-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VrSBn8CvMLrrCqMO/9cZqjdYHTwh3KFwk/6GnxFdYukmoJAyI489uqeWPF6HFrKm cLAeGLXlSXPFEpXsnWeuPw== 0000754510-99-000012.txt : 19990920 0000754510-99-000012.hdr.sgml : 19990920 ACCESSION NUMBER: 0000754510-99-000012 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990917 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY SECURITIES FUND CENTRAL INDEX KEY: 0000754510 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04118 FILM NUMBER: 99713097 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174391706 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAILZONE ZH-2 CITY: BOSTON STATE: MA ZIP: 02109 N-30D 1 FIDELITY BLUE CHIP GROWTH FUND ANNUAL REPORT JULY 31, 1999 (2_FIDELITY_LOGOS)(registered trademark) CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 20 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 24 Notes to the financial statements. REPORT OF INDEPENDENT 28 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 29 OF SPECIAL NOTE 30 Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation. Other third party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company. This report is printed on recycled paper using soy-based inks. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: In July, the steadily growing U.S. economy again sparked fears of inflation and posed the threat of another Federal Reserve Board interest-rate hike at its August policy meeting. Despite rising profits and continued productivity gains at many U.S. corporations, stock and bond markets sold off sharply toward the month's end. Renewed jitters about inflation were sparked by a government report that showed a larger-than-expected increase in the employment-cost index. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that an investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these types of funds. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy. If you have questions, please call us at 1-800-544-8888, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Total returns do not include the effect of the 3.00% sales load which was eliminated as of September 30, 1998. CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS FIDELITY BLUE CHIP GROWTH 19.30% 182.70% 560.75% S&P 500 (registered trademark) 20.20% 220.67% 396.75% Growth Funds Average 18.63% 167.08% 318.64% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the growth funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Inc. The past one year average represents a peer group of 1,067 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS FIDELITY BLUE CHIP GROWTH 19.30% 23.10% 20.78% S&P 500 20.20% 26.25% 17.38% Growth Funds Average 18.63% 21.27% 14.98% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER 10 YEARS Blue Chip Growth S&P 500 00312 SP001 1989/07/31 10000.00 10000.00 1989/08/31 10243.36 10196.00 1989/09/30 10496.82 10154.20 1989/10/31 10340.59 9918.62 1989/11/30 10519.13 10120.96 1989/12/31 10609.49 10363.86 1990/01/31 9720.97 9668.45 1990/02/28 9984.52 9793.17 1990/03/31 10481.48 10052.69 1990/04/30 10383.60 9801.37 1990/05/31 11558.25 10757.01 1990/06/30 11821.79 10683.86 1990/07/31 11543.19 10649.67 1990/08/31 10549.25 9686.94 1990/09/30 10050.92 9215.19 1990/10/31 9990.51 9175.56 1990/11/30 10624.83 9768.30 1990/12/31 10980.97 10040.84 1991/01/31 11840.88 10478.62 1991/02/28 12754.06 11227.84 1991/03/31 13393.29 11499.55 1991/04/30 13248.70 11527.15 1991/05/31 13948.80 12025.12 1991/06/30 13248.70 11474.37 1991/07/31 14413.00 12009.08 1991/08/31 15044.62 12293.69 1991/09/30 14808.87 12088.39 1991/10/31 15105.96 12250.37 1991/11/30 14786.02 11756.68 1991/12/31 16999.53 13101.65 1992/01/31 16464.71 12857.96 1992/02/29 16541.11 13025.11 1992/03/31 16090.34 12771.12 1992/04/30 16304.27 13146.59 1992/05/31 16640.44 13211.01 1992/06/30 16159.10 13014.17 1992/07/31 16823.80 13546.45 1992/08/31 16648.08 13268.74 1992/09/30 16869.15 13425.32 1992/10/31 17103.33 13472.30 1992/11/30 18001.04 13931.71 1992/12/31 18048.68 14103.07 1993/01/31 18088.20 14221.54 1993/02/28 17969.62 14414.95 1993/03/31 18839.24 14719.10 1993/04/30 19139.66 14362.90 1993/05/31 20143.68 14747.83 1993/06/30 20333.42 14790.60 1993/07/31 20333.42 14731.43 1993/08/31 21598.33 15289.75 1993/09/30 22047.79 15172.02 1993/10/31 22294.23 15486.08 1993/11/30 21616.51 15338.97 1993/12/31 22471.11 15524.57 1994/01/31 23363.63 16052.40 1994/02/28 23382.23 15617.38 1994/03/31 22647.76 14936.47 1994/04/30 23317.15 15127.65 1994/05/31 23614.66 15375.75 1994/06/30 22796.51 14999.04 1994/07/31 23372.93 15491.01 1994/08/31 24637.34 16126.14 1994/09/30 24564.16 15731.05 1994/10/31 25698.18 16085.00 1994/11/30 24357.98 15499.18 1994/12/31 24684.51 15729.04 1995/01/31 24066.21 16136.89 1995/02/28 24865.24 16765.74 1995/03/31 25911.60 17260.50 1995/04/30 26872.34 17768.82 1995/05/31 27471.62 18479.04 1995/06/30 28993.60 18908.31 1995/07/31 31000.70 19535.31 1995/08/31 31324.12 19584.34 1995/09/30 31669.05 20410.80 1995/10/31 30871.59 20337.94 1995/11/30 31938.19 21230.77 1995/12/31 31689.04 21639.68 1996/01/31 32121.59 22376.29 1996/02/29 31864.12 22583.72 1996/03/31 32255.47 22801.20 1996/04/30 32430.55 23137.29 1996/05/31 33089.66 23734.00 1996/06/30 33192.65 23824.43 1996/07/31 31678.74 22771.86 1996/08/31 32502.64 23252.12 1996/09/30 34444.72 24560.75 1996/10/31 34957.66 25238.14 1996/11/30 37488.88 27145.89 1996/12/31 36562.49 26608.13 1997/01/31 38687.56 28270.60 1997/02/28 38452.69 28492.25 1997/03/31 36562.49 27321.50 1997/04/30 38788.23 28952.59 1997/05/31 41058.70 30715.23 1997/06/30 42680.47 32091.27 1997/07/31 46091.78 34644.77 1997/08/31 43787.75 32703.97 1997/09/30 45968.47 34495.17 1997/10/31 44443.50 33343.03 1997/11/30 45806.73 34886.48 1997/12/31 46441.99 35485.48 1998/01/31 47312.92 35877.95 1998/02/28 50690.73 38465.47 1998/03/31 52938.68 40435.28 1998/04/30 53385.92 40842.06 1998/05/31 52326.68 40139.99 1998/06/30 55174.87 41770.47 1998/07/31 55386.72 41325.62 1998/08/31 47195.23 35350.76 1998/09/30 50735.94 37615.33 1998/10/31 54163.87 40674.96 1998/11/30 57852.63 43140.27 1998/12/31 62584.67 45626.01 1999/01/31 65789.05 47534.09 1999/02/28 63168.41 46056.73 1999/03/31 66161.65 47899.46 1999/04/30 66111.97 49754.61 1999/05/31 64012.98 48579.90 1999/06/30 67863.20 51276.09 1999/07/30 66074.71 49675.25 IMATRL PRASUN SHR__CHT 19990731 19990811 141854 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Blue Chip Growth Fund on July 31, 1989. As the chart shows, by July 31, 1999, the value of the investment would have grown to $66,075 - a 560.75% increase on the initial investment. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $49,675 - a 396.75% increase. (checkmark)UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Federal Reserve Board policy, Internet stock mania and Y2K concerns all played key roles in the direction of the U.S. equity market for the 12 months that ended July 31, 1999. As we entered the period, investors were still leery of troubled overseas markets and overall liquidity. The Fed then made three successive interest-rate cuts in the fall and confidence was restored. The second quarter of 1999 saw more sharing of the market's gains by smaller stocks, many of which rely on borrowed money to fund their growth. The Russell 2000 Index - a measure of small-stock performance - handily outpaced the large-cap oriented Standard & Poor's 500 Index during that time. For the entire 12 months, though, the S&P 500(registered trademark) returned 20.20%, while the Russell 2000 could only muster 7.41%. The Dow Jones Industrial Average - an index of 30 blue-chip stocks - returned 21.88%. Internet stocks continued to attract investors, with many stock valuations peaking around April, then cooling off some as the period ended. Technology stocks prospered - the tech-heavy NASDAQ index returned a tidy 41.42% during the period - as did telecommunications stocks with Internet exposure. Y2K concerns mounted toward the end of the period, as many investors anticipated a spending freeze within the technology sector. (photograph of John McDowell) An interview with John McDowell, Portfolio Manager of Fidelity Blue Chip Growth Fund Q. HOW DID THE FUND PERFORM, JOHN? A. For the 12 months that ended July 31, 1999, the fund had a total return of 19.30%. That slightly lagged the total return of the fund's benchmark, the Standard & Poor's 500 Index, which posted a return of 20.20% during the same period. The fund outpaced the growth funds average, which was up 18.63% during the period, as measured by Lipper Inc. Q. WHAT WERE THE MAJOR FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE RELATIVE TO THE S&P 500 INDEX? A. Most of the fund's relative performance can be attributed to three sectors: financial services, health care and technology. Because I invest most heavily in the growth sectors of the market, including technology and health care, stocks from these sectors tend to be well-represented in the fund. While the performance of technology stocks was particularly volatile over the past year, they generally performed well, especially Internet stocks. America Online was the fund's single biggest contributor over the past 12 months. I did, however, cut back my AOL position significantly from late 1998 to early 1999 as the stock's valuation increased and as I became more concerned about the possible slowdown in subscriber growth. Weakness in the health care sector offset strength in technology. Slowing earnings growth hurt several hospital and pharmaceutical stocks. In a period where the S&P 500 was up over 20%, all the major U.S. pharmaceutical stocks underperformed, and three - Warner-Lambert, Pfizer and Eli Lilly - actually posted declines. Q. HOW DID THE FINANCE SECTOR FARE? A. As a group, financial services stocks made up one of the market's weakest sectors. Financial services is also one of the S&P's biggest sectors. Generally, most bank and insurance stocks do not meet my growth criteria, and I tend to have less exposure to these issues. Bank stocks were greatly impacted by the credit crisis in September and October of last year. While many of the larger banks have rebounded, they have not fully participated in the strong stock market. My modest exposure to the group's weak performance made the sector one of the biggest contributors to the fund's relative performance. Q. THE FUND PERFORMED WELL AGAINST ITS PEER GROUP. WHAT WERE THE KEYS HERE? A. While it is difficult to generalize, cutting back on Internet positions earlier in 1999 likely had a positive impact on performance relative to my competitors. The average growth manager was probably somewhat more aggressive than I was, and therefore in all likelihood had more exposure to the Internet. If so, the recent decline in Internet stocks would have hurt the typical growth manager more than me. Q. WHICH PARTICULAR HOLDINGS CONTRIBUTED WELL TO PERFORMANCE? A. As I mentioned earlier, AOL was my biggest contributor. I owned a sizable position last year and was fortunate to cut it back early this year before the weakness in Internet stocks toward the end of the period. Positions in other technology stocks, including Xilinx, Cisco Systems, Linear Technology, Texas Instruments, EMC Corp., Micron Technology, Novellus Systems and Microsoft, also contributed. Q. WHICH HOLDINGS DETRACTED? A. Holdings in various health care and consumer stocks, including Eli Lilly, Warner-Lambert, Becton Dickinson and Gillette, hurt performance. The combination of a modest slowdown in earnings growth and higher interest rates caused these stocks to lag the market. Q. WHAT IS YOUR INVESTMENT OUTLOOK? WHAT CHANGES DO YOU ANTICIPATE MAKING TO THE PORTFOLIO? A. I try not to make broad predictions about future market performance. I do, however, have some observations. First, stock valuations are high. This is unusual in an environment of rising interest rates. Offsetting high interest rates, corporate earnings are accelerating from negative growth last year to low double-digit growth this year. Additionally, there is precious little hard evidence that inflation is indeed going to be a problem in the year ahead. If inflation does accelerate from here, I would expect the market, and growth stocks in particular, to be weak. The other big unknown factor on the horizon is technology spending. Year 2000 concerns may cause a slowdown in corporate technology spending in the second half of the year. So far, most of the companies I talk to have not seen any evidence to that effect. Since technology stocks make up such a large part of my investment universe, I am watching this closely, and it may have an impact on my positioning in the months ahead. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON BEHALF OF ANY FIDELITY FUND. (checkmark)FUND FACTS GOAL: seeks growth of capital over the long term by investing mainly in common stocks of well-known and established companies FUND NUMBER: 312 TRADING SYMBOL: FBGRX START DATE: December 31, 1987 SIZE: as of July 31, 1999, more than $23.6 billion MANAGER: John McDowell, since 1996; leader, Fidelity Growth Funds Group; manager, Fidelity Large-Cap Stock Fund, 1995-1996; joined Fidelity in 1985 JOHN MCDOWELL ON THE NEAR-TERM PROSPECTS OF CYCLICAL STOCKS: "There has been debate about the sustainability of the market rotation into economically sensitive stocks and small-caps. Over the long run, growth and value stocks have provided similar returns and small stocks have outperformed large stocks. Therefore, some investors feel the recent strength in value and small-cap stocks simply reflects a reversal in performance driven by their valuation disparity compared to large growth stocks. "Others view improving world growth as evidence that inflation may be on the rise. Higher inflation tends to be bad for growth-stock valuations. Additionally, higher inflation tends to benefit cyclicals because they can generally offset inflation with higher prices, accelerating their earnings growth. "I expect aggregate earnings growth to accelerate in the quarters ahead. But will the market be strong as well? Perhaps, but the key variable is interest rates. Stock valuations are at record-highs and need low interest rates to be sustained. If inflation picks up and rates rise, stock valuations are at risk regardless of earnings growth. In the face of falling valuations, the market would be hard-pressed to show strong results. "As always, I will resist the urge to reach for performance. If market gains are coming from excessively valued stocks, in my experience, the rewards are not worth the risk. My long-term record has been built on prudent and balanced investment decisions." INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1999 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE STOCKS 6 MONTHS AGO General Electric Co. 4.0 3.6 Microsoft Corp. 4.0 4.8 Cisco Systems, Inc. 2.6 2.3 Lucent Technologies, Inc. 2.3 1.4 Intel Corp. 2.1 2.9 Procter & Gamble Co. 2.1 1.5 Merck & Co., Inc. 1.9 2.5 Bristol-Myers Squibb Co. 1.9 1.7 Johnson & Johnson 1.8 1.5 Philip Morris Companies, Inc. 1.7 2.2 TOP FIVE MARKET SECTORS AS OF JULY 31, 1999 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 26.0 28.6 HEALTH 16.0 17.6 FINANCE 9.3 8.4 NONDURABLES 8.6 9.7 RETAIL & WHOLESALE 8.3 8.6
ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JULY 31, 1999 * AS OF JANUARY 31, 1999 ** Stocks 96.2% Stocks 95.7% Short-Term Investments 3.8% Short-Term Investments 4.3% * FOREIGN INVESTMENTS 3.3% ** FOREIGN INVESTMENTS 1.0% Row: 1, Col: 1, Value: 96.2 Row: 1, Col: 1, Value: 95.7 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 8, Value: 3.8 Row: 1, Col: 8, Value: 4.3
INVESTMENTS JULY 31, 1999 Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.2% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 1.8% AEROSPACE & DEFENSE - 1.1% Boeing Co. 2,064,400 $ 93,672 Textron, Inc. 1,118,420 91,990 United Technologies Corp. 1,065,400 71,049 256,711 DEFENSE ELECTRONICS - 0.3% Raytheon Co. Class B 1,225,300 86,154 SHIP BUILDING & REPAIR - 0.4% General Dynamics Corp. 1,325,900 89,250 TOTAL AEROSPACE & DEFENSE 432,115 BASIC INDUSTRIES - 1.0% CHEMICALS & PLASTICS - 0.3% Monsanto Co. 1,537,000 60,135 IRON & STEEL - 0.1% Nucor Corp. 519,300 25,186 PACKAGING & CONTAINERS - 0.6% Corning, Inc. 1,302,500 91,175 Owens-Illinois, Inc. (a) 2,089,000 52,094 143,269 TOTAL BASIC INDUSTRIES 228,590 CONSTRUCTION & REAL ESTATE - 0.3% BUILDING MATERIALS - 0.3% Masco Corp. 2,353,400 70,014 DURABLES - 1.5% AUTOS, TIRES, & ACCESSORIES - 0.1% Federal-Mogul Corp. 269,300 13,061 Honda Motor Co. Ltd. 473,000 20,522 33,583 CONSUMER DURABLES - 0.5% Minnesota Mining & 1,337,600 117,625 Manufacturing Co. COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED CONSUMER ELECTRONICS - 0.2% Matsushita Electric 1,077,000 $ 25,094 Industrial Co. Ltd. Sony Corp. 253,600 31,748 56,842 HOME FURNISHINGS - 0.5% Leggett & Platt, Inc. 3,427,200 87,822 Newell Rubbermaid, Inc. 558,800 24,168 111,990 TEXTILES & APPAREL - 0.2% NIKE, Inc. Class B 680,700 35,396 TOTAL DURABLES 355,436 ENERGY - 4.0% ENERGY SERVICES - 1.5% Baker Hughes, Inc. 1,542,100 53,684 Halliburton Co. 3,778,000 174,260 Noble Drilling Corp. (a) 1,299,300 29,478 Schlumberger Ltd. 1,832,900 111,005 368,427 OIL & GAS - 2.5% Anadarko Petroleum Corp. 2,333,200 89,099 Exxon Corp. 2,569,900 203,986 Texaco, Inc. 1,595,700 99,432 Total Fina SA Class B (a) 766,400 97,607 USX-Marathon Group 3,108,000 94,406 584,530 TOTAL ENERGY 952,957 FINANCE - 9.3% BANKS - 1.0% Bank of New York Co., Inc. 3,896,300 143,920 Northern Trust Corp. 421,300 36,653 State Street Corp. 864,200 61,250 241,823 CREDIT & OTHER FINANCE - 3.3% American Express Co. 1,564,443 206,115 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED CREDIT & OTHER FINANCE - CONTINUED Associates First Capital 3,149,800 $ 120,677 Corp. Class A Citigroup, Inc. 5,372,500 239,412 Fleet Financial Group, Inc. 2,526,800 102,335 Household International, Inc. 890,000 38,214 Providian Financial Corp. 831,300 75,648 782,401 FEDERAL SPONSORED CREDIT - 2.4% Fannie Mae 4,811,100 331,966 Freddie Mac 3,921,400 224,990 556,956 INSURANCE - 2.2% AFLAC, Inc. 729,400 33,826 Ambac Financial Group, Inc. 1,689,700 93,990 American International Group, 1,952,750 226,763 Inc. CIGNA Corp. 751,300 66,255 MBIA, Inc. 612,500 35,066 MGIC Investment Corp. 1,097,500 54,120 510,020 SECURITIES INDUSTRY - 0.4% Morgan Stanley, Dean Witter & 468,300 42,206 Co. Nikko Securities Co. Ltd. 3,420,000 27,467 Nomura Securities Co. Ltd. 2,524,000 35,431 105,104 TOTAL FINANCE 2,196,304 HEALTH - 16.0% DRUGS & PHARMACEUTICALS - 11.0% American Home Products Corp. 1,982,900 101,128 Amgen, Inc. (a) 2,525,500 194,148 Bristol-Myers Squibb Co. 6,643,200 441,773 Genzyme Corp. (General 802,300 45,380 Division) Lilly (Eli) & Co. 6,027,800 395,574 Merck & Co., Inc. 6,605,300 447,096 PE Corp. (Biosystems Group) 1,105,800 61,994 Pfizer, Inc. 7,272,400 246,807 Quintiles Transnational Corp. 1,770,600 67,283 (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED Schering-Plough Corp. 6,863,400 $ 336,307 SmithKline Beecham PLC 820,700 49,293 sponsored ADR Warner-Lambert Co. 3,441,200 227,119 2,613,902 MEDICAL EQUIPMENT & SUPPLIES - - 4.5% Abbott Laboratories 5,870,600 252,069 Becton, Dickinson & Co. 2,481,100 68,075 Boston Scientific Corp. (a) 1,169,400 47,434 Cardinal Health, Inc. 1,539,050 105,040 Guidant Corp. 1,303,700 76,348 Johnson & Johnson 4,676,300 430,804 Medtronic, Inc. 1,150,000 82,872 1,062,642 MEDICAL FACILITIES MANAGEMENT - - 0.5% Health Management Associates, 4,315,450 35,602 Inc. Class A (a) United HealthCare Corp. 1,494,100 91,140 126,742 TOTAL HEALTH 3,803,286 INDUSTRIAL MACHINERY & EQUIPMENT - 6.0% ELECTRICAL EQUIPMENT - 4.6% Ericsson (L.M.) Telefon AB 500,000 16,031 ADR Class B General Electric Co. 8,839,900 963,547 Honeywell, Inc. 708,500 84,887 Omron Corp. 1,310,000 21,843 1,086,308 INDUSTRIAL MACHINERY & EQUIPMENT - 1.3% Illinois Tool Works, Inc. 897,600 66,703 Ingersoll-Rand Co. 1,664,950 107,077 Parker-Hannifin Corp. 1,050,500 49,570 Tyco International Ltd. 980,100 95,744 319,094 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED POLLUTION CONTROL - 0.1% Waste Management, Inc. 1,107,290 $ 28,305 TOTAL INDUSTRIAL MACHINERY & 1,433,707 EQUIPMENT MEDIA & LEISURE - 6.7% BROADCASTING - 3.8% AT&T Corp. (Liberty Media 3,226,400 119,377 Group) Class A (a) Cablevision Systems Corp. 735,400 51,340 Class A (a) CBS Corp. (a) 3,254,100 142,977 Clear Channel Communications, 1,157,400 80,512 Inc. (a) Comcast Corp. Class A 3,868,500 148,937 (special) Cox Communications, Inc. 2,058,700 77,073 Class A (a) MediaOne Group, Inc. 684,600 49,548 Time Warner, Inc. 3,302,805 237,802 907,566 ENTERTAINMENT - 0.7% Disney (Walt) Co. 4,203,100 116,111 Viacom, Inc. Class B 1,128,400 47,322 (non-vtg.) (a) 163,433 PUBLISHING - 0.6% McGraw-Hill Companies, Inc. 250,000 12,719 Tribune Co. 1,320,900 116,322 129,041 RESTAURANTS - 1.6% Brinker International, Inc. 1,690,500 47,123 (a) Darden Restaurants, Inc. 305,100 6,655 McDonald's Corp. 6,306,100 262,886 Tricon Global Restaurants, 1,640,100 66,732 Inc. (a) 383,396 TOTAL MEDIA & LEISURE 1,583,436 NONDURABLES - 8.6% BEVERAGES - 2.4% Anheuser-Busch Companies, 1,648,100 130,097 Inc. COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED BEVERAGES - CONTINUED Coca-Cola Co. (The) 4,474,300 $ 269,856 PepsiCo, Inc. 4,478,900 175,237 575,190 FOODS - 0.8% Heinz (H.J.) Co. 1,081,200 50,952 Nabisco Group Holdings Corp. 2,531,200 47,460 Quaker Oats Co. 1,403,000 95,492 193,904 HOUSEHOLD PRODUCTS - 3.7% Avon Products, Inc. 1,419,800 64,601 Clorox Co. 709,750 79,492 Colgate-Palmolive Co. 1,078,900 53,271 Gillette Co. 4,158,500 182,194 Procter & Gamble Co. 5,545,300 501,850 881,408 TOBACCO - 1.7% Philip Morris Companies, Inc. 10,820,700 403,071 TOTAL NONDURABLES 2,053,573 RETAIL & WHOLESALE - 8.3% APPAREL STORES - 1.0% Gap, Inc. 1,933,600 90,396 Limited, Inc. (The) 1,679,300 76,723 TJX Companies, Inc. 2,328,300 76,979 244,098 DRUG STORES - 1.0% CVS Corp. 2,418,100 120,300 Walgreen Co. 4,044,500 114,510 234,810 GENERAL MERCHANDISE STORES - 2.8% Costco Companies, Inc. (a) 1,165,000 87,084 Dayton Hudson Corp. 2,592,200 167,683 Nordstrom, Inc. 1,916,500 60,250 Wal-Mart Stores, Inc. 8,101,300 342,280 657,297 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED GROCERY STORES - 1.5% Albertson's, Inc. 1,435,200 $ 71,312 Kroger Co. (a) 4,435,200 116,701 Safeway, Inc. 3,116,800 167,918 355,931 RETAIL & WHOLESALE, MISCELLANEOUS - 2.0% Home Depot, Inc. 4,990,500 318,456 Lowe's Companies, Inc. 1,133,500 59,792 Staples, Inc. (a) 3,427,575 98,971 477,219 TOTAL RETAIL & WHOLESALE 1,969,355 SERVICES - 0.8% ADVERTISING - 0.8% Omnicom Group, Inc. 2,599,400 184,232 SERVICES - 0.0% Gartner Group, Inc. Class B 300,397 6,496 (a) TOTAL SERVICES 190,728 TECHNOLOGY - 26.0% COMMUNICATIONS EQUIPMENT - 5.5% Cisco Systems, Inc. (a) 10,020,250 622,508 Lucent Technologies, Inc. 8,229,514 535,433 Newbridge Networks Corp. (a) 1,228,400 32,620 Nokia AB sponsored ADR 1,353,300 115,115 1,305,676 COMPUTER SERVICES & SOFTWARE - - 9.3% Amazon.com, Inc. (a) 190,800 19,092 America Online, Inc. (a) 1,633,900 155,425 At Home Corp. Series A (a) 1,481,452 67,684 Automatic Data Processing, 3,982,980 159,568 Inc. BMC Software, Inc. (a) 514,500 27,719 Ceridian Corp. (a) 347,582 9,732 Compuware Corp. (a) 1,316,900 36,544 DST Systems, Inc. (a) 1,051,500 69,793 eBay, Inc. 155,400 15,181 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - - CONTINUED Electronic Data Systems Corp. 1,663,300 $ 100,318 First Data Corp. 1,966,900 97,484 IMS Health, Inc. 2,307,200 64,313 International Business 1,232,800 154,948 Machines Corp. Intuit, Inc. (a) 551,600 45,128 Lycos, Inc. (a) 1,098,000 45,361 Microsoft Corp. (a) 11,058,800 948,983 Oracle Corp. (a) 2,256,400 85,884 Shared Medical Systems Corp. 923,300 55,283 Siebel Systems, Inc. (a) 109,400 6,468 Synopsys, Inc. (a) 79,200 4,767 VeriSign, Inc. (a) 472,400 35,017 Veritas Software Corp. (a) 38,900 2,183 2,206,875 COMPUTERS & OFFICE EQUIPMENT - - 5.1% Compaq Computer Corp. 2,541,800 61,003 Comverse Technology, Inc. (a) 520,800 39,353 Dell Computer Corp. (a) 4,626,600 189,112 EMC Corp. (a) 3,493,800 211,593 Gateway, Inc. (a) 510,700 38,909 Hewlett-Packard Co. 2,718,900 284,635 Pitney Bowes, Inc. 3,075,000 195,647 Ricoh Co. Ltd. 1,789,000 30,017 Sun Microsystems, Inc. (a) 1,532,300 104,005 Xerox Corp. 1,321,600 64,428 1,218,702 ELECTRONIC INSTRUMENTS - 0.6% Applied Materials, Inc. (a) 1,033,500 74,347 Novellus Systems, Inc. (a) 880,100 56,656 131,003 ELECTRONICS - 5.4% Altera Corp. (a) 1,066,200 38,650 Intel Corp. 7,443,320 513,589 Linear Technology Corp. 2,233,980 137,111 Micron Technology, Inc. (a) 2,133,400 132,537 Motorola, Inc. 1,530,700 139,676 Texas Instruments, Inc. 1,592,200 229,277 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED ELECTRONICS - CONTINUED Vitesse Semiconductor Corp. 354,200 $ 22,625 (a) Xilinx, Inc. (a) 1,253,200 78,168 1,291,633 PHOTOGRAPHIC EQUIPMENT - 0.1% Fuji Photo Film Co. Ltd. 506,000 19,418 TOTAL TECHNOLOGY 6,173,307 TRANSPORTATION - 0.6% AIR TRANSPORTATION - 0.2% AMR Corp. (a) 603,400 39,146 RAILROADS - 0.4% Burlington Northern Santa Fe 1,657,900 53,053 Corp. Union Pacific Corp. 987,800 53,650 106,703 TOTAL TRANSPORTATION 145,849 UTILITIES - 5.3% CELLULAR - 0.9% ALLTEL Corp. 765,800 54,994 Vodafone AirTouch PLC 724,250 152,455 sponsored ADR 207,449 ELECTRIC UTILITY - 0.5% AES Corp. (a) 1,232,600 73,956 CMS Energy Corp. 1,315,900 49,182 123,138 TELEPHONE SERVICES - 3.9% AT&T Corp. 6,326,594 328,587 MCI WorldCom, Inc. (a) 4,099,833 338,236 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - CONTINUED SBC Communications, Inc. 2,972,700 $ 170,001 Sprint Corp. (FON Group) 1,569,500 81,124 917,948 TOTAL UTILITIES 1,248,535 TOTAL COMMON STOCKS 22,837,192 (Cost $15,330,006) CASH EQUIVALENTS - 3.8% Taxable Central Cash Fund (b) 910,994,526 910,995 (Cost $910,995) TOTAL INVESTMENT IN $ 23,748,187 SECURITIES - 100% (Cost $16,241,001)
LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.06%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. INCOME TAX INFORMATION At July 31, 1999, the aggregate cost of investment securities for income tax purposes was $16,254,603,000. Net unrealized appreciation aggregated $7,493,584,000, of which $8,010,593,000 related to appreciated investment securities and $517,009,000 related to depreciated investment securities. The fund hereby designates approximately $689,681,000 as a capital gain dividend for the purpose of the dividend paid deduction. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1999 ASSETS Investment in securities, at $ 23,748,187 value (cost $16,241,001) - See accompanying schedule Receivable for investments 89,920 sold Receivable for fund shares 33,317 sold Dividends receivable 13,329 Interest receivable 3,811 Other receivables 1,014 TOTAL ASSETS 23,889,578 LIABILITIES Payable for investments $ 159,634 purchased Payable for fund shares 31,049 redeemed Accrued management fee 9,619 Other payables and accrued 5,072 expenses TOTAL LIABILITIES 205,374 NET ASSETS $ 23,684,204 Net Assets consist of: Paid in capital $ 15,123,597 Undistributed net investment 64,832 income Accumulated undistributed net 988,561 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 7,507,214 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 445,219 $ 23,684,204 shares outstanding NET ASSET VALUE, offering $53.20 price and redemption price per share ($23,684,204 (divided by) 445,219 shares) STATEMENT OF OPERATIONS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1999 INVESTMENT INCOME $ 164,601 Dividends Interest 40,319 TOTAL INCOME 204,920 EXPENSES Management fee Basic fee $ 117,605 Performance adjustment (22,693) Transfer agent fees 45,051 Accounting fees and expenses 999 Non-interested trustees' 83 compensation Custodian fees and expenses 380 Registration fees 2,012 Audit 47 Legal 75 Miscellaneous 28 Total expenses before 143,587 reductions Expense reductions (3,263) 140,324 NET INVESTMENT INCOME 64,596 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 994,428 Foreign currency transactions 243 994,671 Change in net unrealized appreciation (depreciation) on: Investment securities 2,337,354 Assets and liabilities in (68) 2,337,286 foreign currencies NET GAIN (LOSS) 3,331,957 NET INCREASE (DECREASE) IN $ 3,396,553 NET ASSETS RESULTING FROM OPERATIONS STATEMENT OF CHANGES IN NET ASSETS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, YEAR ENDED JULY 31, 1999 1998 INCREASE (DECREASE) IN NET ASSETS Operations Net investment $ 64,596 $ 74,647 income Net realized gain (loss) 994,671 1,047,466 Change in net unrealized 2,337,286 1,649,287 appreciation (depreciation) NET INCREASE (DECREASE) IN 3,396,553 2,771,400 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (36,306) (83,745) From net investment income From net realized gain (747,879) (562,631) TOTAL DISTRIBUTIONS (784,185) (646,376) Share transactions Net 8,609,208 5,357,347 proceeds from sales of shares Reinvestment of distributions 766,939 636,271 Cost of shares redeemed (5,310,552) (3,989,701) NET INCREASE (DECREASE) IN 4,065,595 2,003,917 NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) 6,677,963 4,128,941 IN NET ASSETS NET ASSETS Beginning of period 17,006,241 12,877,300 End of period (including $ 23,684,204 $ 17,006,241 undistributed net investment income of $64,832 and $41,266, respectively) OTHER INFORMATION Shares Sold 172,671 126,191 Issued in reinvestment of 19,630 16,359 distributions Redeemed (108,433) (93,696) Net increase (decrease) 83,868 48,854
FINANCIAL HIGHLIGHTS YEARS ENDED JULY 31, 1999 1998 1997 1996 1995 SELECTED PER-SHARE DATA Net asset value, beginning $ 47.06 $ 41.21 $ 30.76 $ 32.59 $ 25.14 of period Income from Investment Operations Net investment income .16 C .22 C .28 C .34 .07 C Net realized and unrealized 8.14 7.64 12.70 .42 7.96 gain (loss) Total from investment 8.30 7.86 12.98 .76 8.03 operations Less Distributions From net investment income (.10) (.26) (.28) (.12) - From net realized gain (2.06) (1.75) (2.25) (2.47) (.58) Total distributions (2.16) (2.01) (2.53) (2.59) (.58) Net asset value, end of period $ 53.20 $ 47.06 $ 41.21 $ 30.76 $ 32.59 TOTAL RETURN A, B 19.30% 20.17% 45.50% 2.19% 32.64% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 23,684 $ 17,006 $ 12,877 $ 8,179 $ 6,421 (in millions) Ratio of expenses to average .71% .72% .80% .98% 1.05% net assets Ratio of expenses to average .70% D .70% D .78% D .95% D 1.02% D net assets after expense reductions Ratio of net investment .32% .52% .81% 1.10% .25% income to average net assets Portfolio turnover rate 38% 49% 51% 206% 182%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE FORMER ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1999 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, as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade and settlement date on purchases and sales of securities. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED received. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust. DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the Plan) non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or are invested in a cross-section of other Fidelity funds. Deferred amounts remain in the fund until distributed in accordance with the Plan. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, foreign currency transactions and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED invested in one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund) managed by Fidelity Investments Money Management, Inc., an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities. Income distributions from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions earned by the fund are recorded as interest income in the accompanying financial statements. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $10,408,613,000 and $7,368,421,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. The annual individual fund fee rate is .30%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus).20% of the fund's average net assets over the performance period) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annual rate of .47% of average net assets after the performance adjustment. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of the fund. FDC 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED SALES LOAD - CONTINUED received a sales charge of up to 3% for selling shares of the fund. Effective September 30, 1998, the fund's 3% sales charge was eliminated. Prior to October 12, 1990, FDC received a sales charge of up to 2% and a deferred sales charge of up to 1%. Shares purchased before October 12, 1990 are subject to a 1% deferred sales charge upon redemption. For the period, FDC received sales charges of $743,000 all of which was retained, and deferred sales charges of $21,000, respectively, on redemption of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .22% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $1,237,000 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 $2,206,000 under this arrangement. In addition, the fund has entered into an arrangement with its transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expenses. During the period, the fund's transfer agent fees were reduced by $1,057,000 under this arrangement. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Blue Chip Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Blue Chip Growth Fund (a fund of Fidelity Securities Fund) at July 31, 1999, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Blue Chip Growth Fund 's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts September 8, 1999 DISTRIBUTIONS The Board of Trustees of Fidelity Blue Chip Growth Fund voted to pay on September 7, 1999, to shareholders of record at the opening of business on September 3, 1999, a distribution of $2.07 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.14 per share from net investment income. A total of 82% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders. The fund hereby designates 100% of the long-term capital gain dividends distributed during the fiscal year as 20%-rate capital gain dividends. The fund will notify shareholders in January 2000 of amounts for use in preparing 1999 income tax returns. OF SPECIAL NOTE INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS Recently, the SEC issued new disclosure requirements for all mutual fund prospectuses. While Fidelity could have complied by simply following the new requirements, we saw a different opportunity. We saw the chance to create a brand new prospectus: one that is better organized, easier to use and more informative than ever. The new format of the Fidelity mutual fund prospectus puts the information you need to make informed investment decisions right at your fingertips. In the opening pages, you will find the SEC-mandated summary that highlights the fund's investment objectives, strategies and risks. There's also an easy-to-read performance chart and fee table right up front. Inside, you will find additional features we've introduced to make the fund prospectus a more useful tool. In our new Shareholder Information section, for example, we have provided practical, beneficial information - from how to buy or sell shares, key contact information, investment services, ways to set up your account and more - all in one convenient location. We invite you to spend a moment and review our new prospectus. It is designed to help make your investment decision easier, no matter which of the Fidelity funds you invest in. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. (PHONE_GRAPHIC)FIDELITY AUTOMATED SERVICE TELEPHONE (FASTSM) 1-800-544-5555 PRESS 1 For mutual fund and brokerage trading. 2 For quotes.* 3 For account balances and holdings. 4 To review orders and mutual fund activity. 5 To change your PIN. *0 To speak to a Fidelity representative. BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (COMPUTER_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call EarthLink Sprint at 1-800-288-2967, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider. (COMPUTER_GRAPHIC) FIDELITY ON-LINE XPRESS+(registered trademark) Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President Robert C. Pozen, Senior Vice President Abigail P. Johnson, Vice President John McDowell, Vice President Eric D. Roiter, Secretary Richard A. Silver, Treasurer Matthew N. Karstetter, Deputy Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES BCF-ANN-0999 83746 1.536058.102 CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Aggressive Growth Fund Blue Chip Growth Fund Capital Appreciation Fund Contrafund (registered trademark) Contrafund(registered trademark)II Disciplined Equity Fund Dividend Growth Fund Export and Multinational Fund Fidelity FiftySM Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium Fund(registered trademark) OTC Portfolio Retirement Growth Fund Small Cap Selector Small Cap Stock Fund Stock Selector Tax Managed Stock Fund TechnoQuant(registered trademark) Growth Fund Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) Fidelity Automated Service Telephone (FASTSM) 1-800-544-5555 AUTOMATED LINE FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)(registered trademark) Corporate Headquarters 82 Devonshire St., Boston, MA 02109 www.fidelity.com FIDELITY DIVIDEND GROWTH FUND ANNUAL REPORT JULY 31, 1999 (2_FIDELITY_LOGOS)(registered trademark) CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 17 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 21 Notes to the financial statements. REPORT OF INDEPENDENT 25 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 26 OF SPECIAL NOTE 27 Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation. Other third party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company. This report is printed on recycled paper using soy-based inks. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: In July, the steadily growing U.S. economy again sparked fears of inflation and posed the threat of another Federal Reserve Board interest-rate hike at its August policy meeting. Despite rising profits and continued productivity gains at many U.S. corporations, stock and bond markets sold off sharply toward the month's end. Renewed jitters about inflation were sparked by a government report that showed a larger-than-expected increase in the employment-cost index. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that an investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these types of funds. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy. If you have questions, please call us at 1-800-544-8888, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND FIDELITY DIVIDEND GROWTH 21.90% 261.72% 327.80% S&P 500 (registered trademark) 20.20% 220.67% 247.62% Growth Funds Average 18.63% 167.08% n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on April 27, 1993. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the growth funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Inc. The past one year average represents a peer group of 1,067 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND FIDELITY DIVIDEND GROWTH 21.90% 29.32% 26.12% S&P 500 20.20% 26.25% 22.01% Growth Funds Average 18.63% 21.27% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER LIFE OF FUND Dividend Growth S&P 500 00330 SP001 1993/04/27 10000.00 10000.00 1993/04/30 10150.00 10051.03 1993/05/31 10480.00 10320.39 1993/06/30 10700.00 10350.32 1993/07/31 10800.00 10308.92 1993/08/31 11550.00 10699.63 1993/09/30 11820.00 10617.24 1993/10/31 12080.00 10837.02 1993/11/30 11680.00 10734.07 1993/12/31 12171.52 10863.95 1994/01/31 12493.15 11233.32 1994/02/28 12302.18 10928.90 1994/03/31 11715.49 10452.40 1994/04/30 11786.37 10586.19 1994/05/31 11604.11 10759.80 1994/06/30 11310.46 10496.19 1994/07/31 11826.87 10840.46 1994/08/31 12616.68 11284.92 1994/09/30 12485.05 11008.44 1994/10/31 13041.96 11256.13 1994/11/30 12474.92 10846.18 1994/12/31 12691.18 11007.03 1995/01/31 12732.22 11292.45 1995/02/28 13142.60 11732.51 1995/03/31 13768.44 12078.74 1995/04/30 14404.54 12434.46 1995/05/31 14907.26 12931.46 1995/06/30 15728.03 13231.86 1995/07/31 16456.47 13670.63 1995/08/31 16528.28 13704.94 1995/09/30 16956.49 14283.29 1995/10/31 16359.88 14232.30 1995/11/30 17176.30 14857.10 1995/12/31 17454.52 15143.25 1996/01/31 17928.35 15658.72 1996/02/29 18479.31 15803.88 1996/03/31 18964.16 15956.07 1996/04/30 19845.70 16191.26 1996/05/31 20484.81 16608.83 1996/06/30 19933.85 16672.11 1996/07/31 18997.21 15935.54 1996/08/31 19614.29 16271.62 1996/09/30 20604.68 17187.39 1996/10/31 21100.90 17661.42 1996/11/30 22533.19 18996.44 1996/12/31 22715.29 18620.12 1997/01/31 23405.00 19783.51 1997/02/28 23472.84 19938.61 1997/03/31 22443.92 19119.33 1997/04/30 23631.13 20260.76 1997/05/31 24987.95 21494.23 1997/06/30 26141.23 22457.17 1997/07/31 28346.05 24244.09 1997/08/31 27091.00 22885.94 1997/09/30 28589.46 24139.40 1997/10/31 27906.19 23333.14 1997/11/30 28757.28 24413.23 1997/12/31 29052.83 24832.41 1998/01/31 29926.78 25107.06 1998/02/28 32286.47 26917.78 1998/03/31 33784.68 28296.24 1998/04/30 34321.54 28580.90 1998/05/31 34021.90 28089.59 1998/06/30 35183.01 29230.59 1998/07/31 35095.62 28919.28 1998/08/31 30488.61 24738.13 1998/09/30 33019.39 26322.86 1998/10/31 35516.54 28463.96 1998/11/30 37158.69 30189.16 1998/12/31 39469.17 31928.66 1999/01/31 40018.69 33263.92 1999/02/28 39455.43 32230.07 1999/03/31 41502.39 33519.60 1999/04/30 43013.56 34817.81 1999/05/31 41955.74 33995.77 1999/06/30 44181.29 35882.53 1999/07/30 42780.02 34762.28 IMATRL PRASUN SHR__CHT 19990731 19990812 115925 R00000000000079 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Dividend Growth Fund on April 27, 1993, when the fund started. As the chart shows, by July 31, 1999, the value of the investment would have grown to $42,780 - a 327.80% increase on the initial investment. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $34,762 - a 247.62% increase. (checkmark)UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Federal Reserve Board monetary policy, Internet stock mania and Y2K concerns all played key roles in the direction of the U.S. equity market for the 12 months that ended July 31, 1999. As we entered the period, investors were still leery of troubled overseas markets and overall liquidity. The Fed then made three successive interest-rate cuts in the fall and confidence was restored. The second quarter of 1999 saw more sharing of the market's gains by smaller stocks, many of which rely on borrowed money to fund their growth. The Russell 2000 Index - a measure of small-stock performance - handily outpaced the large-cap oriented Standard & Poor's 500SM Index during that time. For the entire 12 months, though, the S&P 500(registered trademark) returned 20.20%, while the Russell 2000 could only muster 7.41%. The Dow Jones Industrial Average - an index of 30 blue-chip stocks - returned 21.88%. Internet stocks continued to attract investors, with many stock valuations peaking around April, then cooling off some as the period ended. Technology stocks prospered - the tech-heavy NASDAQ index returned a tidy 41.42% during the period - as did telecommunications stocks with Internet exposure. Y2K concerns mounted toward the end of the period, as many investors anticipated a spending freeze within the technology sector. (photograph of Charles Mangum) An interview with Charles Mangum, Portfolio Manager of Fidelity Dividend Growth Fund Q. HOW DID THE FUND PERFORM, CHARLES? A. Relatively well. For the 12 months that ended July 31, 1999, the fund returned 21.90%. This topped the Standard & Poor's 500 Index, which returned 20.20% during the same period. The fund also outpaced the growth funds average - as tracked by Lipper Inc. - which returned 18.63%. Q. CAN YOU HIGHLIGHT SOME OF THE MAIN FACTORS THAT CONTRIBUTED TO PERFORMANCE? A. While the fund managed to top the S&P 500's return for the period, the overall market environment wasn't conducive to ideal returns for stable-growth funds such as Dividend Growth. Instead, investors - perhaps spurred on by a steady economy - favored stocks with more inherent volatility. Since I typically focus on stable growers, or those companies that have shown the ability to generate sustainable earnings growth over time, this sentiment change hurt performance somewhat. My industry selection strategies - particularly my decision to underweight technology stocks relative to the S&P 500 - also proved harmful to performance. Despite these factors, the fund was able to generate a 20%-plus return due mainly to the strong performance of a core group of individual holdings. Q. WHY DID YOU CHOOSE TO MINIMIZE THE FUND'S EXPOSURE TO TECHNOLOGY STOCKS? A. The big issue I had with the technology sector through much of the period was that the stocks had become extraordinarily expensive. I felt the market was pricing in very high growth rates and low earnings volatility in assessing these valuations, and I found that scenario hard to believe. Technology-company earnings are and always will be subject to a fairly high level of volatility due to inventory cycles and other types of corrections. I also felt that some areas of technology - namely companies specializing in computer hardware equipment - would feel the brunt of an industry-wide sales slowdown as Y2K approached. Q. HEALTH CARE STOCKS ENDURED A VERY BUMPY PERIOD, YET THE FUND'S EXPOSURE TO THEM - AROUND 19% OF INVESTMENTS AT THE END OF THE PERIOD - - WAS SIGNIFICANT. ARE YOU ANTICIPATING A TURNAROUND? A. I am. In the fall of 1998 and early 1999, I scaled back the fund's health-care investments relative to the index. Stock valuations - I felt - were stretched, and it seemed like the number of exciting new product announcements was dwindling. Pharmaceutical stocks, long a staple for stable-growth investors, were also hurt by investors' interest in more volatile investments during the period. In May 1999, drug-stock valuations corrected substantially and the stocks began to look attractive to me again. Additionally, as we progressed through the period, several key indicators suggested that the economy would slow in the future. Drug stocks typically perform quite well during an economic slowdown. The fund's sizable holdings in both Schering-Plough and Eli Lilly reflected my renewed optimism in drug stocks. Q. DOES THE FUND HOLD ANY OTHER INVESTMENTS THAT COULD BENEFIT SHOULD THE ECONOMY SLOW? A. Two areas I've focused on over the past few months are supermarket chains and defense stocks. When the economy is slow, people generally don't buy fewer groceries. The fund held positions in the country's three biggest chains - Safeway, Kroger and Albertson's - at the end of the period. On the defense side, we've seen a dramatic pickup in government-funded spending and I've increased the fund's exposure to names such as Raytheon. Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHICH DIDN'T PAN OUT AS YOU HAD HOPED? A. The fund received a nice boost from its energy service investments when the price of oil rebounded earlier this year. Oil prices per barrel jumped from a low of around $12 in December to approximately $22 at the end of the period, and the fund's stakes in ENSCO and Mobil performed well. Texas Instruments prospered due to its digital signal processor (DSP) expertise. DSPs are the working brains of much of today's digital gadgetry and that area has been growing nicely. Disappointments, meanwhile, included retailer Saks as well as government mortgage lender Fannie Mae. Saks merged with Proffitts during the period and the slow integration of the two companies hurt performance. Fannie Mae - the fund's largest individual position at the close of the period - stumbled due to the switch in sentiment from stable-growth names to more volatile investments. Q. WHAT'S YOUR OUTLOOK? A. A little bit of uncertainty could help stable-growth stocks fall back into favor. In terms of the fund itself, I'm very happy with the way the portfolio is positioned. I certainly don't profess to know which way the market will turn, but I feel like I own a number of names with very strong upside potential. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON BEHALF OF ANY FIDELITY FUND. (checkmark)FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in equity securities of companies that have the potential to increase their current dividend or begin paying a dividend FUND NUMBER: 330 TRADING SYMBOL: FDGFX START DATE: April 27, 1993 SIZE: as of July 31, 1999, more than $14.2 billion MANAGER: Charles Mangum, since 1997; joined Fidelity in 1990 CHARLES MANGUM TALKS ABOUT HIS INVESTING STYLE: "While the market environment during the past period hasn't rewarded many stable-growth companies, it does nonetheless provide an effective backdrop for explaining my investment approach. "First and foremost, I believe in showing patience. Finance stocks - - which represented around 18% of the fund's investments at the end of the period - provide a prime example. Many of the fund's finance holdings - including Fannie Mae, Comerica and Freddie Mac - suffered dismal performance periods but still reside in the fund's top-20 list of holdings. That's because I believe in each of these companies and prefer to take a long-term view of their prospects. Each of these companies has shown consistency in generating solid earnings growth over time, is capable of paying out steady dividends and - in my opinion - is well run. I don't believe in turning my back on companies such as these based on short-term market swings. In my experience, companies that have good earnings-growth track records over prolonged periods of time are going to win out in the end. "I also try to avoid sector rotation, or simply jumping headfirst into an industry that may be performing well at the time. While this can result in eye-catching returns on an occasional basis, too much rotation can be a losing proposition over the long haul." INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1999 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Fannie Mae 5.3 2.6 Schering-Plough Corp. 5.0 2.0 Cardinal Health, Inc. 3.7 1.0 Abbott Laboratories 3.4 0.0 Microsoft Corp. 3.3 3.7 General Electric Co. 3.2 4.6 Lilly (Eli) & Co. 2.4 0.8 Mobil Corp. 2.2 1.6 Philip Morris Companies, Inc. 2.2 1.7 Johnson & Johnson 2.0 4.0 TOP FIVE MARKET SECTORS AS OF JULY 31, 1999 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO HEALTH 19.2 15.2 FINANCE 17.7 19.2 TECHNOLOGY 12.2 11.2 UTILITIES 8.1 8.4 RETAIL & WHOLESALE 7.8 5.7
ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JULY 31, 1999 * AS OF JANUARY 31, 1999 ** Stocks 96.7% Stocks 96.8% Short-term Investments 3.3% Short-term Investments 3.2% * FOREIGN INVESTMENTS 0.5% ** FOREIGN INVESTMENTS 4.0% Row: 1, Col: 1, Value: 96.7 Row: 1, Col: 1, Value: 96.8 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 8, Value: 3.3 Row: 1, Col: 8, Value: 3.2
INVESTMENTS JULY 31, 1999 Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.7% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 3.7% AEROSPACE & DEFENSE - 0.9% Cordant Technologies, Inc. (c) 2,908,310 $ 130,329 DEFENSE ELECTRONICS - 1.6% Litton Industries, Inc. (a) 758,200 51,795 Raytheon Co. Class A 2,401,600 166,911 218,706 SHIP BUILDING & REPAIR - 1.2% General Dynamics Corp. 2,363,450 159,090 Newport News Shipbuilding, 375,000 12,070 Inc. 171,160 TOTAL AEROSPACE & DEFENSE 520,195 BASIC INDUSTRIES - 0.5% CHEMICALS & PLASTICS - 0.4% E.I. du Pont de Nemours and 790,000 56,929 Co. METALS & MINING - 0.1% Alcoa, Inc. 288,200 17,256 PACKAGING & CONTAINERS - 0.0% Owens-Illinois, Inc. (a) 10,100 252 TOTAL BASIC INDUSTRIES 74,437 CONSTRUCTION & REAL ESTATE - 0.9% BUILDING MATERIALS - 0.5% Masco Corp. 2,569,000 76,428 REAL ESTATE - 0.1% Stewart Enterprises, Inc. 1,000,000 12,438 Class A REAL ESTATE INVESTMENT TRUSTS - - 0.3% Apartment Investment & 300,000 12,244 Management Co. Class A Glenborough Realty Trust, 1,740,500 30,459 Inc. (c) 42,703 TOTAL CONSTRUCTION & REAL 131,569 ESTATE DURABLES - 1.0% AUTOS, TIRES, & ACCESSORIES - 0.1% Ford Motor Co. 300,000 14,588 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED HOME FURNISHINGS - 0.9% Newell Rubbermaid, Inc. 3,029,272 $ 131,016 TOTAL DURABLES 145,604 ENERGY - 6.2% ENERGY SERVICES - 1.8% ENSCO International, Inc. 4,740,220 96,878 Halliburton Co. 2,130,400 98,265 Smith International, Inc. (a) 1,477,400 64,082 259,225 OIL & GAS - 4.4% Chevron Corp. 611,200 55,772 Cooper Cameron Corp. (a) 1,718,300 62,288 Exxon Corp. 1,200,000 95,250 Mobil Corp. 3,032,400 310,063 Santa Fe Snyder Corp. (a)(c) 11,384,515 105,307 628,680 TOTAL ENERGY 887,905 FINANCE - 17.7% BANKS - 3.9% Chase Manhattan Corp. 1,154,500 88,752 Comerica, Inc. 5,057,145 280,672 Mellon Bank Corp. 127,700 4,310 U.S. Bancorp 500,000 15,563 Wells Fargo & Co. 4,074,000 158,886 548,183 CREDIT & OTHER FINANCE - 2.9% Associates First Capital 6,419,674 245,954 Corp. Class A Fleet Financial Group, Inc. 1,884,600 76,326 Household International, Inc. 2,253,600 96,764 419,044 FEDERAL SPONSORED CREDIT - 7.1% Fannie Mae 10,900,500 752,130 Freddie Mac 4,581,400 262,858 1,014,988 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED INSURANCE - 3.2% AFLAC, Inc. 823,600 $ 38,194 Allmerica Financial Corp. 1,077,200 63,757 American International Group, 898,757 104,368 Inc. Hartford Financial Services 866,500 46,791 Group, Inc. Hartford Life, Inc. Class A 1,028,800 52,083 MBIA, Inc. 142,300 8,147 MGIC Investment Corp. 540,400 26,648 Travelers Property Casualty 2,819,300 111,362 Corp. Class A 451,350 SAVINGS & LOANS - 0.3% Charter One Financial, Inc. 1,879,052 48,620 SECURITIES INDUSTRY - 0.3% Cendant Corp. (a) 99,874 2,010 Morgan Stanley, Dean Witter & 455,300 41,034 Co. 43,044 TOTAL FINANCE 2,525,229 HEALTH - 19.2% DRUGS & PHARMACEUTICALS - 9.6% American Home Products Corp. 543,200 27,703 Bristol-Myers Squibb Co. 1,564,400 104,033 Lilly (Eli) & Co. 5,243,200 344,085 Merck & Co., Inc. 2,341,500 158,490 Schering-Plough Corp. 14,627,300 716,738 Warner-Lambert Co. 200,000 13,200 1,364,249 MEDICAL EQUIPMENT & SUPPLIES - - 9.6% Abbott Laboratories 11,227,600 482,085 Becton, Dickinson & Co. 2,654,614 72,836 Cardinal Health, Inc. 7,673,780 523,735 Johnson & Johnson 3,119,500 287,384 1,366,040 TOTAL HEALTH 2,730,289 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - 4.5% ELECTRICAL EQUIPMENT - 4.3% Emerson Electric Co. 400,000 $ 23,875 General Electric Co. 4,224,400 460,460 Honeywell, Inc. 590,000 70,689 Koninklijke Philips 561,028 56,734 Electronics NV (NY shares) 611,758 INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% Caterpillar, Inc. 384,700 22,553 Ingersoll-Rand Co. 218,800 14,072 36,625 TOTAL INDUSTRIAL MACHINERY & 648,383 EQUIPMENT MEDIA & LEISURE - 5.4% BROADCASTING - 2.9% CBS Corp. (a) 2,730,000 119,949 Clear Channel Communications, 2,314,300 160,988 Inc. (a) Time Warner, Inc. 1,850,256 133,218 414,155 ENTERTAINMENT - 0.1% Viacom, Inc. Class B 270,800 11,357 (non-vtg.) (a) PUBLISHING - 0.3% McGraw-Hill Companies, Inc. 788,200 40,100 RESTAURANTS - 2.1% McDonald's Corp. 2,925,500 121,957 Tricon Global Restaurants, 4,339,600 176,567 Inc. (a) 298,524 TOTAL MEDIA & LEISURE 764,136 NONDURABLES - 6.4% BEVERAGES - 0.5% PepsiCo, Inc. 1,475,000 57,709 Seagram Co. Ltd. 315,600 16,290 73,999 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED FOODS - 1.2% Quaker Oats Co. 2,266,000 $ 154,230 Tootsie Roll Industries, Inc. 577,957 20,012 174,242 HOUSEHOLD PRODUCTS - 2.5% Alberto-Culver Co. Class A (c) 4,336,500 94,048 Clorox Co. 715,363 80,121 Gillette Co. 1,423,100 62,350 Procter & Gamble Co. 1,325,800 119,985 356,504 TOBACCO - 2.2% Philip Morris Companies, Inc. 8,323,800 310,062 TOTAL NONDURABLES 914,807 RETAIL & WHOLESALE - 7.8% APPAREL STORES - 0.1% Gap, Inc. 210,637 9,847 GENERAL MERCHANDISE STORES - 3.6% Dayton Hudson Corp. 3,057,500 197,782 Federated Department Stores, 2,337,600 119,948 Inc. (a) Saks, Inc. (a) 5,589,954 128,569 Wal-Mart Stores, Inc. 1,770,400 74,799 521,098 GROCERY STORES - 2.1% Albertson's, Inc. 1,689,400 83,942 Kroger Co. (a) 3,247,800 85,458 Safeway, Inc. 2,344,300 126,299 295,699 RETAIL & WHOLESALE, MISCELLANEOUS - 2.0% Home Depot, Inc. 2,783,700 177,635 Lowe's Companies, Inc. 1,292,000 68,153 Staples, Inc. (a) 1,100,000 31,763 Tweeter Home Entertainment 376,000 12,526 Group, Inc. (a) 290,077 TOTAL RETAIL & WHOLESALE 1,116,721 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - 1.9% ADVERTISING - 1.8% Omnicom Group, Inc. 3,636,300 $ 257,723 SERVICES - 0.1% Forrester Research, Inc. 509,100 15,718 (a)(c) TOTAL SERVICES 273,441 TECHNOLOGY - 12.2% COMMUNICATIONS EQUIPMENT - 2.2% Cisco Systems, Inc. (a) 2,796,600 173,739 Lucent Technologies, Inc. 2,251,200 146,469 320,208 COMPUTER SERVICES & SOFTWARE - - 6.1% Automatic Data Processing, 1,039,200 41,633 Inc. Computer Sciences Corp. (a) 589,600 37,956 DST Systems, Inc. (a) 1,586,900 105,330 Electronic Data Systems Corp. 357,100 21,538 International Business 1,500,000 188,531 Machines Corp. Microsoft Corp. (a) 5,524,200 474,045 869,033 COMPUTERS & OFFICE EQUIPMENT - - 1.7% Hewlett-Packard Co. 1,239,700 129,781 Pitney Bowes, Inc. 530,800 33,772 Xerox Corp. 1,534,800 74,822 238,375 ELECTRONIC INSTRUMENTS - 0.2% DBT Online, Inc. (a) 768,300 23,193 ELECTRONICS - 2.0% Intel Corp. 1,979,800 136,606 Motorola, Inc. 550,000 50,188 Texas Instruments, Inc. 681,300 98,107 284,901 TOTAL TECHNOLOGY 1,735,710 TRANSPORTATION - 1.2% RAILROADS - 1.2% Burlington Northern Santa Fe 5,192,200 166,150 Corp. COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 8.1% ELECTRIC UTILITY - 2.0% AES Corp. (a) 982,200 $ 58,932 CMS Energy Corp. 1,828,300 68,333 Entergy Corp. 1,753,000 53,138 Illinova Corp. 348,300 11,450 IPALCO Enterprises, Inc. 1,416,200 30,360 PG&E Corp. 2,060,900 65,176 287,389 GAS - 0.1% Dynegy, Inc. 201,300 4,831 TELEPHONE SERVICES - 6.0% Ameritech Corp. 1,882,400 137,886 AT&T Corp. 2,431,781 126,301 Bell Atlantic Corp. 2,348,200 149,698 MCI WorldCom, Inc. (a) 2,364,142 195,042 SBC Communications, Inc. 4,327,112 247,457 856,384 TOTAL UTILITIES 1,148,604 TOTAL COMMON STOCKS 13,783,180 (Cost $11,801,650) CASH EQUIVALENTS - 3.3% Taxable Central Cash Fund (b) 468,278,772 468,279 (Cost $468,279) TOTAL INVESTMENT IN $ 14,251,459 SECURITIES - 100% (Cost $12,269,929)
LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.06%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Affiliated company INCOME TAX INFORMATION At July 31, 1999, the aggregate cost of investment securities for income tax purposes was $12,303,625,000. Net unrealized appreciation aggregated $1,947,834,000, of which $2,343,431,000 related to appreciated investment securities and $395,597,000 related to depreciated investment securities. The fund hereby designates approximately $279,657,000 as a capital gain dividend for the purpose of the dividend paid deduction. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1999 ASSETS Investment in securities, at $ 14,251,459 value (cost $12,269,929) - See accompanying schedule Receivable for investments 169,245 sold Receivable for fund shares 28,790 sold Dividends receivable 13,276 Interest receivable 1,938 Other receivables 16 TOTAL ASSETS 14,464,724 LIABILITIES Payable for investments $ 145,830 purchased Payable for fund shares 24,839 redeemed Accrued management fee 7,845 Other payables and accrued 2,712 expenses TOTAL LIABILITIES 181,226 NET ASSETS $ 14,283,498 Net Assets consist of: Paid in capital $ 11,183,733 Undistributed net investment 45,206 income Accumulated undistributed net 1,073,029 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 1,981,530 (depreciation) on investments NET ASSETS, for 458,655 $ 14,283,498 shares outstanding NET ASSET VALUE, offering $31.14 price and redemption price per share ($14,283,498 (divided by) 458,655 shares) STATEMENT OF OPERATIONS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1999 INVESTMENT INCOME $ 134,182 Dividends (including $3,094 received from affiliated issuers) Interest 19,739 TOTAL INCOME 153,921 EXPENSES Management fee Basic fee $ 63,271 Performance adjustment 6,465 Transfer agent fees 21,370 Accounting fees and expenses 926 Non-interested trustees' 34 compensation Custodian fees and expenses 227 Registration fees 2,161 Audit 62 Legal 22 Miscellaneous 17 Total expenses before 94,555 reductions Expense reductions (3,623) 90,932 NET INVESTMENT INCOME 62,989 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,195,032 (including realized loss of $91 on sales of investments in affiliated issuers) Foreign currency transactions 10 1,195,042 Change in net unrealized 801,977 appreciation (depreciation) on investment securities NET GAIN (LOSS) 1,997,019 NET INCREASE (DECREASE) IN $ 2,060,008 NET ASSETS RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1999 YEAR ENDED JULY 31, 1998 INCREASE (DECREASE) IN NET ASSETS Operations Net investment $ 62,989 $ 34,229 income Net realized gain (loss) 1,195,042 743,965 Change in net unrealized 801,977 341,085 appreciation (depreciation) NET INCREASE (DECREASE) IN 2,060,008 1,119,279 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (38,407) (26,753) From net investment income From net realized gain (597,854) (391,699) TOTAL DISTRIBUTIONS (636,261) (418,452) Share transactions Net 9,445,534 4,628,616 proceeds from sales of shares Reinvestment of distributions 617,315 412,992 Cost of shares redeemed (4,574,330) (2,738,785) NET INCREASE (DECREASE) IN 5,488,519 2,302,823 NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) 6,912,266 3,003,650 IN NET ASSETS NET ASSETS Beginning of period 7,371,232 4,367,582 End of period (including $ 14,283,498 $ 7,371,232 undistributed net investment income of $45,206 and $25,375, respectively) OTHER INFORMATION Shares Sold 331,300 177,628 Issued in reinvestment of 26,258 17,960 distributions Redeemed (161,099) (107,573) Net increase (decrease) 196,459 88,015
FINANCIAL HIGHLIGHTS YEARS ENDED JULY 31, 1999 1998 1997 1996 1995 SELECTED PER-SHARE DATA Net asset value, beginning $ 28.11 $ 25.07 $ 17.24 $ 16.04 $ 11.68 of period Income from Investment Operations Net investment income .17 B .17 B .20 B .11 .05 Net realized and unrealized 5.18 5.21 8.09 2.25 4.47 gain (loss) Total from investment 5.35 5.38 8.29 2.36 4.52 operations Less Distributions From net investment income (.13) (.15) (.09) (.09) (.01) From net realized gain (2.19) (2.19) (.37) (1.07) (.15) Total distributions (2.32) (2.34) (.46) (1.16) (.16) Net asset value, end of $ 31.14 $ 28.11 $ 25.07 $ 17.24 $ 16.04 period TOTAL RETURNA 21.90% 23.81% 49.21% 15.44% 39.14% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 14,283 $ 7,371 $ 4,368 $ 1,220 $ 465 (in millions) Ratio of expenses to average .87% .89% .95% 1.02% 1.21% net assets Ratio of expenses to average .84% C .86% C .92% C .99% C 1.19% C net assets after expense reductions Ratio of net investment .58% .64% .99% .86% .78% income to average net assets Portfolio turnover rate 104% 109% 141% 129% 162%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1999 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, as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade and settlement date on purchases and sales of securities. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, foreign currency transactions, non-taxable dividends and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. 2. OPERATING POLICIES - CONTINUED TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund) managed by Fidelity Investments Money Management, Inc., an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities. Income distributions from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions earned by the fund are recorded as interest income in the accompanying financial statements. INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the fund to borrow from, or lend money to, other participating funds. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $15,530,788,000 and $10,827,907,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. The annual individual fund fee rate is .30%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus).20% of the fund's average net assets over the performance period) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annual rate of .64% of average net assets after the performance adjustment. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .20% of average net assets. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $2,102,000 for the period. 5. INTERFUND LENDING PROGRAM. The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which the loans were outstanding amounted to $19,473,000. The weighted average interest rate was 5.78%. Interest earned from the interfund lending program amounted to $13,000 and is included in interest income on the Statement of Operations. 6. EXPENSE REDUCTIONS. FMR has directed certain portfolio trades to brokers who paid a portion of the fund's expenses. For the period, the fund's expenses were reduced by $3,342,000 under this arrangement. In addition, the fund has entered into arrangements with its custodian and transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $2,000 and $279,000, respectively, under these arrangements. 7. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE Alberto-Culver Co. Class A $ 20,626 $ - $ 1,079 $ 94,048 Cordant Technologies, Inc. 36,213 1,740 585 130,329 Forrester Research, Inc. 1,979 - - 15,718 Glenborough Realty Trust, Inc. 2,583 - 1,430 30,459 Santa Fe Snyder Corp. 32,957 - - 105,307 TOTALS $ 94,358 $ 1,740 $ 3,094 $ 375,861
REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Dividend Growth Fund: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Dividend Growth Fund (a fund of Fidelity Securities Fund) at July 31, 1999, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Dividend Growth Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts September 8, 1999 DISTRIBUTIONS The Board of Trustees of Fidelity Dividend Growth Fund voted to pay on September 7, 1999, to shareholders of record at the opening of business on September 3, 1999, a distribution of $2.14 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.09 per share from net investment income. A total of 19% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders. The fund hereby designates 100% of the long-term capital gain dividends distributed during the fiscal year as 20%-rate capital gain dividends. The fund will notify shareholders in January 2000 of amounts for use in preparing 1999 income tax returns. OF SPECIAL NOTE INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS Recently, the SEC issued new disclosure requirements for all mutual fund prospectuses. While Fidelity could have complied by simply following the new requirements, we saw a different opportunity. We saw the chance to create a brand new prospectus: one that is better organized, easier to use and more informative than ever. The new format of the Fidelity mutual fund prospectus puts the information you need to make informed investment decisions right at your fingertips. In the opening pages, you will find the SEC-mandated summary that highlights the fund's investment objectives, strategies and risks. There's also an easy-to-read performance chart and fee table right up front. Inside, you will find additional features we've introduced to make the fund prospectus a more useful tool. In our new Shareholder Information section, for example, we have provided practical, beneficial information - from how to buy or sell shares, key contact information, investment services, ways to set up your account and more - all in one convenient location. We invite you to spend a moment and review our new prospectus. It is designed to help make your investment decision easier, no matter which of the Fidelity funds you invest in. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. (PHONE_GRAPHIC)FIDELITY AUTOMATED SERVICE TELEPHONE (FASTSM) 1-800-544-5555 PRESS 1 For mutual fund and brokerage trading. 2 For quotes.* 3 For account balances and holdings. 4 To review orders and mutual fund activity. 5 To change your PIN. *0 To speak to a Fidelity representative. BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (COMPUTER_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call EarthLink Sprint at 1-800-288-2967, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider. (COMPUTER_GRAPHIC) FIDELITY ON-LINE XPRESS+(registered trademark) Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 2300 Litton Lane - KH1A Hebron, KY 41048 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75039-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. 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Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ NEW YORK 1055 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 16850 SW 72 Avenue Tigard, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 6150 Poplar Road Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 4017 Northwest Parkway Dallas, TX 1155 Dairy Ashford Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX 19740 IH 45 North Spring, TX UTAH 215 South State Street Salt Lake City, UT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President Robert C. Pozen, Senior Vice President Abigail P. Johnson, Vice President Charles A. Mangum, Vice President Eric D. Roiter, Secretary Richard A. Silver, Treasurer Matthew N. Karstetter, Deputy Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES DGF-ANN-0999 83752 1.536090.102 CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Aggressive Growth Fund Blue Chip Growth Fund Capital Appreciation Fund Contrafund(registered trademark) Contrafund(registered trademark)II Disciplined Equity Fund Dividend Growth Fund Export and Multinational Fund Fidelity FiftySM Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium Fund(registered trademark) OTC Portfolio Retirement Growth Fund Small Cap Selector Small Cap Stock Fund Stock Selector Tax Managed Stock Fund TechnoQuant (registered trademark) Growth Fund Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) Fidelity Automated Service Telephone (FASTSM) 1-800-544-5555 AUTOMATED LINE FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)(registered trademark) Corporate Headquarters 82 Devonshire St., Boston, MA 02109 www.fidelity.com FIDELITY GROWTH & INCOME PORTFOLIO ANNUAL REPORT JULY 31, 1999 (2_FIDELITY_LOGOS)(registered trademark) CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 22 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 26 Notes to the financial statements. REPORT OF INDEPENDENT 30 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 31 OF SPECIAL NOTE 32 Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation. Other third party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company. This report is printed on recycled paper using soy-based inks. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: In July, the steadily growing U.S. economy again sparked fears of inflation and posed the threat of another Federal Reserve Board interest-rate hike at its August policy meeting. Despite rising profits and continued productivity gains at many U.S. corporations, stock and bond markets sold off sharply toward the month's end. Renewed jitters about inflation were sparked by a government report that showed a larger-than-expected increase in the employment-cost index. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that an investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these types of funds. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy. If you have questions, please call us at 1-800-544-8888, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS FIDELITY GROWTH & INCOME 15.20% 185.47% 416.42% S&P 500 (registered trademark) 20.20% 220.67% 396.75% Growth & Income Funds Average 14.11% 155.10% 278.51% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks. To measure how the fund's performance stacked up against its peers, you can compare it to the growth and income funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Inc. The past one year average represents a peer group of 841 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS FIDELITY GROWTH & INCOME 15.20% 23.34% 17.84% S&P 500 20.20% 26.25% 17.38% Growth & Income Funds Average 14.11% 20.39% 14.04% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER 10 YEARS Growth & Income S&P 500 00027 SP001 1989/07/31 10000.00 10000.00 1989/08/31 10215.52 10196.00 1989/09/30 10160.66 10154.20 1989/10/31 9839.62 9918.62 1989/11/30 10002.96 10120.96 1989/12/31 10195.86 10363.86 1990/01/31 9661.42 9668.45 1990/02/28 9809.88 9793.17 1990/03/31 9982.18 10052.69 1990/04/30 9724.69 9801.37 1990/05/31 10443.27 10757.01 1990/06/30 10394.73 10683.86 1990/07/31 10322.30 10649.67 1990/08/31 9440.98 9686.94 1990/09/30 8896.59 9215.19 1990/10/31 8878.05 9175.56 1990/11/30 9316.71 9768.30 1990/12/31 9502.90 10040.84 1991/01/31 10370.78 10478.62 1991/02/28 11244.89 11227.84 1991/03/31 11864.31 11499.55 1991/04/30 12027.70 11527.15 1991/05/31 12718.94 12025.12 1991/06/30 11855.09 11474.37 1991/07/31 12581.43 12009.08 1991/08/31 12947.76 12293.69 1991/09/30 12833.55 12088.39 1991/10/31 13063.08 12250.37 1991/11/30 12381.07 11756.68 1991/12/31 13479.08 13101.65 1992/01/31 13801.42 12857.96 1992/02/29 14104.02 13025.11 1992/03/31 13814.33 12771.12 1992/04/30 14124.98 13146.59 1992/05/31 14177.86 13211.01 1992/06/30 13899.24 13014.17 1992/07/31 14185.07 13546.45 1992/08/31 14038.83 13268.74 1992/09/30 14182.63 13425.32 1992/10/31 14294.95 13472.30 1992/11/30 14736.75 13931.71 1992/12/31 15034.09 14103.07 1993/01/31 15453.61 14221.54 1993/02/28 15629.05 14414.95 1993/03/31 16202.66 14719.10 1993/04/30 16179.65 14362.90 1993/05/31 16517.20 14747.83 1993/06/30 16771.53 14790.60 1993/07/31 16894.96 14731.43 1993/08/31 17558.42 15289.75 1993/09/30 17654.00 15172.02 1993/10/31 17851.56 15486.08 1993/11/30 17448.53 15338.97 1993/12/31 17970.15 15524.57 1994/01/31 18649.48 16052.40 1994/02/28 18293.64 15617.38 1994/03/31 17488.89 14936.47 1994/04/30 17838.18 15127.65 1994/05/31 17895.04 15375.75 1994/06/30 17584.45 14999.04 1994/07/31 18090.36 15491.01 1994/08/31 18783.95 16126.14 1994/09/30 18565.86 15731.05 1994/10/31 18787.09 16085.00 1994/11/30 18089.38 15499.18 1994/12/31 18377.55 15729.04 1995/01/31 18595.40 16136.89 1995/02/28 19144.37 16765.74 1995/03/31 19746.84 17260.50 1995/04/30 20298.28 17768.82 1995/05/31 20875.98 18479.04 1995/06/30 21252.77 18908.31 1995/07/31 22061.39 19535.31 1995/08/31 22228.39 19584.34 1995/09/30 23122.17 20410.80 1995/10/31 23013.87 20337.94 1995/11/30 24096.88 21230.77 1995/12/31 24879.94 21639.68 1996/01/31 25707.74 22376.29 1996/02/29 25992.87 22583.72 1996/03/31 26214.01 22801.20 1996/04/30 26481.69 23137.29 1996/05/31 26989.35 23734.00 1996/06/30 27155.94 23824.43 1996/07/31 26118.60 22771.86 1996/08/31 26526.13 23252.12 1996/09/30 27926.30 24560.75 1996/10/31 28369.58 25238.14 1996/11/30 30161.95 27145.89 1996/12/31 29862.00 26608.13 1997/01/31 31135.00 28270.60 1997/02/28 31484.83 28492.25 1997/03/31 30197.72 27321.50 1997/04/30 31806.05 28952.59 1997/05/31 33521.61 30715.23 1997/06/30 35256.50 32091.27 1997/07/31 37652.57 34644.77 1997/08/31 35608.58 32703.97 1997/09/30 37520.19 34495.17 1997/10/31 36520.59 33343.03 1997/11/30 37964.45 34886.48 1997/12/31 38872.50 35485.48 1998/01/31 39474.46 35877.95 1998/02/28 41923.12 38465.47 1998/03/31 43803.62 40435.28 1998/04/30 43875.20 40842.06 1998/05/31 43363.95 40139.99 1998/06/30 45115.17 41770.47 1998/07/31 44828.13 41325.62 1998/08/31 38728.72 35350.76 1998/09/30 41383.49 37615.33 1998/10/31 44448.14 40674.96 1998/11/30 47041.31 43140.27 1998/12/31 49876.68 45626.01 1999/01/31 50518.63 47534.09 1999/02/28 49572.02 46056.73 1999/03/31 50843.74 47899.46 1999/04/30 52108.30 49754.61 1999/05/31 50778.34 48579.90 1999/06/30 53247.78 51276.09 1999/07/30 51641.82 49675.25 IMATRL PRASUN SHR__CHT 19990731 19990813 101727 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Growth & Income Portfolio on July 31, 1989. As the chart shows, by July 31, 1999, the value of the investment would have grown to $51,642 - a 416.42% increase on the initial investment. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $49,675 - a 396.75% increase. (checkmark)UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Federal Reserve Board policy, Internet stock mania and Y2K concerns all played key roles in the direction of the U.S. equity market for the 12 months that ended July 31, 1999. As we entered the period, investors were still leery of troubled overseas markets and overall liquidity. The Fed then made three successive interest-rate cuts in the fall and confidence was restored. The second quarter of 1999 saw more sharing of the market's gains by smaller stocks, many of which rely on borrowed money to fund their growth. The Russell 2000 Index - a measure of small-stock performance - handily outpaced the large-cap oriented Standard & Poor's 500 Index during that time. For the entire 12 months, though, the S&P 500 returned 20.20%, while the Russell 2000 could only muster 4.89%. The Dow Jones Industrial Average - an index of 30 blue-chip stocks - returned 14.70%. Internet stocks continued to attract investors, with many stock valuations peaking around April, then cooling off some as the period ended. Technology stocks prospered - the tech-heavy NASDAQ index returned a tidy 41.42% during the period - as did telecommunications stocks with Internet exposure. Y2K concerns mounted toward the end of the period, as many investors anticipated a spending freeze within the technology sector. (photograph of Steven Kaye) An interview with Steven Kaye, Portfolio Manager of Fidelity Growth & Income Portfolio Q. HOW DID THE FUND PERFORM, STEVE? A. Like the stock market itself, the fund had its share of ups and downs over the past 12 months. For the year ending July 31, 1999, the fund had a double-digit return of 15.20%. This outpaced the growth and income funds average, as tracked by Lipper Inc., which returned 14.11% during that time frame. However, the fund's performance trailed that of its benchmark, the Standard & Poor's 500 Index, which returned 20.20% over the past 12 months. Q. WHAT WERE SOME OF THE FACTORS THAT HELPED THE FUND OUTPERFORM ITS PEERS, YET CAUSED IT TO LAG ITS BENCHMARK? A. Relative to its peers, the fund benefited from an overweighting in large-capitalization technology stocks, particularly within the computer services and software fields. Significant positions in Microsoft and communications equipment company Cisco Systems were especially beneficial to performance. Conversely, the fund's underweighting in technology relative to the S&P 500 index was the primary drawback to its performance compared to the benchmark. I just didn't own enough large-cap technology and Internet shares, which accounted for approximately 50% of the S&P 500's total return over the past one-year period. Q. GIVEN THE STRONG RUN OF TECHNOLOGY STOCKS - PARTICULARLY INTERNET ISSUES - WHAT CONSIDERATIONS AFFECTED YOUR DECISION TO UNDERWEIGHT THIS SECTOR? A. It came down to a combination of Y2K concerns, valuations, earnings and fundamentals. I anticipated that Year 2000 concerns would cause a slowdown in tech spending, which did not occur. Also, technology valuations in general were stratospheric and, in my mind, their earnings did not justify the high prices of these stocks. Take America Online, for example. At one point during the past year, it was trading at 250 times earnings. Historically, it's a stretch to believe that kind of bet will pay off in the long run. As much as I believe in the power and the potential of the Internet, I cannot abandon my focus on companies with strong, long-term fundamentals and reasonable valuations to chase the latest hot trend. I did, however, have some exposure to the Internet through investments in more established earnings growers, such as MCI WorldCom, which was a top contributor to fund performance. Q. WHAT OTHER STOCKS WOULD YOU CONSIDER TO BE STANDOUTS DURING THE PERIOD? A. As I mentioned earlier, Microsoft performed exceptionally well. A surge in PC demand helped Microsoft's traditional software business, and the company continued to beat earnings estimates. General Electric, the fund's largest holding, reported double-digit earnings growth. Its internationally diversified business was well-positioned to take advantage of the improved global economy. Another company that gave the fund exposure to the Internet was Cisco Systems. Cisco is considered the leader in the switching business - a business that's becoming synonymous with Internet-related industries - and its earnings exceeded expectations. Also, American Express performed well as the financial services industry recovered from last fall's global economic crisis. The company's stock was also rewarded for its increased use of the Internet to deliver new products and services to customers. Q. WHICH STOCKS DETRACTED FROM THE FUND'S OVERALL PERFORMANCE? A. The health care industry in general during 1999 has been a drag on the fund's return. The big pharmaceutical stocks that were so successful in 1998, such as Merck, Pfizer and Eli Lilly, have fallen victim so far this year to high valuations and fears over potential governmental price controls. Health Management Associates, an operator of hospitals in rural communities, was hurt along with the rest of the hospital sector by cutbacks in Medicare reimbursements. Tobacco giant Philip Morris, hampered by its ongoing struggle with litigation, was the largest single detractor from performance during the period. Q. GIVEN THE RISING INTEREST-RATE ENVIRONMENT, WHAT'S YOUR CURRENT OUTLOOK FOR THE ECONOMY, STEVE? A. Over the past year, the consumer has been the backbone of the U.S. economy. But the warning signs are out there that consumer spending may begin to slow. Rising interest rates have driven mortgage rates up and we have seen an increase in gas prices. All of this hits the U.S. consumer in the pocketbook. Without continued spending by consumers, the economy could begin to soften. Under this scenario, steady growth companies with predictable earnings could outperform the market on a relative basis. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON BEHALF OF ANY FIDELITY FUND. (checkmark)FUND FACTS GOAL: to seek a high total return through a combination of current income and capital appreciation FUND NUMBER: 027 TRADING SYMBOL: FGRIX START DATE: December 30, 1985 SIZE: as of July 31, 1999, more than $48.5 billion MANAGER: Steven Kaye, since 1993; manager, Fidelity Blue Chip Growth Fund, 1990- 1992; Fidelity Select Energy Services, Biotechnology and Health Care portfolios, 1986- 1990; joined Fidelity in 1985 STEVEN KAYE ON MAINTAINING A LONG-TERM INVESTMENT HORIZON: "The past one-year period is an excellent example of why it's critical to have a patient, long-term outlook concerning your investments. We had an extraordinary period of volatility over the past 12 months. The market went from being flat late last summer to being up nearly 30% in just a matter of months. We witnessed incredible speculation in the market, and it seemed nearly anyone could make money day-trading Internet stocks. But as we saw late in the period, that bubble burst and some investors who tried to time the market suffered fairly heavy losses. "It's not my style to try to catch different waves. What I'm focused on is the fundamentals of the companies that I own, and whether I see them continuing to grow their earnings for a number of years. Eventually, stocks are driven by their earnings. That's why, over the long term, a disciplined approach has served shareholders of this fund well. As of June 30, 1999, Fidelity Growth & Income Portfolio outperformed over 75% of its peers over the past three-, five- and 10-year periods. Obviously, investors expect good returns. But they must also expect short-term periods of underperformance. When there's a shift in the market, as we experienced in the second quarter of 1999, I can't panic and change everything, nor should investors. History has shown that those who are in it for the long haul usually win." INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1999 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE STOCKS 6 MONTHS AGO General Electric Co. 4.4 4.2 Microsoft Corp. 3.2 3.5 Merck & Co., Inc. 2.6 3.1 Fannie Mae 2.2 1.9 American Express Co. 2.1 2.0 Citigroup, Inc. 1.9 2.0 Exxon Corp. 1.9 1.2 AT&T Corp. 1.7 1.9 MCI WorldCom, Inc. 1.7 2.2 Philip Morris Companies, Inc. 1.6 2.4 TOP FIVE MARKET SECTORS AS OF JULY 31, 1999 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 16.2 17.0 FINANCE 15.9 14.9 HEALTH 13.0 15.5 UTILITIES 8.4 8.7 NONDURABLES 7.6 8.4
ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JULY 31, 1999 * AS OF JANUARY 31, 1999 ** Stocks 93.6% Stocks 93.1% Bonds 0.3% Bonds 0.5% Convertible Securities 0.6% Convertible Securities 0.6% Short-term Investments 5.5% Short-term Investments 5.8% * FOREIGN INVESTMENTS 3.3% ** FOREIGN INVESTMENTS 2.8% Row: 1, Col: 1, Value: 93.59999999999999 Row: 1, Col: 1, Value: 93.09999999999999 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 0.3 Row: 1, Col: 3, Value: 0.5 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 5, Value: 0.6000000000000001 Row: 1, Col: 5, Value: 0.6000000000000001 Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 8, Value: 5.5 Row: 1, Col: 8, Value: 5.8
INVESTMENTS JULY 31, 1999 Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 93.6% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 3.8% AEROSPACE & DEFENSE - 1.9% AlliedSignal, Inc. 5,033,200 $ 325,585 Boeing Co. 3,222,300 146,212 Gulfstream Aerospace Corp. (a) 1,366,800 90,892 Lockheed Martin Corp. 644,900 22,451 Northrop Grumman Corp. 1,304,800 94,109 Textron, Inc. 1,966,000 161,704 United Technologies Corp. 1,102,200 73,503 914,456 DEFENSE ELECTRONICS - 1.3% Litton Industries, Inc. (a)(d) 3,371,600 230,322 Raytheon Co. Class A 5,691,818 395,581 625,903 SHIP BUILDING & REPAIR - 0.6% General Dynamics Corp. 4,245,000 285,742 TOTAL AEROSPACE & DEFENSE 1,826,101 BASIC INDUSTRIES - 1.7% CHEMICALS & PLASTICS - 1.2% E.I. du Pont de Nemours and 3,510,200 252,954 Co. IMC Global, Inc. 4,661,000 85,063 Monsanto Co. 1,069,500 41,844 Union Carbide Corp. 3,869,100 185,717 565,578 METALS & MINING - 0.2% Alcoa, Inc. 1,738,100 104,069 PACKAGING & CONTAINERS - 0.2% Corning, Inc. 1,680,200 117,614 PAPER & FOREST PRODUCTS - 0.1% Kimberly-Clark Corp. 589,500 35,960 TOTAL BASIC INDUSTRIES 823,221 CONSTRUCTION & REAL ESTATE - 1.6% BUILDING MATERIALS - 0.1% Fortune Brands, Inc. 1,506,400 59,503 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - CONTINUED REAL ESTATE INVESTMENT TRUSTS - - 1.5% Boston Properties, Inc. 516,900 $ 17,704 CBL & Associates Properties, 2,151,900 54,066 Inc. (d) Equity Office Properties Trust 6,446,590 161,971 Equity Residential Properties 3,577,365 147,790 Trust (SBI) Macerich Co. 647,600 15,785 Mack-Cali Realty Corp. 699,800 19,594 Manufactured Home 921,400 22,344 Communities, Inc. Public Storage, Inc. 3,540,100 90,936 Rouse Co. (The) 71,400 1,736 Simon Property Group, Inc. 588,900 15,643 Starwood Hotels & Resorts 4,710,543 127,185 Worldwide, Inc. Urban Shopping Centers, Inc. 716,400 21,940 696,694 TOTAL CONSTRUCTION & REAL 756,197 ESTATE DURABLES - 1.6% AUTOS, TIRES, & ACCESSORIES - 1.2% AutoNation, Inc. (a) 2,824,100 42,008 Danaher Corp. 200,000 11,413 Eaton Corp. 1,069,900 105,853 Federal-Mogul Corp. 1,768,100 85,753 Ford Motor Co. 4,710,900 229,068 General Motors Corp. 1,655,138 100,860 574,955 CONSUMER DURABLES - 0.2% Minnesota Mining & 1,386,500 121,925 Manufacturing Co. CONSUMER ELECTRONICS - 0.1% General Motors Corp. Class H 521,800 28,993 (a) TEXTILES & APPAREL - 0.1% Unifi, Inc. (a)(d) 3,831,300 61,540 TOTAL DURABLES 787,413 ENERGY - 5.8% ENERGY SERVICES - 0.1% Schlumberger Ltd. 376,300 22,790 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - 5.7% BP Amoco PLC sponsored ADR 4,223,610 $ 489,411 Chevron Corp. 1,730,900 157,945 Exxon Corp. 11,334,800 899,700 Mobil Corp. 5,430,400 555,258 Royal Dutch Petroleum Co. (NY 8,353,600 509,570 Registry Gilder 1.25) Texaco, Inc. 2,701,600 168,343 2,780,227 TOTAL ENERGY 2,803,017 FINANCE - 15.7% BANKS - 2.8% Bank of America Corp. 2,956,006 196,205 Bank of New York Co., Inc. 9,676,508 357,426 Bank One Corp. 5,650,460 308,303 Chase Manhattan Corp. 1,844,500 141,796 Mellon Bank Corp. 2,083,300 70,311 Wachovia Corp. 2,239,300 174,805 Wells Fargo & Co. 2,629,400 102,547 1,351,393 CREDIT & OTHER FINANCE - 6.2% American Express Co. 7,807,930 1,028,695 Associates First Capital 19,180,638 734,858 Corp. Class A Capital Trust, Inc. (a)(d) 1,635,782 6,850 Citigroup, Inc. 20,424,296 910,158 Concord EFS, Inc. (a) 804,400 27,400 Fleet Financial Group, Inc. 2,369,998 95,985 Household International, Inc. 4,639,940 199,227 3,003,173 FEDERAL SPONSORED CREDIT - 4.2% Fannie Mae 15,075,400 1,040,203 Freddie Mac 7,818,500 448,586 SLM Holding Corp. (d) 12,176,650 554,038 2,042,827 INSURANCE - 2.2% Allmerica Financial Corp. 1,216,100 71,978 American International Group, 4,980,000 578,303 Inc. COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED INSURANCE - CONTINUED Hartford Financial Services 4,813,700 $ 259,940 Group, Inc. MBIA, Inc. 3,212,700 183,927 1,094,148 SECURITIES INDUSTRY - 0.3% Franklin Resources, Inc. 583,600 22,250 Morgan Stanley, Dean Witter & 1,230,400 110,890 Co. 133,140 TOTAL FINANCE 7,624,681 HEALTH - 13.0% DRUGS & PHARMACEUTICALS - 9.0% Allergan, Inc. 1,848,100 174,645 American Home Products Corp. 931,400 47,501 Amgen, Inc. (a) 2,435,750 187,248 Bausch & Lomb, Inc. 791,700 56,854 Bristol-Myers Squibb Co. 11,091,600 737,591 Forest Laboratories, Inc. (a) 1,988,500 101,911 Lilly (Eli) & Co. 6,394,232 419,621 Merck & Co., Inc. 18,315,100 1,239,703 Pfizer, Inc. 8,130,000 275,912 Quintiles Transnational Corp. 771,600 29,321 (a) Schering-Plough Corp. 7,316,400 358,504 SmithKline Beecham PLC 1,097,900 65,943 sponsored ADR Teva Pharmaceutical 1,800,000 83,475 Industries Ltd. ADR Warner-Lambert Co. 8,969,580 591,992 4,370,221 MEDICAL EQUIPMENT & SUPPLIES - - 3.3% Abbott Laboratories 1,833,700 78,734 Bard (C.R.), Inc. (d) 4,246,200 206,471 Baxter International, Inc. 3,497,900 240,262 Becton, Dickinson & Co. 7,732,500 212,160 Cardinal Health, Inc. 2,078,100 141,830 Guidant Corp. 796,500 46,645 Johnson & Johnson 4,040,700 372,249 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - - CONTINUED Medtronic, Inc. 1,321,895 $ 95,259 Stryker Corp. 2,971,900 181,286 1,574,896 MEDICAL FACILITIES MANAGEMENT - - 0.7% Health Management Associates, 2,404,270 19,835 Inc. Class A (a) Tenet Healthcare Corp. (a) 3,808,000 68,306 United HealthCare Corp. 873,400 53,277 Wellpoint Health Networks, 2,556,200 209,928 Inc. (a) 351,346 TOTAL HEALTH 6,296,463 INDUSTRIAL MACHINERY & EQUIPMENT - 6.2% ELECTRICAL EQUIPMENT - 4.7% Emerson Electric Co. 1,474,000 87,979 General Electric Co. 19,483,200 2,123,664 Honeywell, Inc. 422,300 50,597 2,262,240 INDUSTRIAL MACHINERY & EQUIPMENT - 1.4% Caterpillar, Inc. 1,715,600 100,577 Tyco International Ltd. 5,966,900 582,892 683,469 POLLUTION CONTROL - 0.1% Waste Management, Inc. 1,432,387 36,615 TOTAL INDUSTRIAL MACHINERY & 2,982,324 EQUIPMENT MEDIA & LEISURE - 4.2% BROADCASTING - 2.0% CBS Corp. (a) 7,318,034 321,536 Clear Channel Communications, 623,446 43,368 Inc. (a) Infinity Broadcasting Corp. 971,000 26,763 Class A MediaOne Group, Inc. 1,645,500 119,093 Nielsen Media Research, Inc. 2,456,866 79,848 (a) Time Warner, Inc. 4,897,523 352,622 943,230 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED ENTERTAINMENT - 0.6% Disney (Walt) Co. 4,222,400 $ 116,644 Viacom, Inc. Class B 4,456,800 186,907 (non-vtg.) (a) 303,551 LODGING & GAMING - 0.1% Marriott International, Inc. 1,372,500 48,123 Class A Mirage Resorts, Inc. (a) 990,300 13,926 62,049 PUBLISHING - 0.3% Times Mirror Co. Class A 2,128,100 128,218 RESTAURANTS - 1.2% McDonald's Corp. 6,481,700 270,206 Starbucks Corp. (a) 2,150,700 50,004 Tricon Global Restaurants, 6,917,310 281,448 Inc. (a) 601,658 TOTAL MEDIA & LEISURE 2,038,706 NONDURABLES - 7.6% BEVERAGES - 2.3% Anheuser-Busch Companies, 3,276,200 258,615 Inc. Coca-Cola Co. (The) 3,325,000 200,539 PepsiCo, Inc. 13,208,900 516,798 Whitman Corp. 6,930,400 132,111 1,108,063 FOODS - 1.5% Bestfoods 2,530,200 123,347 Nabisco Group Holdings Corp. 2,671,500 50,091 Nestle SA (Reg.) 35,000 68,845 Quaker Oats Co. 1,960,090 133,409 Ralston Purina Co. 2,891,221 86,556 Sara Lee Corp. 2,786,700 61,307 Sysco Corp. 5,681,700 185,721 709,276 HOUSEHOLD PRODUCTS - 2.2% Avon Products, Inc. 2,205,700 100,359 Clorox Co. 460,200 51,542 Colgate-Palmolive Co. 500,000 24,688 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED HOUSEHOLD PRODUCTS - CONTINUED Gillette Co. 2,630,100 $ 115,231 Procter & Gamble Co. 7,690,200 695,963 Unilever NV NY Shares 1,405,892 98,237 1,086,020 TOBACCO - 1.6% Philip Morris Companies, Inc. 20,723,400 771,947 TOTAL NONDURABLES 3,675,306 RETAIL & WHOLESALE - 5.7% APPAREL STORES - 0.3% Abercrombie & Fitch Co. Class 593,200 24,618 A (a) Limited, Inc. (The) 2,797,800 127,824 152,442 DRUG STORES - 1.1% CVS Corp. 6,154,468 306,185 Walgreen Co. 7,897,800 223,606 529,791 GENERAL MERCHANDISE STORES - 1.9% Dayton Hudson Corp. 2,857,100 184,819 Federated Department Stores, 523,530 26,864 Inc. (a) May Department Stores Co. 1,057,800 40,924 (The) Wal-Mart Stores, Inc. 15,588,600 658,618 911,225 GROCERY STORES - 1.0% Kroger Co. (a) 12,531,624 329,738 Safeway, Inc. 2,916,800 157,143 486,881 RETAIL & WHOLESALE, MISCELLANEOUS - 1.4% CDnow, Inc. (a) 1,000,000 19,750 Home Depot, Inc. 10,634,500 678,614 698,364 TOTAL RETAIL & WHOLESALE 2,778,703 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) SERVICES - 1.7% ADVERTISING - 0.5% Interpublic Group of 3,223,934 $ 135,405 Companies, Inc. Omnicom Group, Inc. 1,581,400 112,082 247,487 SERVICES - 1.2% ACNielsen Corp. (a) 841,332 24,346 Block (H&R), Inc. (d) 5,652,900 308,790 Gartner Group, Inc. Class B 3,232,338 69,899 (a) Service Corp. International 373,600 5,931 ServiceMaster Co. 1,760,250 31,685 Viad Corp. 3,377,700 111,675 552,326 TOTAL SERVICES 799,813 TECHNOLOGY - 15.9% COMMUNICATIONS EQUIPMENT - 2.6% ADC Telecommunications, Inc. 2,221,700 98,866 (a) Cisco Systems, Inc. (a) 9,943,200 617,721 Lucent Technologies, Inc. 6,924,629 450,534 Nokia AB sponsored ADR 1,138,400 96,835 1,263,956 COMPUTER SERVICES & SOFTWARE - - 8.3% America Online, Inc. (a) 127,800 12,157 At Home Corp. Series A (a) 453,900 20,738 Automatic Data Processing, 6,813,000 272,946 Inc. BMC Software, Inc. (a) 1,395,600 75,188 Ceridian Corp. (a) 5,267,700 147,496 Compuware Corp. (a) 2,229,600 61,871 DST Systems, Inc. (a) 2,669,300 177,175 Electronic Data Systems Corp. 5,064,500 305,453 Equifax, Inc. 2,579,500 84,801 First Data Corp. 1,673,400 82,938 IMS Health, Inc. (d) 17,168,500 478,572 International Business 4,450,400 559,360 Machines Corp. Lycos, Inc. (a) 457,400 18,896 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - - CONTINUED Microsoft Corp. (a) 18,143,400 $ 1,556,931 Oracle Corp. (a) 4,696,260 178,751 4,033,273 COMPUTERS & OFFICE EQUIPMENT - - 2.9% Compaq Computer Corp. 5,036,100 120,866 EMC Corp. (a) 2,696,600 163,313 Gateway, Inc. (a) 619,900 47,229 Hewlett-Packard Co. 3,622,900 379,272 Pitney Bowes, Inc. 8,569,800 545,254 Sun Microsystems, Inc. (a) 405,000 27,489 Xerox Corp. 2,492,800 121,524 1,404,947 ELECTRONICS - 2.0% Intel Corp. 7,200,300 496,821 Motorola, Inc. 2,492,700 227,459 Texas Instruments, Inc. 1,666,200 239,933 964,213 PHOTOGRAPHIC EQUIPMENT - 0.1% Eastman Kodak Co. 475,800 32,890 TOTAL TECHNOLOGY 7,699,279 TRANSPORTATION - 0.7% AIR TRANSPORTATION - 0.4% AMR Corp. (a) 907,600 58,881 Southwest Airlines Co. 8,050,263 148,930 207,811 RAILROADS - 0.3% Burlington Northern Santa Fe 3,378,000 108,096 Corp. Union Pacific Corp. 333,800 18,130 126,226 TOTAL TRANSPORTATION 334,037 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - 8.4% CELLULAR - 0.5% ALLTEL Corp. 1,632,700 $ 117,248 Vodafone AirTouch PLC 568,950 119,764 sponsored ADR 237,012 ELECTRIC UTILITY - 0.4% CMS Energy Corp. 463,779 17,334 Duke Energy Corp. 909,900 48,168 FPL Group, Inc. 641,900 34,622 PG&E Corp. 2,585,000 81,751 181,875 GAS - 0.4% Enron Corp. 1,520,000 129,485 Williams Companies, Inc. 2,123,100 89,303 218,788 TELEPHONE SERVICES - 7.1% Ameritech Corp. 4,401,300 322,395 AT&T Corp. 16,322,350 847,742 Bell Atlantic Corp. 2,843,186 181,253 BellSouth Corp. 5,858,100 281,189 GTE Corp. 4,212,400 310,401 MCI WorldCom, Inc. (a) 9,769,409 805,976 SBC Communications, Inc. 11,814,892 675,664 U.S. WEST, Inc. 248,026 14,215 3,438,835 TOTAL UTILITIES 4,076,510 TOTAL COMMON STOCKS 45,301,771 (Cost $26,484,753) CONVERTIBLE PREFERRED STOCKS - - 0.3% BASIC INDUSTRIES - 0.1% CHEMICAL & PLASTICS - 0.1% Sealed Air Corp. Series A, 1,054,927 64,878 $2.00 CONVERTIBLE PREFERRED STOCKS - - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - 0.2% CREDIT & OTHER FINANCE - 0.2% Union Pacific Capital Trust 1,377,000 $ 67,645 $3.125 TIDES (c) TOTAL CONVERTIBLE PREFERRED 132,523 STOCKS (Cost $110,600)
CONVERTIBLE BONDS - 0.3% MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT (000S) TECHNOLOGY - 0.3% COMPUTERS & OFFICE EQUIPMENT - - 0.1% Quantum Corp. 7% 8/1/04 B2 $ 40,000 37,000 ELECTRONICS - 0.2% Micron Technology, Inc. 7% B2 86,500 100,989 7/1/04 TOTAL CONVERTIBLE BONDS 137,989 (Cost $120,160) U.S. TREASURY OBLIGATIONS - 0.3% U.S. Treasury Bonds: 6% 2/15/26 Aaa 172,500 165,897 8.125% 8/15/19 Aaa 10,000 11,944 TOTAL U.S. TREASURY OBLIGATIONS 177,841 (Cost $166,451)
CASH EQUIVALENTS - 5.5% MATURITY AMOUNT (000S) Investments in repurchase $ 145,646 145,585 agreements (U.S. Treasury obligations), in a joint trading account at 5.06%, dated 7/30/99 due 8/2/99 SHARES Taxable Central Cash Fund (b) 2,509,332,914 2,509,333 TOTAL CASH EQUIVALENTS 2,654,918 (Cost $2,654,918) TOTAL INVESTMENT IN $ 48,405,042 SECURITIES - 100% (Cost $29,536,882)
SECURITY TYPE ABBREVIATIONS TIDES - Term Income Deferred Equity Securities LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.06%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) 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 $67,645,000 or 0.1% of net assets. (d) Affiliated company INCOME TAX INFORMATION At July 31, 1999, the aggregate cost of investment securities for income tax purposes was $29,551,313,000. Net unrealized appreciation aggregated $18,853,729,000, of which $19,478,121,000 related to appreciated investment securities and $624,392,000 related to depreciated investment securities. The fund hereby designates approximately $2,246,595,000 as a capital gain dividend for the purpose of the dividend paid deduction. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1999 ASSETS Investment in securities, at $ 48,405,042 value (including repurchase agreements of $145,585) (cost $29,536,882) - See accompanying schedule Receivable for investments 509,796 sold Receivable for fund shares 38,273 sold Dividends receivable 36,155 Interest receivable 17,611 Other receivables 1,936 TOTAL ASSETS 49,008,813 LIABILITIES Payable for investments $ 326,399 purchased Payable for fund shares 59,846 redeemed Accrued management fee 20,278 Other payables and accrued 7,095 expenses TOTAL LIABILITIES 413,618 NET ASSETS $ 48,595,195 Net Assets consist of: Paid in capital $ 27,007,714 Undistributed net investment 46,468 income Accumulated undistributed net 2,672,831 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 18,868,182 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 1,028,074 $ 48,595,195 shares outstanding NET ASSET VALUE, offering $47.27 price and redemption price per share ($48,595,195 (divided by) 1,028,074 shares) STATEMENT OF OPERATIONS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1999 INVESTMENT INCOME $ 561,804 Dividends (including $21,452 received from affiliated issuers) Interest 158,494 TOTAL INCOME 720,298 EXPENSES Management fee $ 226,584 Transfer agent fees 87,362 Accounting fees and expenses 1,292 Non-interested trustees' 225 compensation Custodian fees and expenses 604 Registration fees 330 Audit 188 Legal 136 Miscellaneous 62 Total expenses before 316,783 reductions Expense reductions (6,981) 309,802 NET INVESTMENT INCOME 410,496 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,290,552 (including realized gain of $36,835 on sales of investments in affiliated issuers) Foreign currency transactions 659 3,291,211 Change in net unrealized appreciation (depreciation) on: Investment securities 2,872,613 Assets and liabilities in (23) 2,872,590 foreign currencies NET GAIN (LOSS) 6,163,801 NET INCREASE (DECREASE) IN $ 6,574,297 NET ASSETS RESULTING FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1999 YEAR ENDED JULY 31, 1998 INCREASE (DECREASE) IN NET ASSETS Operations Net investment $ 410,496 $ 399,563 income Net realized gain (loss) 3,291,211 1,972,406 Change in net unrealized 2,872,590 4,607,442 appreciation (depreciation) NET INCREASE (DECREASE) IN 6,574,297 6,979,411 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (393,528) (397,518) From net investment income From net realized gain (2,186,858) (1,237,608) TOTAL DISTRIBUTIONS (2,580,386) (1,635,126) Share transactions Net 8,258,120 12,370,734 proceeds from sales of shares Reinvestment of distributions 2,512,407 1,603,367 Cost of shares redeemed (10,529,866) (9,241,449) NET INCREASE (DECREASE) IN 240,661 4,732,652 NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) 4,234,572 10,076,937 IN NET ASSETS NET ASSETS Beginning of period 44,360,623 34,283,686 End of period (including $ 48,595,195 $ 44,360,623 undistributed net investment income of $46,468 and $33,271, respectively) OTHER INFORMATION Shares Sold 186,270 309,914 Issued in reinvestment of 63,951 43,076 distributions Redeemed (236,535) (229,152) Net increase (decrease) 13,686 123,838
FINANCIAL HIGHLIGHTS YEARS ENDED JULY 31, 1999 1998 1997 1996 1995 SELECTED PER-SHARE DATA Net asset value, beginning $ 43.73 $ 38.50 $ 28.20 $ 25.10 $ 22.17 of period Income from Investment Operations Net investment income .39 B .41 B .46 B .49 .43 Net realized and unrealized 5.69 6.59 11.44 3.99 4.14 gain (loss) Total from investment 6.08 7.00 11.90 4.48 4.57 operations Less Distributions From net investment income (.38) (.41) (.48) (.48) (.40) From net realized gain (2.16) (1.36) (1.12) (.90) (1.24) Total distributions (2.54) (1.77) (1.60) (1.38) (1.64) Net asset value, end of period $ 47.27 $ 43.73 $ 38.50 $ 28.20 $ 25.10 TOTAL RETURN A 15.20% 19.06% 44.16% 18.39% 21.95% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 48,595 $ 44,361 $ 34,284 $ 19,206 $ 12,106 (in millions) Ratio of expenses to average .68% .69% .73% .75% .78% net assets Ratio of expenses to average .66% C .68% C .71% C .74% C .77% C net assets after expense reductions Ratio of net investment .88% 1.02% 1.43% 1.82% 2.21% income to average net assets Portfolio turnover rate 35% 32% 38% 41% 67%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1999 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, as an open-end management investment company organized as a Massachusetts business trust. Effective the close of business on April 3, 1998, the fund was closed to new accounts. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade and settlement date on purchases and sales of securities. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED market value of the securities received. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust. DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the Plan) non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or are invested in a cross-section of other Fidelity funds. Deferred amounts remain in the fund until distributed in accordance with the Plan. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, foreign currency transactions, non-taxable dividends and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income orgain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund) managed by Fidelity Investments Money Management, Inc., an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities. Income distributions from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions earned by the fund are recorded as interest income in the accompanying financial statements. RESTRICTED SECURITIES. The fund is permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period the fund had no investments in restricted securities (excluding 144A issues). 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $15,249,991,000 and $17,955,705,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. The annual individual fund fee rate is .20%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. For the period, the management fee was equivalent to an annual rate of .49% of average net assets. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED TRANSFER AGENT FEES - CONTINUED and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .19% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $2,136,000 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 $4,867,000 under this arrangement. In addition, the fund has entered into arrangements with its custodian and transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $5,000 and $2,109,000, respectively, under these arrangements. 6. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE Bard (C.R.), Inc. $ 26,012 $ - $ 3,255 $ 206,471 Bausch & Lomb, Inc. - 62,162 2,816 - Block (H&R), Inc. 17,957 53,677 5,628 308,790 CBL & Associates Properties, - 133 4,109 54,066 Inc. Capital Trust, Inc. - - - 6,850 Ceridian Corp. - 665 - - Coram Healthcare Corp. - 3,831 - - Forest Laboratories, Inc. - 15,745 - - IMS Health, Inc. 8,616 6,176 681 478,572 Litton Industries, Inc. 8,796 6,802 - 230,322 SLM Holding Corp. 157,496 - 4,963 554,038 Unifi, Inc. 2,524 - - 61,540 TOTALS $ 221,401 $ 149,191 $ 21,452 $ 1,900,649
REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Growth & Income Portfolio: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Growth & Income Portfolio (a fund of Fidelity Securities Fund) at July 31, 1999, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Growth & Income Portfolio's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts September 8, 1999 DISTRIBUTIONS The Board of Trustees of Fidelity Growth and Income Portfolio voted to pay on September 7, 1999, to shareholders of record at the opening of business on September 3, 1999, a distribution of $2.44 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.10 per share from net investment income. A total of 84% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders. The fund hereby designates 100% of the long-term capital gain dividends distributed during the fiscal year as 20%-rate capital gain dividends. The fund will notify shareholders in January 2000 of amounts for use in preparing 1999 income tax returns. OF SPECIAL NOTE INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS Recently, the SEC issued new disclosure requirements for all mutual fund prospectuses. While Fidelity could have complied by simply following the new requirements, we saw a different opportunity. We saw the chance to create a brand new prospectus: one that is better organized, easier to use and more informative than ever. The new format of the Fidelity mutual fund prospectus puts the information you need to make informed investment decisions right at your fingertips. In the opening pages, you will find the SEC-mandated summary that highlights the fund's investment objectives, strategies and risks. There's also an easy-to-read performance chart and fee table right up front. Inside, you will find additional features we've introduced to make the fund prospectus a more useful tool. In our new Shareholder Information section, for example, we have provided practical, beneficial information - from how to buy or sell shares, key contact information, investment services, ways to set up your account and more - all in one convenient location. We invite you to spend a moment and review our new prospectus. It is designed to help make your investment decision easier, no matter which of the Fidelity funds you invest in. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. (PHONE_GRAPHIC)FIDELITY AUTOMATED SERVICE TELEPHONE (FASTSM) 1-800-544-5555 PRESS 1 For mutual fund and brokerage trading. 2 For quotes.* 3 For account balances and holdings. 4 To review orders and mutual fund activity. 5 To change your PIN. *0 To speak to a Fidelity representative. BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (COMPUTER_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call EarthLink Sprint at 1-800-288-2967, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider. (COMPUTER_GRAPHIC) FIDELITY ON-LINE XPRESS+(registered trademark) Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 815 East Birch Street Brea, CA 851 East Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19200 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 950 Northgate Drive San Rafael, CA 1400 Civic Drive Walnut Creek, CA 6300 Canoga Avenue Woodland Hills, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 48 West Putnam Avenue Greenwich, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT 29 South Main Street West Hartford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 90 Alhambra Plaza Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 1907 West State Road 434 Longwood, FL 8880 Tamiami Trail, North Naples, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 1502 N. Westshore Blvd. Tampa, FL GEORGIA 3445 Peachtree Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA ILLINOIS One North Franklin Street Chicago, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL 3232 Lake Avenue Wilmette, IL INDIANA 4729 East 82nd Street Indianapolis, IN MAINE 3 Canal Plaza Portland, ME MARYLAND 7401 Wisconsin Avenue Bethesda, MD 1 West Pennsylvania Ave. Towson, MD MASSACHUSETTS 470 Boylston Street Boston, MA 155 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 44 Mall Road Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 29155 Northwestern Hwy. Southfield, MI MINNESOTA 7600 France Avenue South Edina, MN MISSOURI 700 West 47th Street Kansas City, MO 8885 Ladue Road Ladue, MO 200 North Broadway St. Louis, MO NEW JERSEY 150 Essex Street Millburn, NJ 56 South Street Morristown, NJ 501 Route 17, South Paramus, NJ NEW YORK 1055 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 1271 Avenue of the Americas New York, NY 71 Broadway New York, NY 350 Park Avenue New York, NY NORTH CAROLINA 4611 Sharon Road Charlotte, NC OHIO 600 Vine Street Cincinnati, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 16850 SW 72 Avenue Tigard, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 6150 Poplar Road Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 4017 Northwest Parkway Dallas, TX 1155 Dairy Ashford Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX 19740 IH 45 North Spring, TX UTAH 215 South State Street Salt Lake City, UT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 2300 Litton Lane - KH1A Hebron, KY 41048 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75039-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75039-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President Robert C. Pozen, Senior Vice President Richard A. Spillane Jr., Vice President Steven Kaye, Vice President Eric D. Roiter, Secretary Richard A. Silver, Treasurer Matthew N. Karstetter, Deputy Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead * INDEPENDENT TRUSTEES GAI-ANN-0999 83748 1.536189.102 GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA CUSTODIAN The Chase Manhattan Bank New York, NY FIDELITY'S GROWTH AND INCOME FUNDS Balanced Fund Convertible Securities Fund Equity-Income Fund Equity-Income II Fund Fidelity (registered trademark) Fund Global Balanced Fund Growth & Income Portfolio Growth & Income II Portfolio Puritan (registered trademark) Fund Real Estate Investment Portfolio Utilities Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) Fidelity Automated Service Telephone (FASTSM) 1-800-544-5555 AUTOMATED LINE FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)(registered trademark) Corporate Heaquarters 82 Devonshire St., Boston, MA 02109 www.fidelity.com FIDELITY OTC PORTFOLIO ANNUAL REPORT JULY 31, 1999 (2_FIDELITY_LOGOS)(registered trademark) CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 9 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 10 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 18 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 22 Notes to the financial statements. REPORT OF INDEPENDENT 27 The auditors' opinion. ACCOUNTANTS DISTRIBUTIONS 28 OF SPECIAL NOTE 29 Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation. Other third party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company. This report is printed on recycled paper using soy-based inks. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. PRESIDENT'S MESSAGE (photo_of_Edward_C_Johnson_3d) DEAR SHAREHOLDER: In July, the steadily growing U.S. economy again sparked fears of inflation and posed the threat of another Federal Reserve Board interest-rate hike at its August policy meeting. Despite rising profits and continued productivity gains at many U.S. corporations, stock and bond markets sold off sharply toward the month's end. Renewed jitters about inflation were sparked by a government report that showed a larger-than-expected increase in the employment-cost index. While it's impossible to predict the future direction of the markets with any degree of certainty, there are certain basic principles that can help investors plan for their future needs. First, investors are encouraged to take a long-term view of their portfolios. If you can afford to leave your money invested through the inevitable up and down cycles of the financial markets, you will greatly reduce your vulnerability to any single decline. We know from experience, for example, that stock prices have gone up over longer periods of time, have significantly outperformed other types of investments and have stayed ahead of inflation. Second, you can further manage your investing risk through diversification. A stock mutual fund, for instance, is already diversified, because it invests in many different companies. You can increase your diversification further by investing in a number of different stock funds, or in such other investment categories as bonds. If you have a short investment time horizon, you might want to consider moving some of your investment into a money market fund, which seeks income and a stable share price by investing in high-quality, short-term investments. Of course, it's important to remember that an investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these types of funds. Finally, no matter what your time horizon or portfolio diversity, it makes good sense to follow a regular investment plan, investing a certain amount of money in a fund at the same time each month or quarter and periodically reviewing your overall portfolio. By doing so, you won't get caught up in the excitement of a rapidly rising market, nor will you buy all your shares at market highs. While this strategy - known as dollar cost averaging - won't assure a profit or protect you from a loss in a declining market, it should help you lower the average cost of your purchases. Of course, you should consider your financial ability to continue your purchases through periods of low price levels before undertaking such a strategy. If you have questions, please call us at 1-800-544-8888, or visit our web site at www.fidelity.com. We are available 24 hours a day, seven days a week to provide you the information you need to make the investments that are right for you. Best regards, Edward C. Johnson 3d PERFORMANCE: THE BOTTOM LINE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Total returns do not include the effect of the 3.00% sales load which was eliminated as of September 30, 1998. CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS FIDELITY OTC 38.54% 226.55% 453.16% NASDAQ 41.42% 277.32% 541.97% Mid-Cap Funds Average 17.16% 137.46% 276.24% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. You can compare the fund's returns to the performance of the NASDAQ Composite Index - a market capitalization-weighted index that is designed to represent the performance of the National Market System which includes over 5,000 stocks traded only over-the-counter and not on an exchange. To measure how the fund's performance stacked up against its peers, you can compare it to the mid-cap funds average, which reflects the performance of mutual funds with similar objectives tracked by Lipper Inc. The past one year average represents a peer group of 373 mutual funds. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS FIDELITY OTC 38.54% 26.70% 18.65% NASDAQ 41.42% 30.42% 20.43% Mid-Cap Funds Average 17.16% 18.51% 13.81% AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (Note: Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a different figure than that obtained by averaging the cumulative total returns and annualizing the result.) $10,000 OVER 10 YEARS OTC Portfolio NASDAQ (Total Return) 00093 F0091 1989/07/31 10000.00 10000.00 1989/08/31 10447.23 10354.49 1989/09/30 10506.88 10446.05 1989/10/31 10152.61 10076.80 1989/11/30 10245.84 10099.50 1989/12/31 10310.10 10084.05 1990/01/31 9578.05 9232.12 1990/02/28 9844.25 9467.75 1990/03/31 10217.95 9696.87 1990/04/30 9921.04 9365.86 1990/05/31 10571.18 10246.38 1990/06/30 10591.66 10333.75 1990/07/31 10453.44 9809.37 1990/08/31 9552.46 8545.99 1990/09/30 9026.74 7736.19 1990/10/31 8836.37 7419.79 1990/11/30 9449.79 8090.08 1990/12/31 9820.25 8436.01 1991/01/31 10593.58 9359.62 1991/02/28 11414.58 10250.39 1991/03/31 12055.50 10925.00 1991/04/30 12034.31 10992.72 1991/05/31 12622.25 11490.63 1991/06/30 12013.12 10818.08 1991/07/31 12860.61 11424.74 1991/08/31 13538.60 11975.77 1991/09/30 13419.62 12016.11 1991/10/31 14003.08 12396.40 1991/11/30 13341.08 11973.75 1991/12/31 14647.83 13413.89 1992/01/31 15280.32 14202.10 1992/02/29 15309.88 14519.28 1992/03/31 14819.25 13852.04 1992/04/30 14381.83 13290.02 1992/05/31 14588.72 13455.95 1992/06/30 14269.52 12970.56 1992/07/31 14570.99 13380.79 1992/08/31 14210.41 12986.53 1992/09/30 14649.01 13464.79 1992/10/31 15194.89 13984.32 1992/11/30 16267.40 15097.54 1992/12/31 16836.18 15671.97 1993/01/31 16947.77 16135.10 1993/02/28 16284.82 15556.86 1993/03/31 16849.31 16020.27 1993/04/30 16357.02 15368.40 1993/05/31 16796.80 16292.06 1993/06/30 16816.49 16386.61 1993/07/31 17000.28 16419.38 1993/08/31 17315.34 17323.61 1993/09/30 17791.22 17804.49 1993/10/31 18025.87 18205.22 1993/11/30 17549.45 17640.80 1993/12/31 18239.22 18180.74 1994/01/31 18730.33 18751.12 1994/02/28 18533.89 18580.97 1994/03/31 17793.44 17447.74 1994/04/30 17302.33 17238.48 1994/05/31 17211.66 17286.74 1994/06/30 16576.99 16615.91 1994/07/31 16939.66 17013.77 1994/08/31 17785.88 18054.66 1994/09/30 17831.22 18040.72 1994/10/31 18239.22 18370.04 1994/11/30 17642.33 17745.81 1994/12/31 17747.60 17802.98 1995/01/31 17709.47 17898.31 1995/02/28 18639.94 18830.28 1995/03/31 19265.34 19406.38 1995/04/30 20073.78 20061.30 1995/05/31 20645.79 20570.14 1995/06/30 22247.42 22227.95 1995/07/31 23711.77 23861.36 1995/08/31 24016.84 24332.06 1995/09/30 24363.45 24911.25 1995/10/31 24231.33 24752.88 1995/11/30 24666.53 25323.65 1995/12/31 24531.70 25172.86 1996/01/31 24475.08 25373.88 1996/02/29 25348.61 26355.36 1996/03/31 25397.14 26405.07 1996/04/30 26990.53 28558.77 1996/05/31 27977.30 29845.15 1996/06/30 26998.62 28455.98 1996/07/31 25235.38 25960.83 1996/08/31 26723.62 27436.52 1996/09/30 28598.11 29502.41 1996/10/31 28482.97 29386.03 1996/11/30 30511.15 31110.22 1996/12/31 30354.30 31086.18 1997/01/31 31569.95 33238.41 1997/02/28 30029.50 31545.14 1997/03/31 27746.67 29453.70 1997/04/30 28869.52 30408.00 1997/05/31 31458.59 33786.33 1997/06/30 32303.06 34806.99 1997/07/31 35690.19 38483.30 1997/08/31 35133.40 38340.01 1997/09/30 37501.57 40728.59 1997/10/31 34401.09 38517.29 1997/11/30 34286.61 38694.47 1997/12/31 33363.49 37977.96 1998/01/31 34111.55 39178.25 1998/02/28 38579.96 42850.83 1998/03/31 39557.43 44442.92 1998/04/30 39986.31 45250.41 1998/05/31 37113.76 43097.31 1998/06/30 39607.30 45919.84 1998/07/31 39926.47 45393.68 1998/08/31 31857.39 36362.83 1998/09/30 36347.83 41097.82 1998/10/31 38011.72 42994.83 1998/11/30 41028.18 47334.62 1998/12/31 46835.67 53253.36 1999/01/31 51011.49 60875.70 1999/02/28 48724.99 55598.97 1999/03/31 51430.14 59827.79 1999/04/30 51483.82 61823.27 1999/05/31 52535.82 60080.76 1999/06/30 55391.26 65339.73 1999/07/30 55316.12 64196.65 IMATRL PRASUN SHR__CHT 19990731 19990812 120101 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity OTC Portfolio on July 31, 1989. As the chart shows, by July 31, 1999, the value of the investment would have grown to $55,316 - a 453.16% increase on the initial investment. For comparison, look at how the NASDAQ Composite Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 would have grown to $64,197 - a 541.97% increase. (checkmark)UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP Federal Reserve Board monetary policy, Internet stock mania and Y2K concerns all played key roles in the direction of the U.S. equity market for the 12 months that ended July 31, 1999. As we entered the period, investors were still leery of troubled overseas markets and overall liquidity. The Fed then made three successive interest-rate cuts in the fall and confidence was restored. The second quarter of 1999 saw more sharing of the market's gains by smaller stocks, many of which rely on borrowed money to fund their growth. The Russell 2000 Index - a measure of small-stock performance - handily outpaced the large-cap oriented Standard & Poor's 500SM Index during that time. For the entire 12 months, though, the S&P 500 returned 20.20%, while the Russell(registered trademark) 2000 could only muster 7.41%. The Dow Jones Industrial Average - an index of 30 blue-chip stocks - returned 21.88%. Internet stocks continued to attract investors, with many stock valuations peaking around April, then cooling off some as the period ended. Technology stocks prospered - the tech-heavy NASDAQ index returned a tidy 41.42% during the period - as did telecommunications stocks with Internet exposure. Y2K concerns mounted toward the end of the period, as many investors anticipated a spending freeze within the technology sector. (photograph of Robert Bertelson) An interview with Robert Bertelson, Portfolio Manager of Fidelity OTC Portfolio Q. HOW DID THE FUND PERFORM, BOB? A. For the 12 months that ended July 31, 1999, the fund returned 38.54%. This trailed the NASDAQ Composite Index - which returned 41.42% during the period - but topped the mid-cap funds average, which returned 17.16% according to Lipper Inc. Q. WHAT FACTORS CONTRIBUTED TO PERFORMANCE DURING THE PERIOD? A. For starters, we had a favorable backdrop for many of the stocks the fund tends to emphasize. When the period began, investors were still concerned with global economies and liquidity within the markets. The Federal Reserve Board made several interest-rate cuts in the fall of 1998 and while liquidity was restored, global economies remained a bit sluggish. This environment led investors to high-growth sectors, and the fund was well-represented in several, including technology, telecommunications and cable TV. In terms of the fund's performance relative to its benchmarks, the fund lagged the NASDAQ mostly due to its relative underweighting in technology stocks. I pulled back on some of these holdings in December, and my decision to do so was premature as many tech stocks continued to run. As far as the Lipper peer group, the fund may have benefited from the fact that it had greater exposure to high-growth names than its competitors. Q. CAN YOU GO INTO MORE DETAIL ON YOUR TECHNOLOGY STRATEGY DURING THE PERIOD? A. While just under 34% of the fund's investments fell into the technology basket at the end of the period - and many performed well - the story was more about what the fund didn't own. For instance, the fund had minimal exposure to the Internet craze, mainly due to my suspicions about the viability of the business models in that area and the lack of discrimination investors showed in gobbling up Internet IPOs. These stocks hit their frenzied peaks around April and have cooled off some since. Also, as I mentioned, I underweighted the fund - - relative to the NASDAQ - in big tech leaders such as Cisco and Intel. In hindsight, this positioning hurt the fund. Q. THAT BEING SAID, THE FUND STILL GENERATED A STRONG RETURN. WERE YOU ABLE TO FIND OPPORTUNITIES ELSEWHERE? A. The fund benefited from its health care investments - particularly in the biotechnology area - and from its cable TV positions. Biotech names such as Biogen and Amgen performed quite nicely during the period as both companies benefited from strong product lines and increased sales. Biogen, for example, has seen its drug for the treatment of multiple sclerosis emerge as a clear leader in combating that disease. In the cable area, the fund's stakes in companies such as Liberty Media - which merged with AT&T during the period - and Comcast paid off handsomely. Liberty's stock rose as investors realized the potential of the company's broad range of programming assets, and Comcast - one of the larger cable firms in the U.S. - executed its business plans well and was helped along by its ownership of cable TV retailer QVC. Q. WHAT OTHER STOCKS PERFORMED WELL DURING THE PERIOD? WHICH ONES PROVED DISAPPOINTING? A. Ascend Communications, which the fund no longer held at the end of the period, worked out well as the company benefited from being acquired by Lucent Technologies. Comverse Technology - which crept into the fund's top-10 list of holdings during the period - also fared well. Comverse is a market leader in voice-mail systems. On the negative side, the fund's positions in Axent Technology and Networks Associates - both of which are involved in the security segment of the software industry - performed poorly as each encountered earnings shortfalls. Axent specializes in encryption and remote-access technology, while Networks develops anti-virus software. Q. WHAT'S YOUR OUTLOOK? A. In terms of the overall investing climate, the only certainty is that there will be uncertainty. I'll be monitoring a couple of things closely in the coming months. First, if global economies enter a phase of simultaneous improvement, we may see additional upward pressure on interest rates. Historically, such a development has not been kind to growth stocks. Second, we have Y2K issues ahead of us (SEE CALLOUT BOX ON PAGE 8). In terms of the portfolio itself, I'll continue to look closely at all segments of the OTC market for earnings growth and capital appreciation opportunities. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON BEHALF OF ANY FIDELITY FUND. (checkmark)FUND FACTS GOAL: capital appreciation by normally investing in securities principally traded on the over-the-counter market FUND NUMBER: 093 TRADING SYMBOL: FOCPX START DATE: December 31, 1984 SIZE: as of July 31, 1999, more than $7.2 billion MANAGER: Bob Bertelson, since 1997; manager, Fidelity Convertible Securities Fund, 1996-1997; Fidelity Select Industrial Equipment Portfolio, 1994-1996; Fidelity Select Energy Portfolio, 1992-1994; joined Fidelity in 1991 BOB BERTELSON OFFERS HIS THOUGHTS ON AND CONCERNS ABOUT Y2K: "I see Y2K as being one of the most significant issues for the investment world over the next few months, mainly because of the unexpected behavior it may produce in a variety of areas. For example, investors may shy away from holding risky or illiquid investments - those that aren't easily traded - as the millennium nears. In addition, companies may build up inventories in anticipation of the event - much like consumers tend to stock up on groceries before a big storm - which could cause economic statistics to look stronger than they really are. "The area in which Y2K concerns are currently most visible is technology. Many companies, for instance, could freeze their technology-related spending activity as the end of the year approaches. Given the relatively high valuations within the sector, technology stocks could be particularly vulnerable. "For these reasons, I underweighted the fund's technology positions relative to the NASDAQ. At the close of the period, the fund's 33.8% weighting in tech stocks was considerably lower than the NASDAQ weighting of 58.9%." INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1999 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Microsoft Corp. 8.8 9.5 MCI WorldCom, Inc. 8.0 7.8 Comcast Corp. Class A (special) 6.0 3.1 Amgen, Inc. 3.7 3.5 Biogen, Inc. 3.2 1.9 Cisco Systems, Inc. 2.7 0.5 At Home Corp. Series A 2.3 0.7 AT&T Corp. (Liberty Media 1.8 0.2 Group) Class A Comverse Technology, Inc. 1.8 0.9 Quantum Corp. 1.6 1.8 TOP FIVE MARKET SECTORS AS OF JULY 31, 1999 % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN THESE MARKET SECTORS 6 MONTHS AGO TECHNOLOGY 33.8 40.3 HEALTH 15.1 13.8 MEDIA & LEISURE 12.7 11.1 UTILITIES 11.3 10.4 FINANCE 6.3 8.3
ASSET ALLOCATION (% OF FUND'S INVESTMENTS) AS OF JULY 31, 1999 * AS OF JANUARY 31, 1999 ** Stocks 95.0% Stocks 92.8% Convertible Securities 0.0% Convertible Securities 0.4% Short-term Investments 5.0% Short-term Investments 6.8% * FOREIGN INVESTMENTS 4.1% ** FOREIGN INVESTMENTS 2.5% Row: 1, Col: 1, Value: 95.0 Row: 1, Col: 1, Value: 92.8 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.4 Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 8, Value: 5.0 Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 8, Value: 6.8
INVESTMENTS JULY 31, 1999 Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 95.0% SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - 0.6% PAPER & FOREST PRODUCTS - 0.6% Smurfit-Stone Container Corp. 2,000,000 $ 44,750 (a) DURABLES - 1.2% AUTOS, TIRES, & ACCESSORIES - 0.2% Modine Manufacturing Co. 200,000 6,406 PACCAR, Inc. 200,000 11,463 17,869 CONSUMER ELECTRONICS - 1.0% Gemstar International Group 1,085,200 71,895 Ltd. (a) TOTAL DURABLES 89,764 ENERGY - 5.6% ENERGY SERVICES - 0.5% BJ Services Co. (a) 1,100,000 33,619 Marine Drilling Companies, 372,000 5,557 Inc. (a) 39,176 OIL & GAS - 5.1% Amerada Hess Corp. 1,091,000 64,574 Anadarko Petroleum Corp. 500,000 19,094 Anderson Exploration Ltd. (a) 200,000 2,582 Apache Corp. 927,700 39,369 Canadian Hunter Exploration 400,000 6,453 Ltd. Canadian Natural Resources 200,000 4,229 Ltd. (a) Kerr-McGee Corp. 516,600 26,605 Newfield Exploration Co. (a) 1,939,700 56,130 Noble Affiliates, Inc. 1,176,300 34,407 Penn West Petroleum Ltd. (a) 200,000 3,784 Poco Petroleums Ltd. (a) 300,000 2,639 Rio Alto Exploration Ltd. (a) 800,000 13,198 Tosco Corp. 600,000 15,825 Vastar Resources, Inc. 1,239,800 81,052 369,941 TOTAL ENERGY 409,117 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - 6.3% BANKS - 4.5% Compass Bancshares, Inc. 300,000 $ 8,644 Fifth Third Bancorp 200,000 13,013 Marshall & Ilsley Corp. 1,804,400 116,609 Northern Trust Corp. 100,000 8,700 Peoples Heritage Financial 1,779,000 32,133 Group, Inc. Seacoast Financial Services 337,500 3,987 Corp. (a) UnionBanCal Corp. 1,300,000 46,800 Zions Bancorp 1,701,000 98,658 328,544 CREDIT & OTHER FINANCE - 0.3% Concord EFS, Inc. (a) 585,400 19,940 SAVINGS & LOANS - 1.5% Astoria Financial Corp. 234,850 8,939 Charter One Financial, Inc. 2,119,940 54,853 Golden State Bancorp, Inc. (a) 1,404,640 31,078 Golden State Bancorp, Inc. 971,540 1,518 litigation warrants 12/31/99 (a) Washington Federal, Inc. 554,312 13,685 Webster Financial Corp. 74,100 1,954 112,027 TOTAL FINANCE 460,511 HEALTH - 15.1% DRUGS & PHARMACEUTICALS - 11.0% Allergan, Inc. 500,000 47,250 Amgen, Inc. (a) 3,472,700 266,964 Biogen, Inc. (a) 3,405,680 234,353 Centocor, Inc. (a) 304,500 16,976 Chiron Corp. (a) 600,000 15,038 Cytyc Corp. (a) 619,000 15,243 Forest Laboratories, Inc. (a) 407,000 20,859 Genentech, Inc. 7,000 994 Genzyme Corp. (General 100,000 5,656 Division) Immunex Corp. (a) 927,500 104,692 Martek Biosciences (a) 300,000 2,981 Medimmune, Inc. (a) 287,200 22,940 QLT PhotoTherapeutics, Inc. 134,100 8,569 (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED DRUGS & PHARMACEUTICALS - CONTINUED Quintiles Transnational Corp. 500,000 $ 19,000 (a) Sepracor, Inc. (a) 317,200 23,314 804,829 MEDICAL EQUIPMENT & SUPPLIES - - 1.7% Biomet, Inc. 389,400 14,164 Boston Scientific Corp. (a) 2,498,000 101,325 Closure Medical Corp. (a) 120,000 2,040 PSS World Medical, Inc. (a) 500,000 5,156 U.S. Surgical Corp. rights 673 0 6/30/00 (a) 122,685 MEDICAL FACILITIES MANAGEMENT - - 2.4% Lincare Holdings, Inc. (a)(c) 3,162,500 94,875 Oxford Health Plans, Inc. (a) 1,100,000 19,663 PacifiCare Health Systems, 116,000 7,910 Inc. Class A (a) Quorum Health Group, Inc. (a) 800,000 8,050 United HealthCare Corp. 300,000 18,300 Wellpoint Health Networks, 348,900 28,653 Inc. (a) 177,451 TOTAL HEALTH 1,104,965 INDUSTRIAL MACHINERY & EQUIPMENT - 0.9% ELECTRICAL EQUIPMENT - 0.9% Adtran, Inc. (a) 300,000 11,344 ANTEC Corp. (a) 400,000 16,775 Ericsson (L.M.) Telefon AB 500,000 16,031 ADR Class B Oak Industries, Inc. (a) 200,000 8,613 Vicor Corp. (a) 700,000 14,525 67,288 MEDIA & LEISURE - 12.7% BROADCASTING - 11.6% AMFM, Inc. (a) 1,846,200 96,926 AT&T Corp. (Liberty Media 3,489,268 129,103 Group) Class A (a) Cablevision Systems Corp. 650,000 45,378 Class A (a) CAIS Internet, Inc. 502,900 7,858 Clear Channel Communications, 462,926 32,202 Inc. (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED BROADCASTING - CONTINUED Comcast Corp. Class A 11,438,880 $ 440,397 (special) EchoStar Communications Corp. 280,600 19,186 Class A (a) MIH Ltd. 275,800 8,067 Sinclair Broadcast Group, 1,625,000 30,773 Inc. Class A (a) USA Networks, Inc. (a) 700,000 33,556 843,446 RESTAURANTS - 1.1% Outback Steakhouse, Inc. (a) 2,450,000 81,769 TOTAL MEDIA & LEISURE 925,215 NONDURABLES - 0.6% FOODS - 0.6% Nabisco Group Holdings Corp. 2,300,000 43,125 RETAIL & WHOLESALE - 3.4% APPAREL STORES - 0.3% Ross Stores, Inc. 416,400 20,039 GENERAL MERCHANDISE STORES - 1.4% Costco Companies, Inc. (a) 746,400 55,793 Dollar Tree Stores, Inc. (a) 129,750 5,490 Michaels Stores, Inc. (a) 700,000 20,388 Nordstrom, Inc. 264,800 8,325 Stein Mart, Inc. (a) 1,984,400 13,209 103,205 RETAIL & WHOLESALE, MISCELLANEOUS - 1.7% Bed Bath & Beyond, Inc. (a) 1,200,000 40,725 PETsMART, Inc. (a) 4,000,000 30,250 Staples, Inc. (a) 1,841,975 53,187 124,162 TOTAL RETAIL & WHOLESALE 247,406 SERVICES - 0.2% On Assignment, Inc. (a) 178,100 5,076 Robert Half International, 300,000 7,931 Inc. (a) 13,007 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - 33.8% COMMUNICATIONS EQUIPMENT - 5.6% Aspect Telecommunications 1,800,200 $ 20,252 Corp. (a) Cisco Systems, Inc. (a) 3,201,376 198,885 Newbridge Networks Corp. (a) 1,100,000 29,211 Nokia AB sponsored ADR 1,200,000 102,075 Pairgain Technologies, Inc. 100,000 944 (a) Tellabs, Inc. (a) 1,000,000 61,563 412,930 COMPUTER SERVICES & SOFTWARE - - 18.7% Amdocs Ltd. (a) 300,000 7,988 Ariba, Inc. 501,900 44,967 Aspect Development, Inc. (a) 1,161,700 22,944 At Home Corp. Series A (a) 3,766,510 172,082 Audible, Inc. 104,800 1,114 Axent Technologies, Inc. 2,506,400 35,090 (a)(c) CBT Group PLC sponsored ADR 1,300,000 36,400 (a) Clarify, Inc. (a) 408,800 13,465 Compuware Corp. (a) 2,007,300 55,703 Concord Communications, Inc. 60,000 2,460 (a) Electronics for Imaging, Inc. 1,153,300 63,215 (a) Fiserv, Inc. (a) 893,925 26,650 Genesys Telecommunications 300,000 8,250 Laboratories, Inc. (a) International Integration, 88,700 1,863 Inc. (a) Intuit, Inc. (a) 204,400 16,722 ISS Group, Inc. (a) 102,200 2,223 Legato Systems, Inc. (a) 1,219,000 87,159 Microsoft Corp. (a) 7,484,200 642,229 National Instrument Corp. (a) 100,000 4,475 Netegrity, Inc. (a)(c) 700,000 14,700 Networks Associates, Inc. (a) 197,800 3,462 Oracle Corp. (a) 770,500 29,327 Peregrine Systems, Inc. (a) 700,000 20,913 Phone.com, Inc. 2,600 162 Synopsys, Inc. (a) 600,000 36,113 Vantive Corp. (a) 150,000 1,402 VeriSign, Inc. (a) 68,400 5,070 Veritas Software Corp. (a) 200,000 11,225 Visual Networks, Inc. (a) 50,000 1,803 1,369,176 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - - 5.5% Adaptec, Inc. (a) 800,000 $ 31,100 Computer Network Technology 100,000 1,444 Corp. (a) Comverse Technology, Inc. (a) 1,703,750 128,740 Copper Mountain Networks, 1,600 194 Inc. Dell Computer Corp. (a) 899,200 36,755 Emulex Corp. (a) 245,300 27,627 F5 Networks, Inc. 10,700 535 Gadzoox Networks, Inc. 302,800 22,786 Juniper Networks, Inc. 12,000 1,949 Maxtor Corp. 1,900,000 10,272 Quantum Corp. (a) 5,331,700 118,964 Sun Microsystems, Inc. (a) 300,000 20,363 400,729 ELECTRONIC INSTRUMENTS - 0.2% Applied Materials, Inc. (a) 100,000 7,194 Novellus Systems, Inc. (a) 117,000 7,532 14,726 ELECTRONICS - 3.8% Altera Corp. (a) 233,700 8,472 Arm Holdings PLC sponsored 1,400,000 66,325 ADR (a) Broadcom Corp. Class A (a) 141,900 17,099 Brocade Communications 226,900 26,859 Systems, Inc. EFTC Corp. (a)(c) 870,000 2,501 Intel Corp. 1,293,200 89,231 Lattice Semiconductor Corp. 200,000 11,475 (a) Linear Technology Corp. 200,000 12,275 Microchip Technology, Inc. (a) 200,000 10,025 PMC-Sierra, Inc. (a) 166,800 13,052 Sanmina Corp. (a) 150,000 9,797 Vitesse Semiconductor Corp. 186,100 11,887 (a) 278,998 TOTAL TECHNOLOGY 2,476,559 TRANSPORTATION - 3.3% AIR TRANSPORTATION - 2.0% Comair Holdings, Inc. 2,235,000 54,618 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - CONTINUED AIR TRANSPORTATION - CONTINUED Midwest Express Holdings, 641,750 $ 21,338 Inc. (a) Northwest Airlines Corp. 2,260,400 72,615 Class A (a) 148,571 TRUCKING & FREIGHT - 1.3% Air Express International 665,800 17,810 Corp. Expeditors International of 1,304,600 40,524 Washington, Inc. USFreightways Corp. 560,000 27,650 Yellow Corp. (a) 500,000 8,563 94,547 TOTAL TRANSPORTATION 243,118 UTILITIES - 11.3% CELLULAR - 1.1% QUALCOMM, Inc. 403,600 62,962 UnitedGlobalCom, Inc. (a) 269,400 20,373 83,335 ELECTRIC UTILITY - 0.1% Illinova Corp. 157,000 5,161 GAS - 0.3% Columbia Gas System, Inc. 249,200 14,827 Dynegy, Inc. 200,000 4,800 19,627 TELEPHONE SERVICES - 9.8% Intermedia Communications, 200,000 5,513 Inc. (a) Level 3 Communications, Inc. 100,000 5,300 (a) MCI WorldCom, Inc. (a) 7,086,204 584,612 McLeodUSA, Inc. Class A (a) 2,157,400 64,317 Metromedia Fiber Network, 911,200 29,272 Inc. Class A (a) Pacific Gateway Exchange, 100,000 2,450 Inc. (a) Qwest Communications 219,500 6,475 International, Inc. (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - CONTINUED Time Warner Telecom, Inc. 190,000 $ 5,914 WinStar Communications, Inc. 300,000 15,750 (a) 719,603 TOTAL UTILITIES 827,726 TOTAL COMMON STOCKS 6,952,551 (Cost $4,881,728) CASH EQUIVALENTS - 5.0% MATURITY AMOUNT (000S) Investments in repurchase $ 4,972 4,970 agreements (U.S. Treasury obligations), in a joint trading account at 5.06%, dated 7/30/99 due 8/2/99 SHARES Taxable Central Cash Fund (b) 364,368,933 364,369 TOTAL CASH EQUIVALENTS 369,339 (Cost $369,339) TOTAL INVESTMENT IN $ 7,321,890 SECURITIES - 100% (Cost $5,251,067)
LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.06%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Affiliated company INCOME TAX INFORMATION At July 31, 1999, the aggregate cost of investment securities for income tax purposes was $5,276,833,000. Net unrealized appreciation aggregated $2,045,057,000, of which $2,278,852,000 related to appreciated investment securities and $233,795,000 related to depreciated investment securities. The fund hereby designates approximately $275,332,000 as a capital gain dividend for the purpose of the dividend paid deduction. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1999 ASSETS Investment in securities, at $ 7,321,890 value (including repurchase agreements of $4,970) (cost $5,251,067) - See accompanying schedule Receivable for investments 14,301 sold Receivable for fund shares 14,455 sold Dividends receivable 191 Interest receivable 1,566 Other receivables 1,621 TOTAL ASSETS 7,354,024 LIABILITIES Payable for investments $ 27,805 purchased Payable for fund shares 23,736 redeemed Accrued management fee 3,198 Other payables and accrued 1,686 expenses TOTAL LIABILITIES 56,425 NET ASSETS $ 7,297,599 Net Assets consist of: Paid in capital $ 4,496,929 Accumulated undistributed net 729,843 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 2,070,827 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 141,613 $ 7,297,599 shares outstanding NET ASSET VALUE, offering $51.53 price and redemption price per share ($7,297,599 (divided by) 141,613 shares) STATEMENT OF OPERATIONS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1999 INVESTMENT INCOME $ 12,789 Dividends Interest 19,224 TOTAL INCOME 32,013 EXPENSES Management fee Basic fee $ 35,418 Performance adjustment (7,619) Transfer agent fees 12,241 Accounting fees and expenses 881 Non-interested trustees' 31 compensation Custodian fees and expenses 118 Registration fees 766 Audit 59 Legal 31 Miscellaneous 6 Total expenses before 41,932 reductions Expense reductions (831) 41,101 NET INVESTMENT INCOME (LOSS) (9,088) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 756,541 (including realized gain (loss) of ($17,710) on sales of investments in affiliated issuers) Foreign currency transactions (75) 756,466 Change in net unrealized 1,083,299 appreciation (depreciation) on investment securities NET GAIN (LOSS) 1,839,765 NET INCREASE (DECREASE) IN $ 1,830,677 NET ASSETS RESULTING FROM OPERATIONS STATEMENT OF CHANGES IN NET ASSETS AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, YEAR ENDED JULY 31, 1999 1998 INCREASE (DECREASE) IN NET ASSETS Operations Net investment $ (9,088) $ (13,687) income (loss) Net realized gain (loss) 756,466 564,676 Change in net unrealized 1,083,299 (90,852) appreciation (depreciation) NET INCREASE (DECREASE) IN 1,830,677 460,137 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (266,093) (272,886) from net realized gains Share transactions Net 4,757,859 3,562,844 proceeds from sales of shares Reinvestment of distributions 260,154 267,122 Cost of shares redeemed (3,777,986) (3,547,368) NET INCREASE (DECREASE) IN 1,240,027 282,598 NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) 2,804,611 469,849 IN NET ASSETS NET ASSETS Beginning of period 4,492,988 4,023,139 End of period $ 7,297,599 $ 4,492,988 OTHER INFORMATION Shares Sold 108,722 94,593 Issued in reinvestment of 8,336 7,806 distributions Redeemed (87,687) (94,757) Net increase (decrease) 29,371 7,642
FINANCIAL HIGHLIGHTS YEARS ENDED JULY 31, 1999 1998 1997 1996 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 40.03 $ 38.46 $ 31.20 $ 31.09 $ 22.42 period Income from Investment Operations Net investment income (loss) (.07) C (.12) C (.05) C .13 .09 Net realized and unrealized 13.95 4.21 11.71 1.80 8.79 gain (loss) Total from investment 13.88 4.09 11.66 1.93 8.88 operations Less Distributions From net investment income - - (.08) (.02) (.09) From net realized gain (2.38) (2.52) (4.32) (1.80) (.12) Total distributions (2.38) (2.52) (4.40) (1.82) (.21) Net asset value, end of period $ 51.53 $ 40.03 $ 38.46 $ 31.20 $ 31.09 TOTAL RETURN A, B 38.54% 11.87% 41.43% 6.43% 39.98% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 7,298 $ 4,493 $ 4,023 $ 2,635 $ 2,110 (in millions) Ratio of expenses to average .75% .76% .85% .83% .82% net assets Ratio of expenses to average .74% D .75% D .84% D .82% D .81% D net assets after expense reductions Ratio of net investment (.16)% (.32)% (.15)% .42% .35% income (loss) to average net assets Portfolio turnover rate 117% 125% 147% 133% 62%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE FORMER ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1999 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, as an open-end management investment company organized as a Massachusetts business trust. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade and settlement date on purchases and sales of securities. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Investment income is 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust. DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the Plan) non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or are invested in a cross-section of other Fidelity funds. Deferred amounts remain in the fund until distributed in accordance with the Plan. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, net operating losses 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. Accumulated net investment loss and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences that will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the fund, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. 2. OPERATING POLICIES - CONTINUED REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency securities are transferred to an account of the fund, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the fund's investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the fund may invest in the Taxable Central Cash Fund (the Cash Fund) managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities. Income distributions from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions earned by the fund are recorded as interest income in the accompanying financial statements. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $6,810,694,000 and $6,113,107,000, respectively. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly basic fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. The annual individual fund fee rate is .35%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus).20% of the fund's average net assets over the performance period) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annual rate of .50% of average net assets after the performance adjustment. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an affiliate of FMR and the general distributor of the fund, received sales charges of $68,000 on sales of shares of the fund all of which was retained. Effective September 30, 1998, the fund's 3% sales charge was eliminated. TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the transfer agent fees were equivalent to an annual rate of .22% of average net assets. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $173,000 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 $539,000 under this arrangement. In addition, the fund has entered into arrangements with its custodian and transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's expenses. During the period, the fund's custodian and transfer agent fees were reduced by $7,000 and $285,000, respectively, under these arrangements. 6. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE Aspect Telecommunications $ 1,857 $ 6,795 $ - $ - Corp. Axent Technologies, Inc. 15,328 - - 35,090 Davox Corp. 2,125 10,128 - - EFTC Corp. 543 - - 2,501 Galileo Technology Ltd. 1,742 14,937 - - Lattice Semiconductor Corp. - 1,282 - - Lincare Holdings, Inc. 6,116 - - 94,875 Netegrity, Inc. - - - 14,700 TOTALS $ 27,711 $ 33,142 $ - $ 147,166
REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity OTC Portfolio: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity OTC Portfolio (a fund of Fidelity Securities Fund) at July 31, 1999, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity OTC Portfolio's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts September 8, 1999 DISTRIBUTIONS The Board of Trustees of Fidelity OTC Portfolio voted to pay on September 7, 1999, to shareholders of record at the opening of business on September 3, 1999, a distribution of $4.16 per share derived from capital gains realized from sales of portfolio securities. A total of 11% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders. The fund hereby designates 100% of the long-term capital gain dividends distributed during the fiscal year as 20%-rate capital gain dividends. The fund will notify shareholders in January 2000 of amounts for use in preparing 1999 income tax returns. OF SPECIAL NOTE INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS Recently, the SEC issued new disclosure requirements for all mutual fund prospectuses. While Fidelity could have complied by simply following the new requirements, we saw a different opportunity. We saw the chance to create a brand new prospectus: one that is better organized, easier to use and more informative than ever. The new format of the Fidelity mutual fund prospectus puts the information you need to make informed investment decisions right at your fingertips. In the opening pages, you will find the SEC-mandated summary that highlights the fund's investment objectives, strategies and risks. There's also an easy-to-read performance chart and fee table right up front. Inside, you will find additional features we've introduced to make the fund prospectus a more useful tool. In our new Shareholder Information section, for example, we have provided practical, beneficial information - from how to buy or sell shares, key contact information, investment services, ways to set up your account and more - all in one convenient location. We invite you to spend a moment and review our new prospectus. It is designed to help make your investment decision easier, no matter which of the Fidelity funds you invest in. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. (PHONE_GRAPHIC)FIDELITY AUTOMATED SERVICE TELEPHONE (FASTSM) 1-800-544-5555 PRESS 1 For mutual fund and brokerage trading. 2 For quotes.* 3 For account balances and holdings. 4 To review orders and mutual fund activity. 5 To change your PIN. *0 To speak to a Fidelity representative. BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (COMPUTER_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call EarthLink Sprint at 1-800-288-2967, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider. (COMPUTER_GRAPHIC) FIDELITY ON-LINE XPRESS+(registered trademark) Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 2300 Litton Lane - KH1A Hebron, KY 41048 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6I 400 East Las Colinas Blvd. Irving, TX 75039-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 (LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions - CP6R 400 East Las Colinas Blvd. Irving, TX 75039-5517 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 500 Merrimack, NH 03054-0500 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President Robert C. Pozen, Senior Vice President Bart A. Grenier, Vice President Robert Bertelson, Vice President Eric D. Roiter, Secretary Richard A. Silver, Treasurer Matthew N. Karstetter, Deputy Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer BOARD OF TRUSTEES Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA * INDEPENDENT TRUSTEES OTC-ANN-0999 83750 1.536191.102 CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY'S GROWTH FUNDS Aggressive Growth Fund Blue Chip Growth Fund Capital Appreciation Fund Contrafund (registered trademark) Contrafund(registered trademark) I I Disciplined Equity Fund Dividend Growth Fund Export and Multinational Fund Fidelity FiftySM Growth Company Fund Large Cap Stock Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium Fund(registered trademark) OTC Portfolio Retirement Growth Fund Small Cap Selector Small Cap Stock Fund Stock Selector Tax Managed Stock Fund TechnoQuant(registered trademark) Growth Fund Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) Fidelity Automated Service Telephone (FASTSM) 1-800-544-5555 AUTOMATED LINE FOR QUICKEST SERVICE (2_FIDELITY_LOGOS)(registered trademark) Corporate Headquarters 82 Devonshire St., Boston, MA 02109 www.fidelity.com -----END PRIVACY-ENHANCED MESSAGE-----