12 3/4%, 12/15/02 Ba3 5,000 5,788 457472AB Stelco Co. 10 1/4%, 4/30/96 - CAD 4,500 3,352 858076AE 9,140 CONGLOMERATES - 0.1% Coltec Industries, Inc. 10 1/4%, 4/1/02 Ba2 6,000 6,465 196879AB CONSTRUCTION & REAL ESTATE - 0.1% BUILDING MATERIALS - 0.1% DAL Tile International, Inc. secured 0%, 7/15/98 Caa 3,210 2,026 23426RAA USG Corp. 10 1/4%, 12/15/02 B2 3,500 3,588 903293AK 5,614 ENERGY - 0.2% ENERGY SERVICES - 0.1% TransTexas Gas Corp. 10 1/2%, 9/1/00 B1 3,530 3,768 893895AA OIL & GAS - 0.1% Mesa Capital Corp. secured 0%, 6/30/98 (e) - 10,000 9,063 590910AF TOTAL ENERGY 12,831 CORPORATE BONDS - CONTINUED PRINCIPAL AMOUNT (000S) NONCONVERTIBLE BONDS - CONTINUED FINANCE - 0.6% BANKS - 0.6% First Bank Systems, Inc. 9.56%, 2/7/94 Baa1 $ 10,000 $ 10,025 3192799H KeyCorp 6.15%, 1/16/95 A2 5,000 5,103 49326EBD Morgan (J.P.) & Co., Inc. 5 3/8%, 1/21/95 Aa1 15,000 15,219 6168809D Republic National Bank New York 5 1/5%, 1/17/95 Aa1 15,000 15,162 760677BE 45,509 CREDIT & OTHER FINANCE - 0.0% GPA Delaware, Inc.: 8 1/2%, 3/3/97 - 2,000 1,760 3619289C 8 3/4%, 12/15/98 Caa 280 237 361928AA 8 5/8%, 1/15/99 - 1,500 1,245 3619289B General Electric Capital Corp. peso linked 11.09%, 10/29/96 (h) Aaa 2,000 2,005 36962FPE 5,247 TOTAL FINANCE 50,756 HEALTH - 0.0% MEDICAL FACILITIES MANAGEMENT - 0.0% American Healthcare Management, Inc. 10%, 8/1/03 B2 5,000 5,275 026496AD MEDIA & LEISURE - 0.3% BROADCASTING - 0.2% SCI Television, Inc. secured 11%, 6/30/05 - 7,250 7,612 783895AJ SPI Holding, Inc. reset pay-in-kind 11 1/2%, 12/1/02 B- 7,000 7,175 78462GAF 14,787 LODGING & GAMING - 0.0% La Quinta Inns, Inc. 9 1/4%, 5/15/03 B2 5,000 5,163 504195AB PUBLISHING - 0.1% News America Holdings, Inc. 9 1/4%, 2/1/13 Ba1 7,500 8,598 652478AH TOTAL MEDIA & LEISURE 28,548 CORPORATE BONDS - CONTINUED PRINCIPAL AMOUNT (000S) NONCONVERTIBLE BONDS - CONTINUED NONDURABLES - 0.1% BEVERAGES - 0.1% Dr. Pepper/Seven-Up Companies, Inc. 0%, 11/1/02 (e) B3 $ 7,500 $ 6,000 256131AD RETAIL & WHOLESALE - 0.2% APPAREL STORES - 0.1% Apparel Retailers, Inc. 12 3/4%, 8/15/05 Caa 1,160 719 037795AB Specialty Retailers, Inc. 10%, 8/15/00 (f) B1 5,000 5,100 847514AC 5,819 RETAIL & WHOLESALE, MISCELLANEOUS - 0.1% Color Tile, Inc. 10 3/4%, 12/15/01 B2 7,000 7,333 196267AD TOTAL RETAIL & WHOLESALE 13,152 UTILITIES - 0.1% CELLULAR - 0.0% Cencall Communications Corp. 0%, 1/15/04 (e) Caa 1,970 1,221 151297AB ELECTRIC UTILITY - 0.1% Long Island Lighting Co. 10 1/4%, 6/15/94 Baa3 10,000 10,208 542671CB TOTAL UTILITIES 11,429 TOTAL NONCONVERTIBLE BONDS 149,210 TOTAL CORPORATE BONDS (Cost $307,128) 340,032 U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 1.9% U.S. TREASURY OBLIGATIONS - 1.5% 6 7/8%, 2/15/94 Aaa 15,000 15,019 912827ZW 8 7/8%, 2/15/94 Aaa 15,000 15,030 912827WY 7%, 5/15/94 Aaa 15,000 15,162 912827A7 9 1/2%, 5/15/94 Aaa 35,000 35,623 912827XG 9 1/2%, 10/15/94 Aaa 28,700 29,893 912827VK 8 1/8%, 8/15/19 Aaa 10,000 12,145 912810ED 122,872 U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED PRINCIPAL AMOUNT (000S) U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.4% Federal Home Loan Bank: 9.55%, 4/25/94 Aaa $ 10,000 $ 10,144 313388VN 5.89%, 11//25/94 Aaa 10,000 10,187 313388C9 Federal National Mortgage Association 7.45%, 7/11/94 Aaa 10,000 10,178 313586Y5 30,509 TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $158,344) 153,381 FOREIGN GOVERNMENT SECURITIES - 3.1% Argentinean Government: BOCON: 3.3125%, 4/1/01 (h) B1 8,853 7,661 039995AF 3.9775%, 4/1/01 (h) - ARP 620 503 039995AH 3.3125%, 9/1/02 (h) - 3,115 2,567 039995AM euro 3.9775%, 9/1/02 (h) - ARP 808 613 039995AJ 3.9775%, 4/1/07 (h) - ARP 3,090 2,237 039995AW Brady euro: 4%, 3/31/23 B1 40,750 28,576 039995AD 4 1/4%, 3/31/23 B1 500 435 039995AL 4.1875%, 3/31/05 (h) BB- 11,250 9,914 039995AU 4.1875%, 3/31/05 (f)(h) - 750 661 039995AT Brazilian Government IDU euro 4.3125%, 1/1/01 (h) B2 2,970 2,554 1057569E Danish Government Bullet: 9%, 11/15/00 Aa1 DKK 80,000 14,010 2485059A 8%, 5/15/03 Aa1 DKK 57,300 9,687 249998AG French Government: 8 1/2%, 10/25/08 Aaa FRF 100,000 21,172 351996AL 8 1/2%, 4/25/23 Aaa FRF 372,000 81,445 351996AC Mexican Government: Bondes 10.31%, 9/22/94 (h) - MXN 12,300 3,962 597998TE Brady: 4.1875%, 12/31/19 (h) Ba3 1,500 1,397 597998QD 4.3125%, 12/31/19 (h) Ba3 10,750 10,010 597998RJ 6 1/4%, 12/31/19 Ba3 18,750 15,492 597998PF Cetes 0%, 6/30/94 - MXN 19,700 6,066 597998UR Moroccan Government Trust 4 1/2%, 1/3/09 (f)(h) - 16,500 13,757 New Zealand Government 8%, 4/15/04 Aa3 NZD 15,500 10,409 6501629K Nigerian Government Brady 5 1/2%, 11/15/20 (e) - 1,250 745 997999AC FOREIGN GOVERNMENT SECURITIES - CONTINUED PRINCIPAL AMOUNT (000S) Siderurgica Brasileiras SA inflation indexed 6%, 8/15/99 - BRC 753 $ 117 82599PAA Swedish Government 10 3/4%, 1/23/97 Aa2 SEK 75,000 10,659 8702009Q TOTAL FOREIGN GOVERNMENT SECURITIES (Cost $234,574) 254,649 OTHER SECURITIES - 1.1% INDEXED SECURITIES - 1.1% Bankers Trust Company notes (h)(j): 2.322%, 11/9/94 (coupon inversely indexed to HELIBOR and principal indexed to value of 2-year Finnish securities, both multiplied by 8) 2,500 2,765 0669919B 0%, 1/27/95 (coupon inversely indexed to STIBOR and principal indexed to value of 2-year Swedish securities, both multiplied by 9) 5,000 4,948 06699DAB 6.245%, 2/3/95 (coupon inversely indexed to HELIBOR and principal indexed to value of 2-year Finnish securities, both multiplied by 8) 8,000 7,857 06699DAD 11.6143%, 2/3/95 (coupon inversely indexed to LIBOR and principal indexed to value of 4-year Canadian securities, both multiplied by 5) 25,000 24,620 06699DAE Bayerische Landesbank cert. of dep. (h)(j): 3 1/8%, 9/13/94 (coupon inversely indexed to STIBOR and principal indexed to value of 2-year Swedish securities, both multiplied by 6) 10,000 10,184 072999AH 6.106%, 1/27/95 (coupon inversely indexed to HELIBOR and principal indexed to value of 2-year Finnish securities, both multiplied by 8) 12,750 12,290 072999AS 0%, 1/27/95 (inversely indexed to 2-year SEK LIBOR, multiplied by 9) 5,000 4,851 072999AT 6.2675%, 1/27/95 (coupon inversely indexed to HELIBOR and principal indexed to value of 2-year Finnish securities, both multiplied by 8) 7,300 7,074 072999AU OTHER SECURITIES - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT (A) (000S) (000S) INDEXED SECURITIES - CONTINUED Citibank Nassau (h)(j): 0%, 11/10/94 (coupon inversely indexed to ITL LIBOR and principal indexed to value of 2-year Italian securities, both multiplied by 8) $ 5,000 $ 5,123 223991AY 0%, 11/29/94 (coupon inversely indexed to ITL LIBOR and principal indexed to value of 2-year Italian securities, both multiplied by 8) 5,000 5,284 223991BE 0%, 1/27/95 (coupon inversely indexed to STIBOR and principal indexed to 2-year Swedish securities, both multiplied by 9) 5,000 4,800 223991BS TOTAL OTHER SECURITIES (Cost $90,551) 89,796 COMMERCIAL PAPER - 0.1% Banco International Mexico 0%, 4/14/94 (Cost $9,732) MXN 31,137 9,795 282996AJ REPURCHASE AGREEMENTS - 12.3% MATURITY AMOUNT (000S) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 3.19% dated 1/31/94 due 2/1/94 $ 1,013,779 1,013,689 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $7,045,335) $ 8,209,832 FORWARD FOREIGN CURRENCY CONTRACTS AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED DATE(S) VALUE GAIN/(LOSS) CONTRACTS TO BUY 114,062 FRF 2/1/94 $ 19,374 $ (82) 2,258,038 JPY 2/28/94 20,751 (52) TOTAL CONTRACTS TO BUY (Payable amount $40,259) $ 40,125 $ (134) THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 0.5% CONTRACTS TO SELL 161,697 DKK 2/7/94 $ 24,021 $ 115 720,347 FRF 2/1/94 to 4/28/94 121,636 82 6,138,568 JPY 2/28/94 to 2/28/94 56,473 168 138,184 NOK 2/7/94 to 4/11/94 17,475 (657) TOTAL CONTRACTS TO SELL (Receivable amount $219,313) $ 219,605 $ (292) THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 2.7% SECURITIES SOLD SHORT AMOUNTS IN THOUSANDS NUMBER OF SHARES ISSUER VALUE 131 CBS, Inc. $ 40,117 136 General Instrument Corp. 8,002 226 News Corp. Ltd. ADR 13,045 157 Norwest Corp. 4,149 416 Sensormatic Electronics Corp. 13,763 TOTAL SECURITIES SOLD SHORT (Total proceeds $67,554) $ 79,076 THE VALUE OF SECURITIES SOLD SHORT AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 1.0% CURRENCY ABBREVIATIONS ARP - Argentinean peso BRC - Brazilian cruzeiro CAD - Canadian dollar DKK - Danish krone FRF - French franc ITL - Italian lira JPY - Japanese yen MXN - Mexican peso NZD - New Zealand dollar NOK - Norwegian krone SEK - Swedish krona LEGEND 1. Principal amount is stated in United States dollars unless otherwise noted. 2. Non-income producing 3. Non-income producing - issuer filed for protection under the Federal Bankruptcy Code or is in default of interest payment. 4. Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 5. Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. 6. 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 $226,680,000 or 2.8% of net assets. 7. Security pledged to cover margin requirements on open short sale transactions (see Note 2 of Notes to Financial Statements). At the period end the value of securities pledged amounted to $82,944,000. 8. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 9. Market value reflects the payment of the first installment. Additional equal payments of $699,000 are payable in January and October of 1995. 10. Inverse floating rate security is a security where the coupon is inversely indexed to a floating interest rate multiplied by a specified factor. If the floating rate is high enough, the coupon rate may be zero or be a negative amount that is carried forward to reduce future interest and/or principal payments. The price may be considerably more volatile than the price of a comparable fixed rate security. OTHER INFORMATION The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S S&P RATINGS RATINGS Aaa, Aa, A 1.9% AAA, AA, A 5.6% Baa 0.9% BBB 0.7% Ba 1.3% BB 0.8% B 1.4% B 1.1% Caa 0.1% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 1.3%. Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 87.0% United Kingdom 2.4 Netherlands 1.9 Canada 1.7 Japan 1.4 France 1.4 Mexico 1.2 Others (individually less than 1%) 3.0 TOTAL 100.0% INCOME TAX INFORMATION At January 31, 1994, the aggregate cost of investment securities for income tax purposes was $7,051,075,000. Net unrealized appreciation aggregated $1,158,757,000, of which $1,250,803,000 related to appreciated investment securities and $92,046,000 related to depreciated investment securities. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JANUARY 31, 1994 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase $ 8,209,832 agreements of $1,013,689) (cost $7,045,335) (Notes 1 and 2) - See accompanying schedule Securities sold short, at value (proceeds received $67,554) (Note (79,076) $ 8,130,756 2) Long foreign currency contracts held, at value (cost $40,259) 40,125 (Note 2) Short foreign currency contracts (Note 2) (219,605) Contracts held, at value Receivable for contracts held 219,313 (292) Restricted cash on securities sold short (Note 2) 67,554 Cash 70 Receivable for investments sold 253,466 Receivable for fund shares sold 27,601 Dividends receivable 9,897 Interest receivable 16,430 Other receivables 3,164 TOTAL ASSETS 8,548,771 LIABILITIES Payable for foreign currency contracts held (Notes 1 and 2) 40,259 Payable for investments purchased 253,254 Payable for fund shares redeemed 11,756 Accrued management fee 3,475 Other payables and accrued expenses 2,443 TOTAL LIABILITIES 311,187 NET ASSETS $ 8,237,584 Net Assets consist of (Note 1): Paid in capital $ 6,868,395 Distributions in excess of net investment income 220 Accumulated undistributed net realized gain (loss) on 216,420 investments Net unrealized appreciation (depreciation) on: Investment securities 1,164,497 Foreign currency contracts (426) Short sales (11,522) NET ASSETS, for 357,177 shares outstanding $ 8,237,584 NET ASSET VALUE and redemption price per share ($8,237,584 $23.06 (divided by) 357,177 shares) Maximum offering price per share (100/97.00 of $23.06) $23.77
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED JANUARY 31, 1994 (UNAUDITED) INVESTMENT INCOME $ 63,158 Dividends (including $2 received from affiliated issuers) (Note 6) Interest 43,343 TOTAL INCOME 106,501 EXPENSES Management fee (Note 4) $ 19,226 Transfer agent fees (Note 4) 9,716 Accounting fees and expenses (Note 4) 386 Non-interested trustees' compensation 18 Custodian fees and expenses 289 Registration fees 574 Audit 55 Legal 32 Miscellaneous 394 Total expenses before reductions 30,690 Expense reductions (Note 5) (368) 30,322 NET INVESTMENT INCOME 76,179 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1, 2 AND 3) Net realized gain (loss) on: Investment securities 339,458 Foreign currency contracts 3,610 343,068 Change in net unrealized appreciation (depreciation) on: Investment securities 325,541 Foreign currency contracts (6,281) Short sales (4,307) 314,953 NET GAIN (LOSS) 658,021 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 734,200 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED ENDED JULY 31, JANUARY 31, 1994 1993 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS Operations $ 76,179 $ 138,527 Net investment income Net realized gain (loss) on investments 343,068 175,544 Change in net unrealized appreciation (depreciation) 314,953 612,689 on investments NET INCREASE (DECREASE) IN NET ASSETS RESULTING 734,200 926,760 FROM OPERATIONS Distributions to shareholders: (90,623) (145,686) From net investment income From net realized gain (247,030) (484,558) TOTAL DISTRIBUTIONS (337,653) (630,244) Share transactions 1,666,341 2,629,566 Net proceeds from sales of shares Reinvestment of distributions from: 87,659 140,620 Net investment income Net realized gain 241,409 472,581 Cost of shares redeemed (800,693) (1,091,633) Net increase (decrease) in net assets resulting from 1,194,716 2,151,134 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS 1,591,263 2,447,650 NET ASSETS Beginning of period 6,646,321 4,198,671 End of period (including undistributed net investment $ 8,237,584 $ 6,646,321 income of $220 and $13,832, respectively) OTHER INFORMATION Shares Sold 74,718 128,243 Issued in reinvestment of distributions from: 3,995 7,018 Net investment income Net realized gain 10,976 24,981 Redeemed (35,965) (53,563) Net increase (decrease) 53,724 106,679
FINANCIAL HIGHLIGHTS SIX MONTHS YEARS ENDED JULY 31, ENDED JANUARY 31, 1994 (UNAUDITED) 1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA Net asset value, $ 21.90 $ 21.34 $ 19.92 $ 17.10 $ 18.56 $ 14.56 beginning of period Income from Investment Operations Net investment .23 .53 .50 .46 .58 .76(dagger) income Net realized and 1.98 3.02 1.94 3.10 (.02) 3.86 unrealized gain (loss) on investments Total from investment 2.21 3.55 2.44 3.56 .56 4.62 operations Less Distributions From net investment (.28) (.59) (.38) (.52) (.75) (.62) income From net realized (.77) (2.40) (.64) (.22) (1.27) - gain Total distributions (1.05) (2.99) (1.02) (.74) (2.02) (.62) Net asset value, end of $ 23.06 $ 21.90 $ 21.34 $ 19.92 $ 17.10 $ 18.56 period TOTAL RETURN (double dagger) 10.38%# 19.10% 12.75% 21.89% 3.22% 32.66% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 8,238 $ 6,646 $ 4,199 $ 2,686 $ 1,910 $ 1,428 period (in millions) Ratio of expenses to .82%*(diamond) .83% .86% .87% .87% .89% average net assets Ratio of expenses to .83%*(diamond) .83% .86% .87% .87% .89% average net assets before expense reductions Ratio of net investment 2.06%* 2.67% 2.49% 2.62% 3.43% 4.76% income to average net assets Portfolio turnover rate 103%* 87% 221% 215% 108% 97%
* ANNUALIZED (double dagger) TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. # THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. (diamond) SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. (dagger) NET INVESTMENT INCOME PER SHARE CONTAINS A SPECIAL DIVIDEND FROM QUANTUM CHEMICAL CORP. OF $.09 PER SHARE. NOTES TO FINANCIAL STATEMENTS For the period ended January 31, 1994 (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 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 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 current exchange rate. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rate on the dates of the transactions. It is not practical to identify the portion of each amount shown in the fund's Statement of Operations under the caption "Realized and Unrealized Gain (Loss) on Investments" that arises from changes in foreign currency exchange rates. Investment income includes net realized and unrealized currency gains and losses recognized between accrual and payment dates. 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. Dividend and interest income is recorded net of foreign taxes where recovery of such taxes is not assured. 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 are primarily due to differing treatments for foreign currency transactions, equalization, market discount, non-taxable 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED dividends, net operating losses, expiring capital loss carryforwards and losses deferred due to wash sales excise tax regulations. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. 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. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. 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, the fund changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts as of July 31, 1993 have been reclassified to reflect an increase in paid in capital of $55,647,000, an increase in undistributed net investment income of $832,000 and a decrease in accumulated net realized gain on investments of $56,479,000. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign currency contracts. These contracts involve market risk in excess of the amount reflected in the fund's Statement of Assets and Liabilities. The face or contract amount in U.S. dollars reflects the total exposure the fund has in that particular currency contract. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and presented net on the Statement of Assets and Liabilities. Gain (loss) on the purchase or sale of forward foreign currency contracts having the same settlement date and broker is recognized on the date of offset, otherwise gain (loss) is recognized on settlement date. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The fund's investment adviser, Fidelity Management & Research Company (FMR), is responsible for 2. OPERATING POLICIES - CONTINUED REPURCHASE AGREEMENTS - CONTINUED determining that the value of these underlying securities remains at least equal to the resale price. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management contracts with FMR, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Federal Agency obligations. SHORT SALES AGAINST THE BOX. The fund may hedge its investments against changes in value by engaging in short sales against the box. In a short sale against the box, the fund sells a borrowed security, while at the same time either owning an identical security or having the right to obtain such a security. By selling short against the box the equity underlying one of its convertible holdings, the fund would seek to offset the effect that a decline in the underlying equity might have on the value of the convertible security. While the short sale is outstanding, the fund will not dispose of the security hedged by the short sale. The fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the fund instructs the custodian to maintain in a separate account securities having a value at least equal to the amount of the securities sold short. INDEXED SECURITIES. The fund may invest in indexed securities whose value is linked either directly or inversely to changes in foreign currencies, interest rates, commodities, indices, or other reference instruments. Indexed securities may be more volatile than the reference instrument itself, but any loss is limited to the amount of the original investment. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $3,893,144,000 and $3,442,266,000, respectively, of which sales of U.S. government and government agency obligations aggregated $132,150,000. 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 ranging from .31% to .52% and is based on the monthly average net assets of all the mutual funds advised by FMR. The annual individual fund fee rate is .20%. For the period, the 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED management fee was equivalent to an annualized rate of .52% of average net assets. The Board of Trustees approved a new group fee rate schedule with rates ranging from .2850% to .5200%. Effective November 1, 1993, FMR has voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an affiliate of FMR and the general distributor of the fund, received sales charges of $4,472,000 on sales of shares of the fund. TRANSFER AGENT FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives fees based on the type, size, number of accounts and the number of transactions made by shareholders. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING FEE. 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 $1,965,000 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 $368,000 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 with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNT IN THOUSANDS PURCHASES SALES DIVIDEND MARKET AFFILIATES COST COST INCOME VALUE Cephalon, Inc. (a) $ 927 - - $ 11,835 Summit Care Corp. (a) $ 753 - - TNT Freightways 110 278 $ 2 29,189 TOTALS $ 1,037 $ 1,031 $ 2 $ 41,024 (a) non-income producing 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)(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)(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. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO WRITE FIDELITY 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. Please send ALL correspondence about retirement accounts to Dallas. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 2269 Boston, MA 02107-2269 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30280 Salt Lake City, UT 84130-0280 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments Additional Payments P.O. Box 2656 Boston, MA 02293-0656 Fidelity Investments Additional Payments P.O. Box 620024 Dallas, TX 75262-0024 Fidelity Investments Additional Payments P.O. Box 31455 Salt Lake City, UT 84131-0455 OVERNIGHT EXPRESS Fidelity Investments Additional Payments World Trade Center 164 Northern Avenue Boston, MA 02210 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02103-0878 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02101-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 620024 Dallas, TX 75262-0024 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 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 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 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 2249 Galiano Street Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 32 West Central Boulevard 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 1 West Pennsylvania Ave. Towson, MD 7401 Wisconsin Avenue Bethesda, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 101 Cambridge Street Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B 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 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 1903 East Ninth Street Cleveland, OH 28699 Chagrin Boulevard Woodmere Village, 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 1010 Lamar Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 175 East 400 South 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 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Steven Kaye, Vice President Gary L. French, Treasurer John H. Costello, Assistant Treasurer Arthur S. Loring, Secretary Robert H. Morrison, Manager, Security Transactions BOARD OF TRUSTEES J. Gary Burkhead Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * 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 Income 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 1-800-544-0118for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE -----END PRIVACY-ENHANCED MESSAGE-----