-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FZkR87AuhTx2ZRLZw/jM1SuRsGVHW/XMsJ/yyDwFTW4koOjuYCY5pPFtGy6vZTcj zhSeD97qr9s3c+cznqle1w== 0000795422-94-000023.txt : 19940912 0000795422-94-000023.hdr.sgml : 19940912 ACCESSION NUMBER: 0000795422-94-000023 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940731 FILED AS OF DATE: 19940908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY SECURITIES FUND CENTRAL INDEX KEY: 0000754510 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04118 FILM NUMBER: 94548425 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174391706 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MZ ZH1 CITY: BOSTON STATE: MA ZIP: 02109 N-30D 1 FIDELITY (registered trademark) GROWTH & INCOME PORTFOLIO ANNUAL REPORT JULY 31, 1994 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 35 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 39 Notes to the financial statements. REPORT OF INDEPENDENT 43 The auditor's opinion. ACCOUNTANTS 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, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: The first half of 1994 was an unsettling time for many investors. After three years of a nearly perfect environment for stock market investing, stock prices generally fell from February through June. Investors disagree about whether this decline represents only a short-term correction or signals the beginning of a longer bear market. One can collect statistics to support either opinion, but of course, nobody knows for sure what will happen to stock prices in the months ahead. We do know, however, that market declines are a normal part of stock market investing. We have historically seen corrections of 10% or more every two years. That's why I thought this might be a good time to review three basic investment principles that have proven helpful to successful stock market investors in every market cycle. First, take a long-term approach when investing in stocks and stock funds. If you can afford to leave your money invested through the market's inevitable ups and downs, you will greatly reduce your vulnerability to any single decline. Over time, stock prices have gone up - and have significantly outperformed other types of investments and stayed ahead of inflation. But in the short-term, because of their volatility, stocks have greater risk. Second, you can further manage risk by diversifying your investments. A stock mutual fund is already diversified, because it invests in many different companies. You can increase your diversification by investing in a number of different stock funds, or in different investment categories, such as bonds. You should also keep money you'll need in the near future in a more stable investment. Finally, it makes good sense to follow a regular investment plan, investing a set amount of money at the same time each month or quarter. That way, you can avoid getting caught up in the excitement of a rapidly-rising market - and won't end up buying all your shares at market highs. This strategy won't assure a profit or protect you from a loss in a declining market, but it should help you lower the average cost of your purchases. For this to be effective, you must continue to buy shares in both up and down markets. If you have questions, please call us at 1-800-544-8888. We would be happy to send you a Fidelity FundMatch kit, which can help you determine the mix of investments that is right for you. You might also find it convenient to set up a regular investment plan using the Fidelity Automatic Account Builder.SM We look forward to hearing from 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Growth & Income 7.08% 80.90% 303.53% Growth & Income (incl. 3% sales 3.86% 75.48% 291.43% charge) S&P 500(registered trademark) 5.16% 54.91% 189.08% Average Growth & Income Fund 4.95% 52.11% 155.03% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 30, 1985. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, you would have $1,050. For comparison, you can look at the performance of the Standard & Poor's Composite Index of 500 Stocks - a common proxy for the U.S. stock market. You can also look at the average growth & income fund, which reflects the performance of over 370 growth & income funds tracked by Lipper Analytical Services Inc. These benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Growth & Income 7.08% 12.59% 17.63% Growth & Income (incl. 3% sales 3.86% 11.90% 17.21% charge) S&P 500(registered trademark) 5.16% 9.15% 13.15% Average Growth & Income Fund 4.95% 8.62% n/a AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Growth & Income Standard & Poor's 500 Stock Index 12/30/85 9700.00 10000.00 12/31/85 9700.00 10081.75 01/31/86 10252.90 10138.21 02/28/86 11232.60 10896.55 03/31/86 12580.90 11504.57 04/30/86 12697.30 11374.57 05/31/86 13104.70 11979.70 06/30/86 13444.20 12182.15 07/31/86 12861.59 11501.17 08/31/86 13552.86 12354.56 09/30/86 12686.33 11332.84 10/31/86 13301.34 11986.74 11/30/86 13340.43 12278.02 12/31/86 13086.06 11964.93 01/31/87 14666.60 13576.61 02/28/87 15363.61 14112.88 03/31/87 15825.00 14520.74 04/30/87 15805.98 14391.51 05/31/87 15865.22 14516.72 06/30/87 16447.70 15249.81 07/31/87 17359.64 16022.98 08/31/87 17708.02 16620.63 09/30/87 17568.67 16256.64 10/31/87 13908.03 12754.96 11/30/87 13164.69 11703.95 12/31/87 13841.69 12594.62 01/31/88 14709.54 13124.86 02/29/88 15489.51 13736.47 03/31/88 15156.86 13312.02 04/30/88 15400.97 13459.78 05/31/88 15600.69 13576.88 06/30/88 16321.81 14200.06 07/31/88 16310.61 14146.10 08/31/88 16120.17 13665.13 09/30/88 16703.97 14247.27 10/31/88 17031.94 14643.34 11/30/88 16783.13 14433.94 12/31/88 17022.17 14686.53 01/31/89 18088.20 15761.59 02/28/89 17893.34 15369.13 03/31/89 18446.32 15727.23 04/30/89 19232.74 16543.47 05/31/89 20134.82 17213.48 06/30/89 20273.23 17115.36 07/31/89 21637.21 18660.88 08/31/89 22103.53 19026.63 09/30/89 21984.84 18948.62 10/31/89 21290.20 18509.02 11/30/89 21643.61 18886.60 12/31/89 22060.99 19339.88 01/31/90 20904.62 18042.17 02/28/90 21225.84 18274.92 03/31/90 21598.67 18759.20 04/30/90 21041.53 18290.22 05/31/90 22596.33 20073.52 06/30/90 22491.32 19937.02 07/31/90 22334.58 19873.22 08/31/90 20427.65 18076.68 09/30/90 19249.75 17196.35 10/31/90 19209.64 17122.40 11/30/90 20158.76 18228.51 12/31/90 20561.64 18737.08 01/31/91 22439.48 19554.02 02/28/91 24330.83 20952.13 03/31/91 25671.08 21459.18 04/30/91 26024.60 21510.68 05/31/91 27520.27 22439.94 06/30/91 25651.14 21412.19 07/31/91 27222.73 22410.00 08/31/91 28015.36 22941.12 09/30/91 27768.26 22558.00 10/31/91 28264.89 22860.28 11/30/91 26789.21 21939.01 12/31/91 29164.99 24448.83 01/31/92 29862.45 23994.08 02/29/92 30517.20 24306.00 03/31/92 29890.36 23832.04 04/30/92 30562.54 24532.70 05/31/92 30676.95 24652.91 06/30/92 30074.10 24285.58 07/31/92 30692.55 25278.86 08/31/92 30376.14 24760.64 09/30/92 30687.27 25052.82 10/31/92 30930.31 25140.50 11/30/92 31886.24 25997.80 12/31/92 32529.60 26317.57 01/31/93 33437.33 26538.64 02/28/93 33816.92 26899.56 03/31/93 35058.06 27467.14 04/30/93 35008.26 26802.44 05/31/93 35738.64 27520.74 06/30/93 36288.93 27600.55 07/31/93 36556.01 27490.15 08/31/93 37991.54 28532.03 09/30/93 38198.34 28312.33 10/31/93 38625.81 28898.40 11/30/93 37753.78 28623.86 12/31/93 38882.40 28970.21 01/31/94 40352.30 29955.20 02/28/94 39582.35 29143.41 03/31/94 37841.11 27872.76 04/30/94 38596.87 28229.53 05/31/94 38719.91 28692.49 06/30/94 38047.88 27989.53 07/29/94 39142.53 28907.58 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Growth & Income Portfolio on December 30, 1985, when the fund started, and paid a 3% sales charge. As the chart shows, by July 31, 1994, the value of your investment would have grown to $39,143 - a 291.43% increase on your initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends reinvested, the same $10,000 investment in the S&P 500 would have grown to $28,908 - a 189.08% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks or bonds will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP After generally falling through much of 1994, U.S. stock prices rebounded in July on the strength of improving corporate earnings. Rising interest rates caused the stock market to stumble from February through June. Stocks largely took their cue from bonds, which fell sharply due to concerns that the strengthening economy might trigger higher inflation. Late in the period, a weakening U.S. dollar put additional downward pressure on stocks. The Standard & Poor's 500 index had a total return of 5.16% for the 12 months ended July 31, 1994, mainly due to gains made in 1993. Cyclical stocks - those whose prices tend to move in tandem with the economy - were among the market leaders. These included such sectors as chemicals, metals and paper. Market laggards included most consumer nondurables - especially retail, beverage and drug companies. In addition, rising interest rates hurt such rate-sensitive sectors as insurance and utilities. Aside from Japanese stocks, which made strong gains due to a strengthening economy and yen, most foreign markets suffered corrections in 1994. However, strong gains in 1993 helped drive the Morgan Stanley EAFE (Europe, Australia, Far East) index to a 14.13% total return for the 12 months ended July 31. The Morgan Stanley Emerging Markets Free Index was up 40.62%, again due to strong performance in 1993. An interview with Steve Kaye, Portfolio Manager of Fidelity Growth & Income Portfolio Q. STEVE, HOW HAS THE FUND PERFORMED THIS YEAR? A. The fund had a total return of 7.08% for the 12 months ended July 31, 1994, compared to 4.95% for the average growth and income fund tracked by Lipper Analytical Services and 5.16% for the Standard & Poor's 500 index during the same period. Q. WHY DID THE FUND PERFORM BETTER THAN THE AVERAGE FUND? A. The fund benefited from full participation in the strong market of the last half of 1993. In the first half of 1994, the fund was helped by its investments in real estate investment trusts (REITs), chemical companies and Japanese stocks. I also held more cash during the past several months, because I was more careful with my stock picking in a negative market environment. The cash earned a better return than the market in the first half of 1994. Q. ARE REITS NEW FOR THE FUND? A. No, but since I took over as manager last year, I started buying REITs in the last quarter of 1993, and the fund had a 3.2% stake in them by July 31. I believed that the strengthening economy would lead to inflation, causing real estate values to rise. The fund owns a lot of apartment REITs, investments that have benefited from tighter supply and higher demand. Modest rent increases and increasing occupancies have helped these REITs improve their cash flows. The fund also owns regional shopping mall REITs - such as Simon Properties and Urban Shopping Centers - because they are producing attractive yields, around 8%, and growing cash flows. Q. WHY DID CHEMICALS HELP? A. The economic cycle is at a point where demand for chemicals is increasing, boosting prices and chemical company stocks. Du Pont and Union Carbide have been the two largest chemical investments in the fund over the past six months, and both have performed very well. Akzo NV, a Dutch chemical company and the world's largest salt manufacturer, also did well; it exceeded earnings expectations because it cut costs and improved volumes. Q. WERE YOUR JAPANESE INVESTMENTS HELPED BY THE DROP IN THE DOLLAR? A. The performance of the fund's Japanese stocks - including the auto makers Suzuki, Toyota, Honda and Nissan, as well as general exporters such as Matsushita Electric - helped the fund. These companies have effectively cut costs, and the Japanese economy appears poised for recovery. On the other hand, the benefit of currency impact due to the weakened dollar was offset by my use of forward foreign currency contracts to hedge the fund's Japanese stocks against currency risk. These instruments - a type of derivative investment - essentially tie the value of the underlying investment - the stocks - to the U.S. dollar. I use them because I want to bet on the stock market, not on what's going on with the yen. Q. DID THE FUND OWN ANY OTHER DERIVATIVE INVESTMENTS? A. The fund owned a small stake in inverse floaters - instruments that are structured to benefit from falling interest rates - which worked out in 1993, but performed poorly when rates began rising this year. There was virtually no exposure to these instruments by the end of the first quarter, but the fund did lose some money on them. By July 31, the small stake in foreign currency contracts was the fund's only investment in derivatives. Q. AREN'T THESE INVESTMENTS RISKY? A. Derivative investments can be risky, depending on how they're structured. The fund's stake in inverse floaters was extremely sensitive to changes in interest rates, which is one reason I sold them when it appeared rates would continue to rise. It's important to note that these investments have not been a big part of the fund in the past. Q. WHY DID YOU BUY A LOT OF HEALTH CARE STOCKS THIS YEAR, WHEN THOSE COMPANIES ARE FACING THE POSSIBILITY OF MAJOR CHANGES AS A RESULT OF HEALTHCARE REFORM? A. The fund had an 8.1% stake in health care stocks at the end of July, up from 6.5% six months ago. These stocks have had a few bad years, but they've come down in price so much they're now attractively valued. It's a classic case of the market being too pessimistic. The fund purchased a broad range of health care stocks, such as Medtronic, American Cyanamid and Columbia HCA. Another investment has been Becton Dickinson, a maker of needles and syringes, which was an attractively valued stock whose price has risen. Q. RETAIL SALES HAVE BEEN SLUGGISH. WHY HAS THE FUND BEEN ADDING TO THIS SECTOR? A. Valuations - stock prices compared to measures such as earnings - for a number of retailers have become very attractive. The fund has bought significant positions in Sears and Toys "R" Us. Additionally, the fund has done very well with drug stores. Two examples are Revco and Rite-Aid, which are benefiting from prescription contracts with managed care organizations that increase the traffic into their stores and help the sales of all the other products these chains sell. Q. WHAT ABOUT DISAPPOINTMENTS? A. The biggest disappointment has been General Electric. The stock has dropped due to the well-publicized problems at a brokerage firm that GE owns. This problem was just a speck on the elephant, but it was very visible, so it hurt the stock. I'm sticking with the company, however, because it continues to have attractive business prospects with the potential for earnings growth. In addition, the fund held bond investments during the period, mostly foreign, that were affected by the fall in bond markets worldwide. As of July 31, the fund has reduced its bond holdings to 5.6%, down from 9.2% on January 31, 1994. Historically, the fund hasn't held a large stake in bonds. Q. HAVE YOU ADDED ANY NEW NAMES TO THE FUND? A. I've added Browning-Ferris and WMX Technologies, waste disposal companies that have been out of favor with investors for a number of years. This business usually picks up late in the economic cycle, where I think we are right now. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. I plan on moving the fund toward a more fully invested position. There have been some stock market sectors that have undergone severe corrections, such as technology and gaming. I'm looking to add investments from these groups, because there are some good values. I have purchased over one million shares of Caesars World, a major casino operator. The fund's biggest technology investments are in Intel and IBM. Intel is the dominant microchip maker for personal computers and has launched a new product called Pentium. The company has a rock-solid balance sheet and is buying back stock. IBM is a much different situation, a turnaround story. New management has cut costs and the company's second quarter earnings were a significant surprise. Given the company's theme of cost reduction, it looks attractive over the next year. FUND FACTS GOAL: to increase the fund's share price over the long-term and provide some current income START DATE: December 30, 1985 SIZE: as of July 31, 1994, more than $8.7 billion MANAGER: Steven Kaye, since January 1993; manager, Fidelity Blue Chip Growth Fund, October 1990 - December 1992; Fidelity Select Energy Services, Biotechnology, and Health Care Portfolios, 1986-1990; joined Fidelity in 1985 (checkmark) STEVE KAYE ON HISTORICAL ANALYSIS: "I look at long-term historical charts to help me pick stocks. Stock prices always follow earnings, so I try to identify those companies with earnings growth that appears out of line with the stock price. Sometimes stock prices go below their historic earnings trend lines, but there is usually a good reason. Drug stocks fell over the past few years, for example, because people thought health reform was going to restrict drug companies' pricing flexibility. "I pay attention to historical valuations - prices compared to measures such as earnings and cash flow - assuming that there are no underlying problems in a company. When stocks are at very high historical valuations, the risk/reward trade-off usually isn't very compelling. When the market is going well, stocks with high valuations often continue to rise, so an overvalued stock may work for a while. But in today's more uncertain market, it will be important to look for stocks with fair valuations and a sound history of earnings growth." (solid bullet) Finance, energy, basic industries and health were the fund's top four investment sectors as of July 31, 1994. INVESTMENT CHANGES TOP TEN STOCKS AS OF JULY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO General Electric Co. 2.8 2.9 Philip Morris Companies, Inc. 1.6 1.0 British Petroleum PLC ADR 1.5 1.0 Columbia/HCA Healthcare Corp. 1.2 1.2 Schlumberger Ltd. 1.1 0.4 Federal National Mortgage Association 1.1 1.1 Ameritech Corp. 1.0 1.0 Southwestern Bell Corp. 1.0 1.0 American Express Co. 0.8 0.5 Intel Corp. 0.8 - TOP FIVE INDUSTRIES AS OF JULY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE INDUSTRIES 6 MONTHS AGO Finance 10.6 11.5 Energy 8.7 7.4 Basic Industries 8.5 5.3 Health 8.4 7.0 Utilities 6.7 10.1 ASSET ALLOCATION AS OF JULY 31, 1994* AS OF JANUARY 31, 1994** Row: 1, Col: 1, Value: 12.7 Row: 1, Col: 2, Value: 3.2 Row: 1, Col: 3, Value: 4.0 Row: 1, Col: 4, Value: 40.1 Row: 1, Col: 5, Value: 40.0 Row: 1, Col: 1, Value: 13.5 Row: 1, Col: 2, Value: 6.4 Row: 1, Col: 3, Value: 6.8 Row: 1, Col: 4, Value: 73.3 Stocks 80.1% Bonds 4.0% Convertibles 3.2% Other securities and short-term Investments 12.7% FOREIGN INVESTMENTS 13.4% Stocks 73.3% Bonds 6.8% Convertibles 6.4% Other securities and short-term investments 13.5% FOREIGN INVESTMENTS 13.0% * ** INVESTMENTS JULY 31, 1994 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 79.9% SHARES VALUE (NOTE 1) (000S) AEROSPACE & DEFENSE - 2.3% AEROSPACE & DEFENSE - 0.8% Aviall, Inc. 260,900 $ 2,120 Flightsafety International, Inc. 578,300 20,963 Martin Marietta Corp. 355,100 16,113 McDonnell Douglas Corp. 210,000 23,730 Thiokol Corp. 194,900 5,019 67,945 DEFENSE ELECTRONICS - 1.4% General Motors Corp. Class H 346,700 12,958 Litton Industries, Inc. 779,200 28,928 Loral Corp. 1,095,000 40,789 Raytheon Co. 638,200 41,882 124,557 SHIP BUILDING & REPAIR - 0.1% General Dynamics Corp. 158,600 6,364 TOTAL AEROSPACE & DEFENSE 198,866 BASIC INDUSTRIES - 7.9% CHEMICALS & PLASTICS - 5.6% Akzo NV: Ord. 322,000 38,822 sponsored ADR 50,000 3,013 Albemarle Corp. 783,200 13,608 DSM NV 85,000 6,830 du Pont (E.I.) de Nemours & Co. 1,038,500 61,661 Eastman Chemical Co. 766,000 39,545 Ferro Corp. 1,000,400 24,010 Georgia Gulf Corp. (a) 344,100 12,345 Great Lakes Chemical Corp. 1,012,900 60,268 Hoechst AG Ord. 93,300 20,322 Imperial Chemical Industries PLC: ADR 355,000 18,194 Ord . 1,576,400 20,324 Lyondell Petrochemical Co. 712,400 17,721 Minnesota Mining & Manufacturing Co. 522,800 27,774 Monsanto Co. 143,200 11,009 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - CONTINUED CHEMICALS & PLASTICS - CONTINUED NL Industries, Inc. (a) 501,000 $ 5,010 Nalco Chemical Co. 441,700 14,410 Olin Corp. 463,200 25,592 Union Carbide Corp. 2,192,200 61,930 Witco Corp. 213,000 6,204 Yizheng Chemical Fibre Co. Class H (a) 3,190,000 979 489,571 IRON & STEEL - 0.1% Nucor Corp. 113,500 7,832 METALS & MINING - 0.7% Alcan Aluminium Ltd. 1,382,100 33,898 Alumax, Inc. (a) 98,100 3,017 Noranda, Inc. 522,200 9,182 Reynolds Metals Co. 269,500 13,576 59,673 PACKAGING & CONTAINERS - 0.2% Ball Corp. 436,929 11,524 Owens-Illinois, Inc. (a) 579,300 6,155 17,679 PAPER & FOREST PRODUCTS - 1.3% Abitibi-Price, Inc. (a) 695,000 8,648 Abitibi-Price, Inc. (installment receipts) (a)(i) 139,800 794 Bowater, Inc. 146,500 3,937 Champion International Corp. 372,100 12,744 International Paper Co. 207,000 15,085 QUNO Corp. (a) 283,400 4,855 QUNO Corp. (e) 40,700 697 Rayonier, Inc. 160,525 4,956 Scott Paper Co. 232,500 13,427 Stone Container Corp. 516,800 8,527 Temple-Inland, Inc. 679,900 34,760 Weyerhaeuser Co. 171,500 7,203 115,633 TOTAL BASIC INDUSTRIES 690,388 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONGLOMERATES - 2.5% Allied-Signal, Inc. 329,000 $ 12,584 Dial Corp. (The) 390,800 8,060 Hanson Trust PLC sponsored ADR 321,200 6,384 ITT Corp. 692,100 59,348 Mark IV Industries, Inc. 477,066 9,184 Textron, Inc. 691,100 36,801 Tyco Laboratories, Inc. 215,000 9,299 United Technologies Corp. 936,400 56,418 Whitman Corp. 1,094,500 18,058 216,136 CONSTRUCTION & REAL ESTATE - 3.6% BUILDING MATERIALS - 0.4% Lafarge Corp. 1,639,600 31,972 CONSTRUCTION - 0.0% Pulte Corp. 146,700 3,337 REAL ESTATE INVESTMENT TRUSTS - 3.2% Amli Residential Properties Trust (SBI) (k) 795,500 17,103 Avalon Properties, Inc. 912,150 19,269 Bay Apartment Community 376,000 7,708 Beacon Properties Corp. 353,600 6,542 CBL & Associates Properties, Inc. 760,700 15,309 Camden Property Trust (SBI) 256,700 5,904 Carr Realty Corp. 86,000 1,763 Crown American Realty Trust (SBI) 1,238,800 17,653 Developers Diversified Realty Corp. 459,500 14,072 Duke Realty Investors, Inc. 450,800 12,172 Equity Residential Property Trust (SBI) 1,053,100 34,489 Highwoods Properties, Inc. 278,000 5,664 Irvine Apartment Communities 191,400 3,828 Liberty Property Trust (SBI) 225,000 4,416 Macerich Company 469,500 9,273 Manufactured Home Communities, Inc 538,000 11,029 Mid Atlantic Realty Trust (SBI) 28,800 256 Oasis Residential, Inc. 450,940 11,048 Simon Properties Group, Inc. 847,000 22,551 Smith (Charles E.) Residential Realty, Inc. (a) 275,000 6,909 Stewart Enterprises, Inc. Class A 42,500 919 Storage Equities, Inc. (k) 1,282,200 19,393 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - CONTINUED REAL ESTATE INVESTMENT TRUSTS - CONTINUED Storage USA, Inc. 137,900 $ 3,654 Summit Property Trust (SBI) (k) . . . . . . . . . . . . . . . . . . . . . . . . 687,400 13,404 Urban Shopping Centers, Inc. 621,800 13,680 278,008 TOTAL CONSTRUCTION & REAL ESTATE 313,317 DURABLES - 3.3% AUTOS, TIRES, & ACCESSORIES - 2.2% Bandag, Inc. 181,900 10,186 Echlin, Inc. 315,000 10,001 General Motors Corp. 365,000 18,752 Goodyear Tire & Rubber Co. 547,200 19,494 Hino Motors Ltd. Ord. 326,000 3,149 Honda Motor Co. Ltd. 813,000 14,079 Magna International, Inc. Class A 158,963 6,594 Nissan Motor Co. Ltd. Ord. 650,000 5,010 Snap-on Tools Corp. 329,900 12,083 Suzuki Motor Corp. 2,135,000 27,996 TRW, Inc. 605,800 42,255 Toyota Motor Corp. 999,000 21,200 190,799 CONSUMER ELECTRONICS - 0.6% Aktiebolaget Electrolux 169,700 8,262 Matsushita Electric Industrial Co. Ltd. 1,200,000 19,700 Sony Corp. 395,000 23,210 Whirlpool Corp. 87,500 4,452 55,624 TEXTILES & APPAREL - 0.5% Liz Claiborne, Inc. 676,800 14,382 NIKE, Inc. Class B 69,100 4,250 Nisshinbo Industries 465,000 5,213 Unifi, Inc. 944,200 23,487 47,332 TOTAL DURABLES 293,755 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - 8.4% ENERGY SERVICES - 1.9% Enterra Corp. (a) 240,200 $ 4,804 Halliburton Co. 655,100 22,273 Helmerich & Payne, Inc. 638,200 17,790 Nowsco Well Service Ltd. 200,000 3,427 Schlumberger Ltd. 1,640,200 96,772 Smith International, Inc. (a) 803,100 13,753 Tidewater, Inc. 364,800 8,664 167,483 OIL & GAS - 6.5% Amerada Hess Corp. 962,100 50,029 Amoco Corp. 803,000 48,080 Anderson Exploration Ltd. (a) 649,200 7,961 Apache Corp. 833,308 21,354 British Petroleum PLC: ADR 1,711,500 130,074 Ord. 3,873,700 24,702 Burlington Resources, Inc. 329,900 12,907 Chevron Corp. 500,400 22,205 Inverness Petroleum Ltd. (a) 709,400 6,141 Kerr-McGee Corp. 620,500 31,180 Mobil Corp. 450,000 37,744 Murphy Oil Corp. 774,300 34,456 Occidental Petroleum Corp. 469,100 9,323 Renaissance Energy Ltd. (a) 328,400 6,988 Royal Dutch Petroleum Co. 377,700 42,680 Total Compagnie Francaise des Petroles Class B 44,900 2,589 Total SA sponsored ADR 1,230,200 35,368 Ultramar Corp. 185,400 5,075 Unocal Corp. 1,188,900 34,478 563,334 TOTAL ENERGY 730,817 FINANCE - 9.4% BANKS - 2.6% BNP CI Ord. 220,300 10,645 Banc One Corp. 1,020,760 34,068 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED BANKS - CONTINUED BankAmerica Corp. 325,000 $ 15,681 Bank of New York Co., Inc. 144,000 4,554 Chemical Banking Corp. 550,000 21,106 Citicorp 31,941 1,318 Comerica, Inc. 668,600 19,891 CoreStates Financial Corp. 227,900 6,210 Deutsche Bank AG 35,000 16,173 First Interstate Bancorp 95,300 7,159 Mellon Bank Corp. 31,924 1,828 NBD Bancorp, Inc. 145,300 4,631 NationsBank Corp. 836,489 46,634 Shawmut National Corp. 459,685 9,768 Signet Banking Corp. 2,542 104 State Street Boston Corp. 581,300 22,307 Wells Fargo & Co. 28,000 4,351 226,428 CLOSED END INVESTMENT COMPANY - 0.0% ASA Ltd. 57,000 2,636 CREDIT & OTHER FINANCE - 1.6% American Express Co. 2,615,100 69,300 Beneficial Corp. 866,200 34,431 Dean Witter Discover & Co. 427,116 17,138 Household International, Inc. 657,773 22,529 143,398 FEDERAL SPONSORED CREDIT - 1.8% Federal Home Loan Mortgage Corporation 808,800 48,124 Federal National Mortgage Association 1,088,200 94,401 Student Loan Marketing Association 450,600 15,715 158,240 INSURANCE - 2.5% Allstate Corp. 717,800 17,945 American Bankers Insurance Group, Inc. 314,600 6,764 American Income Holding, Inc. 584,200 15,919 Exel Ltd. 256,000 10,272 General Re Corp. 182,300 21,078 Loews Corp. 255,600 22,557 MBIA, Inc. 593,200 34,406 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED INSURANCE - CONTINUED Midocean Reinsurance Ord. (a) 900,000 17,381 Penncorp. Financial Group, Inc. 613,500 10,046 SAFECO Corp. 295,600 16,369 Travelers, Inc. (The) 1,238,166 41,014 213,751 SAVINGS & LOANS - 0.3% Ahmanson (H.F.) & Co. 1,395,600 27,738 SECURITIES INDUSTRY - 0.6% Daiwa Securities 1,230,000 19,700 Lehman Brothers Holdings, Inc. 483,020 7,608 Nikko Securities 900,000 11,171 Nomura Securities Co. Ltd. 509,000 11,260 49,739 TOTAL FINANCE 821,930 HEALTH - 8.0% DRUGS & PHARMACEUTICALS - 2.9% Allergan, Inc. 1,143,600 27,589 American Cyanamid Co. 983,000 59,594 Amgen, Inc. 136,400 6,777 Astra A Free shares 550,000 11,972 COR Therapeutics, Inc. (a) 512,000 6,272 Cephalon, Inc. (a)(k) 738,500 7,200 Chiron Corp. (a) 100,000 5,375 Genentech, Inc. (redeemable) (a) 154,700 7,774 Lilly (Eli) & Co. 296,700 14,427 Pfizer, Inc. 549,400 34,063 Pharmacia AB A Free Shares 980,300 15,025 Schering-Plough Corp. 724,600 46,465 Scios, Inc. (a) 590,000 3,761 Synergen, Inc. (a) 95,000 440 Syntex Corp. 376,000 8,836 255,570 MEDICAL EQUIPMENT & SUPPLIES - 3.0% Baxter International, Inc. 1,849,500 48,781 Becton, Dickinson & Co. 1,187,900 50,040 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - CONTINUED Johnson & Johnson 765,300 $ 35,969 Kendall International, Inc. (a) 383,000 20,060 McKesson Corp. 77,100 7,671 Medtronic, Inc. 482,900 43,038 Pall Corp. 1,278,100 20,130 St. Jude Medical, Inc. 1,032,200 32,772 258,461 MEDICAL FACILITIES MANAGEMENT - 2.1% Columbia/HCA Healthcare Corp. 2,529,681 102,452 Humana, Inc. (a) 1,719,300 32,237 National Medical Enterprises, Inc. 425,300 7,230 Quorum Health Group, Inc. (a) 283,300 5,383 U.S. Healthcare, Inc. 410,000 15,529 United HealthCare Corp. 572,800 26,062 188,893 TOTAL HEALTH 702,924 HOLDING COMPANIES - 0.2% Triarc Companies, Inc. Class A (a) 884,100 13,704 INDUSTRIAL MACHINERY & EQUIPMENT - 6.3% ELECTRICAL EQUIPMENT - 3.5% American Superconductor Corp. (a) 139,000 3,753 Duracell International, Inc. 110,600 4,659 General Electric Co. 4,857,000 244,671 Itel Corp. 236,683 8,018 Murata Manufacturing Co. 341,000 15,087 Philips Electronics 619,500 18,986 Scientific-Atlanta, Inc. 248,200 8,625 303,799 INDUSTRIAL MACHINERY & EQUIPMENT - 1.4% Caterpillar, Inc. 376,900 40,847 Cooper Industries, Inc. 805,100 30,191 Harnischfeger Industries, Inc. 280,600 5,787 Indresco, Inc. (a) 214,000 2,515 Keystone International, Inc. 503,700 9,507 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED Komatsu Limited Ord. 770,000 $ 7,384 Parker-Hannifin Corp. 81,800 3,528 TRINOVA Corp. 455,800 17,548 Watts Industries, Inc. Class A 347,100 8,417 125,724 POLLUTION CONTROL - 1.4% Attwoods PLC: ADR 637,300 5,815 Ord. 2,250,000 4,099 Browning-Ferris Industries, Inc. 1,964,400 60,896 Safety Kleen Corp. 812,000 14,210 WMX Technologies, Inc. 1,286,400 37,466 122,486 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 552,009 MEDIA & LEISURE - 2.4% BROADCASTING - 0.3% Home Shopping Network, Inc. (a) 905,100 10,748 Infinity Broadcasting Corp. (a) 405,225 11,701 22,449 ENTERTAINMENT - 0.3% Carnival Cruise Lines, Inc. Class A 446,300 21,088 Players International, Inc. (a) 269,700 4,787 25,875 LEISURE DURABLES & TOYS - 0.1% Brunswick Corp. 365,900 8,736 LODGING & GAMING - 1.4% Aztar Corp. (a)(k) 2,453,700 15,949 Boomtown, Inc. (a) 355,100 5,770 Caesars World, Inc. (a) 1,064,400 42,310 La Quinta Motor Inns, Inc. 189,225 5,393 Marriott International, Inc. 713,000 19,786 Mirage Resorts, Inc. (a) 1,159,150 21,299 President Riverboat Casinos, Inc. (a) 223,700 1,566 Promus Companies, Inc. (a) 481,600 13,966 126,039 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED PUBLISHING - 0.1% Houghton Mifflin Co. 142,000 $ 5,272 RESTAURANTS - 0.2% Brinker International, Inc. (a) 180,300 4,034 McDonald's Corp. 559,300 15,171 19,205 TOTAL MEDIA & LEISURE 207,576 NONDURABLES - 5.6% BEVERAGES - 0.8% Dr. Pepper/Seven-Up Companies, Inc. (a) 1,377,200 31,331 Kirin Brewery Co. Ltd. 250,000 3,103 Seagram Co. Ltd. 1,123,400 34,644 69,078 FOODS - 1.4% Archer-Daniels-Midland Co. 398,300 9,808 CPC International, Inc. 50,800 2,565 ConAgra, Inc. 1,321,200 41,948 Dean Foods Co. 281,000 8,395 Gerber Products Co. 175,000 9,122 Hormel (George A) & Co. 122,900 2,750 Kellogg Co. 20,000 1,035 Nestle SA 6,000 5,264 Ralcorp Holdings, Inc. (a) 326,366 5,263 Ralston Purina Co. 501,200 18,544 Tyson Foods, Inc. 539,800 13,023 117,717 HOUSEHOLD PRODUCTS - 1.1% First Brands Corp. 191,500 6,583 Orkla AS Class B (non-vtg.) 329,050 11,480 Premark International, Inc. 964,800 40,401 Procter & Gamble Co. 715,000 39,861 98,325 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - CONTINUED TOBACCO - 2.3% Philip Morris Companies, Inc. 2,614,400 $ 143,792 RJR Nabisco Holdings Corp. 5,291,300 32,409 UST, Inc. 906,600 26,178 202,379 TOTAL NONDURABLES 487,499 RETAIL & WHOLESALE - 5.5% APPAREL STORES - 0.1% Limited, Inc. (The) 150,000 2,963 United States Shoe Corp. 190,600 3,669 6,632 DRUG STORES - 0.7% Revco (D.S.), Inc. (a) 2,270,893 40,592 Rite Aid Corp. 1,188,200 24,061 64,653 GENERAL MERCHANDISE STORES - 2.1% Broadway Stores, Inc. (a) 1,014,700 10,147 Carson Pirie Scott & Co. (a)(k) 1,188,600 22,138 Consolidated Stores Corp. (a) 16,000 196 Dayton Hudson Corp. 275,000 22,688 Dillard Department Stores, Inc. Class A 301,000 10,084 Federated Department Stores, Inc. 100,000 2,038 Hornbach Baumarket AG (Bearer) 8,500 5,037 May Department Stores Co. (The) 746,100 29,564 Penney (J.C.) Co., Inc. 133,000 6,584 Sears, Roebuck & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,272,100 60,107 Wal-Mart Stores, Inc. 550,000 13,750 182,333 GROCERY STORES - 1.2% Fleming Companies, Inc. 613,900 18,110 Food Lion, Inc. Class A 1,554,900 9,232 Kroger Co. (The) (a) 361,800 9,090 Safeway, Inc. (a) 1,615,100 39,974 Starbucks Corp. (a) 200,300 5,809 Stop & Shop Companies, Inc. (a) 971,800 24,781 106,996 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - 1.4% Amway Japan Ltd. sponsored ADR 265,000 $ 4,836 Circuit City Stores, Inc. 892,800 19,530 Home Depot, Inc. (The) 306,900 12,583 Lowe's Companies, Inc. 649,800 23,393 Office Depot, Inc. (a) 461,600 9,751 Toys "R" Us, Inc. (a) 1,541,600 52,993 123,086 TOTAL RETAIL & WHOLESALE 483,700 SERVICES - 1.0% LEASING & RENTAL - 0.0% PHH Corp. 76,900 2,874 PRINTING - 0.1% Toppan Printing Co. Ltd. 300,000 4,474 SERVICES - 0.9% ADT Ltd. 3,519,700 36,517 Chemed Corp. 34,800 1,183 Kelly Services, Inc. Class A 136,100 4,015 Western Atlas, Inc. 720,100 35,015 76,730 TOTAL SERVICES 84,078 TECHNOLOGY - 4.5% COMMUNICATIONS EQUIPMENT - 0.5% Cabletron Systems, Inc. (a) 425,400 42,859 COMPUTER SERVICES & SOFTWARE - 0.5% BancTec, Inc. (a) 456,050 9,235 LEGENT Corp. (a) 150,100 3,565 Microsoft Corp. (a) 50,600 2,606 Oracle Systems Corp. (a) 609,600 23,317 Platinum Technology, Inc. (a) 577,900 8,957 47,680 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - 1.5% Canon, Inc. 386,000 $ 6,607 Casio Computer Co. Ltd. Ord. 345,000 4,213 Hewlett-Packard Co. 22,900 1,778 International Business Machines Corp. 856,500 52,889 Sun Microsystems, Inc. (a) 698,300 15,537 Xerox Corp. 498,300 50,951 131,975 ELECTRONICS - 1.5% AMP, Inc. 644,900 48,206 Hitachi Ltd. 1,300,000 12,558 Intel Corp. (a) 1,118,800 66,289 Texas Instruments, Inc. 4,600 362 127,415 PHOTOGRAPHIC EQUIPMENT - 0.5% Fuji Photo Film Co. Ltd. 200,000 4,424 Polaroid Corp. 1,129,900 38,982 43,406 TOTAL TECHNOLOGY 393,335 TRANSPORTATION - 2.6% AIR TRANSPORTATION - 0.2% AMR Corp. (a) 229,000 13,110 RAILROADS - 2.0% CSX Corp. 761,900 59,142 Canadian Pacific Ltd. Ord. 2,114,500 31,079 Chicago & North Western Holdings Corp. (a) 730,600 15,891 Illinois Central Corp., Series A 533,900 17,018 Santa Fe Pacific Corp. 2,006,600 41,386 Trinity Industries, Inc. 230,950 7,362 171,878 TRUCKING & FREIGHT - 0.4% Airborne Freight Corp. 197,100 5,272 Rollins Truck Leasing Corp. 177,750 3,155 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - CONTINUED TRUCKING & FREIGHT - CONTINUED TNT Freightways Corp. (k) 1,079,350 $ 26,714 XTRA Corp. 83,900 3,912 39,053 TOTAL TRANSPORTATION 224,041 UTILITIES - 6.4% CELLULAR - 0.6% Airtouch Communications (a) 517,200 13,447 Rogers Communications, Inc. Class B (a) 720,000 10,258 Vodafone Group PLC sponsored ADR 902,400 25,831 49,536 ELECTRIC UTILITY - 1.2% Eastern Utilities Associates 138,004 3,416 Entergy Corp. 1,225,000 31,238 Illinova Corp. 522,500 10,907 Long Island Lighting Co. 467,600 8,651 PSI Resources, Inc. 402,700 8,910 Pinnacle West Capital Corp. 709,700 12,508 Public Service Co. of New Mexico (a) 650,000 7,881 Veba Vereinigte Elektrizetaets & Bergwerks AG Ord. 75,300 24,716 108,227 GAS - 0.3% Enron Corp. 225,000 7,284 MCN Corp. 140,000 5,583 Sonat, Inc. 182,200 6,035 UGI Corp. 461,302 9,745 28,647 TELEPHONE SERVICES - 4.3% ALC Communications Corp. (a) 615,700 19,933 AT & T Corp. 250,000 13,656 Ameritech Corp. 2,155,300 88,367 BellSouth Corp. 917,600 57,350 Comsat Corp., Series 1 604,300 15,787 GTE Corp. 225,000 7,144 LCI International, Inc. (a) 335,800 6,128 LDDS Communications, Inc. (a) 131,740 2,569 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - CONTINUED MCI Communications Corp. 854,900 $ 19,449 NYNEX Corp. 182,900 7,042 Rochester Telephone Corp. 661,200 15,951 Southwestern Bell Corp. 2,039,200 85,646 Sprint Corp. 518,000 18,972 Telefonica de Mexico SA: Ord. . 600,000 8,567 sponsored ADR 170,000 7,246 373,807 TOTAL UTILITIES 560,217 TOTAL COMMON STOCKS (Cost $6,298,064) 6,974,292 PREFERRED STOCKS - 1.8% CONVERTIBLE PREFERRED STOCKS - 1.6% BASIC INDUSTRIES - 0.3% METALS & MINING - 0.3% Reynolds Metals Co. $3.31 459,500 23,664 DURABLES - 0.5% AUTOS, TIRES, & ACCESSORIES - 0.5% Chrysler Corp., Series A, $4.625 (e) 84,000 11,298 Ford Motor Co. (Del.), Series A, $4.20 318,200 33,093 44,391 ENERGY - 0.1% OIL & GAS - 0.1% Diamond Shamrock, Inc. 5% (e) 89,000 4,851 Valero Energy Corp. $3.125 99,000 4,356 9,207 PREFERRED STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONVERTIBLE PREFERRED STOCKS - CONTINUED FINANCE - 0.3% BANKS - 0.2% Bank of New York Co. Inc. 7 3/4% 172,300 $ 10,036 Chemical Banking Corp. $5.00 (e) 60,000 4,500 Norwest Corp., Series B, $3.50 57,400 4,190 18,726 CREDIT & OTHER FINANCE - 0.1% American Express Co. 6 1/4%, 272,000 11,288 SAVINGS & LOANS - 0.0% Ahmanson (H.F.) & Co., Series D, $3.00 18,400 888 TOTAL FINANCE 30,902 HEALTH - 0.1% MEDICAL EQUIPMENT & SUPPLIES - 0.1% U.S. Surgical Corp. $2.20 (e) 321,000 7,704 INDUSTRIAL MACHINERY & EQUIPMENT - 0.0% Cooper Industries, Inc. exchangeable $8.00 12,800 298 NONDURABLES - 0.2% TOBACCO - 0.2% RJR Nabisco Holdings Corp., Series A, depositary shares representing 1/4 share (a) 2,800,000 17,500 UTILITIES - 0.1% TELEPHONE SERVICES - 0.1% LCI International, Inc. $1.25 344,700 9,652 TOTAL CONVERTIBLE PREFERRED STOCKS 143,318 NONCONVERTIBLE PREFERRED STOCKS - 0.2% UTILITIES - 0.2% TELEPHONE SERVICES - 0.2% SIP (Societa Ital Per L'Eser) Spa Di Risp N/C Ord. 1,549,900 3,641 Stet (Societa Finanziaria Telefonica) Spa (a) 3,500,000 9,648 TOTAL NONCONVERTIBLE PREFERRED STOCKS 13,289 TOTAL PREFERRED STOCKS (Cost $133,863) 156,607 CORPORATE BONDS - 3.1% MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) (000S) (000S) CONVERTIBLE BONDS - 1.6% BASIC INDUSTRIES - 0.0% PACKAGING & CONTAINERS - 0.0% Polly Peck International PLC euro 7 1/4%, 1/4/05 (b) - $ 7,500 $ 3,000 CONGLOMERATES - 0.1% Mark IV Industries, Inc. 6 1/4%, 2/15/07 B1 4,800 6,486 CONSTRUCTION & REAL ESTATE - 0.0% REAL ESTATE INVESTMENT TRUSTS - 0.0% Liberty Property Limited Partnership 8%, 7/1/01 - 1,591 1,583 DURABLES - 0.0% TEXTILES & APPAREL - 0.0% Unifi, Inc. 6%, 3/15/02 Baa1 2,250 2,289 ENERGY - 0.1% INDEPENDENT POWER - 0.1% California Energy, Inc. 5%, 7/31/00 (e) B1 6,200 5,394 FINANCE - 0.4% BANKS - 0.4% Bank of New York Co., Inc. 7 1/2%, 8/15/01 Baa1 21,972 35,485 HEALTH - 0.3% DRUGS & PHARMACEUTICALS - 0.1% Astra AB 9 1/4%, 8/30/94 - SEK 11,112 6,298 MEDICAL EQUIPMENT & SUPPLIES - 0.2% Medco Containment Services, Inc.: 6%, 9/1/01 (f) Aaa 14,750 18,788 6%, 9/1/01 (e) Aaa 650 827 19,615 TOTAL HEALTH 25,913 CORPORATE BONDS - CONTINUED MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) (000S) (000S) CONVERTIBLE BONDS - CONTINUED MEDIA & LEISURE - 0.3% BROADCASTING - 0.1% Time Warner, Inc. liquid yield option 0%, 6/22/13 Ba1 $ 24,520 $ 9,072 LODGING & GAMING - 0.1% Argosy Gaming Co. 12%, 6/1/01 B3 10,000 10,650 PUBLISHING - 0.1% News America Holdings, Inc. gtd. exchangeable 0%, 3/31/02 (f) Ba3 15,600 11,973 TOTAL MEDIA & LEISURE 31,695 RETAIL & WHOLESALE - 0.2% GROCERY STORES - 0.2% Food Lion, Inc. 5%, 6/1/03 (e) A3 6,700 6,357 Kroger Co. 6 3/8%, 12/1/99 B2 3,800 5,206 Starbucks Corp. 4 1/2%, 8/1/03 B2 7,500 7,847 19,410 TECHNOLOGY - 0.2% COMMUNICATIONS EQUIPMENT - 0.1% General Instrument Corp. 5%, 6/15/00 B1 6,500 8,913 ELECTRONICS - 0.1% Motorola, Inc. liquid yield option 0%, 9/27/13 A1 6,750 4,590 TOTAL TECHNOLOGY 13,503 TOTAL CONVERTIBLE BONDS 144,758 NONCONVERTIBLE BONDS - 1.5% BASIC INDUSTRIES - 0.3% IRON & STEEL - 0.1% Inland Steel Industries, Inc. 12 3/4%, 12/15/02 BA3 5,000 5,575 Stelco Co. 10 1/4%, 4/30/96 - CAD 4,500 3,189 8,764 CORPORATE BONDS - CONTINUED MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) (000S) (000S) NONCONVERTIBLE BONDS - CONTINUED BASIC INDUSTRIES - CONTINUED PAPER & FOREST PRODUCTS - 0.2% Repap Wisconsin, Inc. 8 1/4%, 2/1/02 B1 $ 580 $ 508 Stone Container Corp. 9 7/8%, 2/1/01 B1 15,000 13,950 14,458 TOTAL BASIC INDUSTRIES 23,222 CONGLOMERATES - 0.1% Coltec Industries, Inc. 10 1/4%, 4/1/02 B1 6,000 6,000 CONSTRUCTION & REAL ESTATE - 0.1% BUILDING MATERIALS - 0.1% DAL Tile International, Inc. secured 0%, 7/15/98 Caa 3,870 2,385 USG Corp. 10 1/4%, 12/15/02 B1 3,500 3,518 5,903 ENERGY - 0.1% ENERGY SERVICES - 0.0% TransTexas Gas Corp. 10 1/2%, 9/1/00 B1 3,530 3,548 OIL & GAS - 0.1% Mesa Capital Corp. secured 0%, 6/30/98 (g) B3 10,000 9,075 TOTAL ENERGY 12,623 FINANCE - 0.5% BANKS - 0.4% KeyCorp 6.15%, 1/16/95 A2 5,000 5,011 Morgan (J.P.) & Co., Inc. 5 3/8%, 1/21/95 Aa1 15,000 15,006 Republic National Bank New York 5 1/5%, 1/17/95 Aa1 15,000 15,143 35,160 CREDIT & OTHER FINANCE - 0.1% GPA Delaware, Inc.: 8 1/2%, 3/3/97 - 2,000 1,740 8 3/4%, 12/15/98 Caa 160 131 8 5/8%, 1/15/99 - 1,500 1,166 CORPORATE BONDS - CONTINUED MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) (000S) (000S) NONCONVERTIBLE BONDS - CONTINUED FINANCE - CONTINUED CREDIT & OTHER FINANCE - CONTINUED General Electric Capital Corp. peso linked 16.95%, 10/29/96 (h) Aaa $ 2,000 $ 1,785 4,822 TOTAL FINANCE 39,982 MEDIA & LEISURE - 0.3% BROADCASTING - 0.1% SCI Television, Inc. secured 11%, 6/30/05 B3 7,250 7,386 LODGING & GAMING - 0.1% Bally's Park Place Funding, Inc. 9 1/4%, 3/15/04 B1 5,000 4,300 La Quinta Inns, Inc. 9 1/4%, 5/15/03 B2 5,000 4,725 9,025 PUBLISHING - 0.1% GACC Holding Co. 9 3/4%, 3/1/04 (e) - 10,000 9,825 TOTAL MEDIA & LEISURE 26,236 RETAIL & WHOLESALE - 0.1% APPAREL STORES - 0.0% Apparel Retailers, Inc. 12 3/4%, 8/15/05 Caa 1,610 966 Specialty Retailers, Inc. 10%, 8/15/00 B1 5,000 4,850 5,816 RETAIL & WHOLESALE, MISCELLANEOUS - 0.1% Color Tile, Inc. 10 3/4%, 12/15/01 B2 7,000 6,720 TOTAL RETAIL & WHOLESALE 12,536 TOTAL NONCONVERTIBLE BONDS 126,502 TOTAL CORPORATE BONDS (Cost $271,150) 271,260 U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 0.6% MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) (000S) (000S) U.S. TREASURY OBLIGATIONS - 0.5% 9 1/2%, 10/15/94 Aaa $ 28,700 $ 28,978 8 1/8%, 8/15/19 Aaa 10,000 10,708 39,686 U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.1% Federal Home Loan Bank 5.89%, 11//25/94 Aaa 10,000 10,025 TOTAL U.S GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $51,699) 49,711 FOREIGN GOVERNMENT OBLIGATIONS - 1.9% Argentinean Government (h): BOCON: 3 1/4%, 4/1/01 - ARP 629 339 3 1/4%, 4/1/01 B1 13,574 9,680 3 1/4%, 9/1/02 - ARP 822 374 3 1/4%, 4/1/07 - ARP 3,145 1,285 Brady euro: 4%, 3/31/23 B1 40,750 20,884 4 1/4%, 3/31/23 B1 500 351 3.1875%, 9/1/02 - 9,502 5,964 euro 5%, 3/31/05 - 23,500 17,214 5%, 3/31/05 (e) - 750 549 Brazilian Federative Republic IDU euro 8 3/4%, 1/1/01 (h) B2 2,940 2,157 Canadian Government 9 3/4%, 10/1/97 Aaa CAD 39,750 29,572 French Government OAT: 8 1/2%, 10/25/08 Aaa FRF 100,000 20,105 8 1/2%, 4/25/23 Aaa FRF 120,000 23,783 Mexican Government: Bondes 18.24%, 9/22/94 (h) - MXN 12,300 3,621 Brady 6 1/4%, 12/31/19 Ba3 18,750 12,351 Moroccan Government Trust 4 1/2%, 1/3/09 (e)(h) - 16,500 11,694 New Zealand Government 8%, 4/15/04 Aaa NZD 15,500 9,290 Nigerian Government Brady 5 1/2%, 11/15/20 (g) - 500 180 Siderurgica Brasileiras SA inflation indexed 6%, 8/15/99 (l) - BRR 753 90 TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $176,687) 169,483 OTHER SECURITIES - 0.0% MOODY'S RATINGS (D) PRINCIPAL VALUE (NOTE 1) (UNAUDITED) AMOUNT (C) (000S) (000S) PURCHASED BANK DEBT - 0.0% Republic of Equador loan participation 0% (a) (Cost $570) - $ 1,000 $ 516 REPURCHASE AGREEMENTS - 12.7% MATURITY AMOUNT (000S) Investments in repurchase agreements, (U.S. Treasury obligations), in a joint trading account at 4.23% dated 7/29/94 due 8/1/94 $1,107,663 1,107,273 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $8,039,306) $ 8,729,142 FORWARD FOREIGN CURRENCY CONTRACTS AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED DATE(S) VALUE GAIN/(LOSS) CONTRACTS TO SELL 323,872 FRF 10/28/94 $ 59,774 $ (184) 17,066,985 JPY 8/15/94 to 9/9/94 171,195 (7,798) 55,282 SEK 10/11/94 7,082 (112) TOTAL CONTRACTS TO SELL (Receivable amount $229,957) $ 238,051 $ (8,094) THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 2.7% SECURITIES SOLD SHORT NUMBER OF SHARES ISSUER VALUE (000S) 100,000 Merck & Co., Inc. $ 2,962 225,900 News Corp. Ltd. ADR 11,634 TOTAL SECURITIES SOLD SHORT (Total proceeds $16,019) $ 14,596 THE VALUE OF SECURITIES SOLD SHORT AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 0.2% CURRENCY ABBREVIATIONS ARP - Argentinean peso BRR - Brazilian real CAD - Canadian dollar FRF - French franc JPY - Japanese yen MXN - Mexican peso NZD - New Zealand dollar SEK - Swedish krona LEGEND 1. Non-income producing 2. Non-income producing - issuer filed for protection under the Federal Bankruptcy Code or is in default of interest payment. 3. Principal amount is stated in United States dollars unless otherwise noted. 4. Standard & Poor's Corporation credit ratings are used in the absence of a rating by Moody's Investors Service, Inc. 5. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $63,696,000 or 0.7% of net assets. 6. A portion of the security pledged to cover margin requirements on open short sale transactions (see Note 2 of Notes to Financial Statements). At the period end the value of securities pledged amounted to $15,794,000. 7. Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. 8. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. 9. Market value reflects the payment of the first installment. Additional equal payments of $699,000 are payable in January and October of 1995. 10. Most foreign government obligations have not been individually rated by S&P or Moody's. The ratings listed are assigned to securities by FMR, the fund's investment adviser, based principally on S&P and Moody's ratings of the sovereign credit of the issuing government. 11. Affiliated company (See Note 6 of Notes to Financial Statements). 12. Principal amount shown is original face amount and does not reflect the inflation adjustments. The composition of long-term debt holdings as a percentage of total value of investment in securities, is as follows (ratings are unaudited): MOODY'S RATINGS S&P RATINGS Aaa, Aa, A 2.3% AAA, AA, A 2.6% Baa 0.4% BBB 0.1% Ba 0.4% BB 0.6% B 1.6% B 1.0% Caa 0.0% CCC 0.0% Ca, C 0.0% CC, C 0.0% D 0.0% The percentage not rated by either S&P or Moody's amounted to 0.6%. FMR has determined that unrated debt securities that are lower quality account for 0.5% of the total value of investment in securities. Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 86.6% United Kingdom 3.1 Japan 2.6 Canada 2.3 Netherlands 1.3 France 1.1 Others (individually less than 1%) 3.0 TOTAL 100.0% INCOME TAX INFORMATION At July 31, 1994, the aggregate cost of investment securities for income tax purposes was $8,055,960,000. Net unrealized appreciation aggregated $673,182,000, of which $848,133,000 related to appreciated investment securities and $174,951,000 related to depreciated investment securities. The fund hereby designates $39,998,000 as a capital gain dividend for the purpose of the dividend paid deduction. At July 31, 1994, the fund was required to defer $998,000 of losses on futures contracts and options. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER SHARE AMOUNTS) JULY 31, 1994 ASSETS Investment in securities, at value (including repurchase $ 8,729,142 agreements of $1,107,273) (cost $8,039,306) (Notes 1 and 2) - See accompanying schedule Securities sold short, at value (proceeds received (14,596) $ 8,714,546 $16,019) (Note 2) Restricted cash on securities sold short (Note 2) 16,019 Cash 149 Receivable for investments sold 99,127 Receivable for fund shares sold 14,558 Dividends receivable 10,547 Interest receivable 11,373 Other receivables 3,163 TOTAL ASSETS 8,869,482 LIABILITIES Payable for investments purchased 88,312 Unrealized depreciation on foreign currency contracts 8,094 Payable for fund shares redeemed 8,856 Accrued management fee 3,738 Other payables and accrued expenses 3,282 TOTAL LIABILITIES 112,282 NET ASSETS $ 8,757,200 Net Assets consist of (Note 1): Paid in capital $ 7,708,315 Undistributed net investment income 8,861 Accumulated undistributed net realized gain (loss) on 357,175 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 682,849 investments and assets and liabilities in foreign currencies NET ASSETS, for 394,940 shares outstanding $ 8,757,200 NET ASSET VALUE and redemption price per share $22.17 ($8,757,200 (divided by) 394,940 shares) Maximum offering price per share (100/97.00 of $22.17) $22.86
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1994 INVESTMENT INCOME $ 140,623 Dividends (including $1,473 received from affiliated issuers) (Note 7) Interest (including security lending fees of $52) (Note 6) 87,051 TOTAL INCOME 227,674 EXPENSES Management fee (Note 4) $ 40,956 Transfer agent fees (Note 4) 20,162 Accounting fees and expenses (Note 4) 775 Non-interested trustees' compensation 47 Custodian fees and expenses 581 Registration fees 1,200 Audit 97 Legal 52 Reports to shareholders 511 Miscellaneous 549 Total expenses before reductions 64,930 Expense reductions (Note 5) (987) 63,943 NET INVESTMENT INCOME 163,731 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1, 2 AND 3) Net realized gain (loss) on: Investment securities 510,501 Foreign currency transactions (7,703) Short sales (19,341) 483,457 Change in net unrealized appreciation (depreciation) on: Investment securities (149,120) Short sales 8,638 Assets and liabilities in foreign currencies (14,265) (154,747) NET GAIN (LOSS) 328,710 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 492,441 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEARS ENDED JULY 31, 1994 1993 INCREASE (DECREASE) IN NET ASSETS Operations $ 163,731 $ 138,527 Net investment income Net realized gain (loss) 483,457 175,544 Change in net unrealized appreciation (depreciation) (154,747) 612,689 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 492,441 926,760 FROM OPERATIONS Distributions to shareholders: (165,953) (145,686) From net investment income From net realized gain (247,094) (484,558) TOTAL DISTRIBUTIONS (413,047) (630,244) Share transactions 3,791,186 2,629,566 Net proceeds from sales of shares Reinvestment of distributions 401,972 613,201 Cost of shares redeemed (2,161,673) (1,091,633) Net increase (decrease) in net assets resulting from 2,031,485 2,151,134 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS 2,110,879 2,447,650 NET ASSETS Beginning of period 6,646,321 4,198,671 End of period (including undistributed net investment $ 8,757,200 $ 6,646,321 income of $8,861 and $13,832, respectively) OTHER INFORMATION Shares Sold 170,517 128,243 Issued in reinvestment of distributions 18,230 31,999 Redeemed (97,260) (53,563) Net increase (decrease) 91,487 106,679
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1994 1993 1992 1991 1990 SELECTED PER-SHARE DATA Net asset value, beginning of $ 21.90 $ 21.34 $ 19.92 $ 17.10 $ 18.56 period Income from Investment Operations Net investment income .45 .53 .50 .46 .58 Net realized and unrealized 1.07 3.02 1.94 3.10 (.02) gain (loss) Total from investment 1.52 3.55 2.44 3.56 .56 operations Less Distributions From net investment income (.48) (.59) (.38) (.52) (.75) From net realized gain (.77) (2.40) (.64) (.22) (1.27) Total distributions (1.25) (2.99) (1.02) (.74) (2.02) Net asset value, end of period $ 22.17 $ 21.90 $ 21.34 $ 19.92 $ 17.10 TOTAL RETURN A,B 7.08% 19.10% 12.75% 21.89% 3.22% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 8,757 $ 6,646 $ 4,199 $ 2,686 $ 1,910 (in millions) Ratio of expenses to average .82% .83% .86% .87% .87% net assets Ratio of expenses to average .83% .83% .86% .87% .87% net assets before expense reductions Ratio of net investment income 2.09% 2.67% 2.49% 2.62% 3.43% to average net assets Portfolio turnover rate 92% 87% 221% 215% 108%
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1994 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Growth & Income Portfolio (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange), are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the 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. Effective August 1, 1993, the fund adopted Statement of Position (SOP) 93-4: Foreign Currency Accounting and Financial Statement Presentation for Investment Companies. In accordance with this SOP, reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. Further, as permitted under the SOP, the effects of changes in foreign currency exchange rates on investments in securities are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on investment in securities. INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions, market discount, non-taxable dividends, and losses deferred due to wash sales, futures, and options. 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 may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable gain or income 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. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective August 1, 1993, the fund adopted Statement of Position 93-2: Determi- nation, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the fund changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts as of August 1, 1993 have been reclassified to reflect an increase in paid in capital of $55,647,000, an increase in undistributed net investment income of $832,000 and a decrease in accumulated net realized gain on investments of $56,479,000. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign currency contracts. These contracts involve market risk in excess of the amount reflected in the fund's Statement of Assets and Liabilities. The face or contract amount in U.S. dollars, as reflected in the schedule of investments under the caption "Forward Foreign Currency Contracts," reflects the total exposure the fund has in that particular currency contract. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset, otherwise gain (loss) is recognized on settlement date. 2. OPERATING POLICIES - CONTINUED REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The fund's investment adviser, Fidelity Management & Research Company (FMR), is responsible for determining that the value of these underlying securities remains at least equal to the resale price. SHORT SALES AGAINST THE BOX. The fund may hedge its investments against changes in value by engaging in short sales against the box. In a short sale against the box, the fund sells a borrowed security, while at the same time either owning an identical security or having the right to obtain such a security. By selling short against the box the equity underlying one of its convertible holdings, the fund would seek to offset the effect that a decline in the underlying equity might have on the value of the convertible security. While the short sale is outstanding, the fund will not dispose of the security hedged by the short sale. The fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale and the fund instructs the custodian to maintain in a separate account securities having a value at least equal to the amount of the securities sold short. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $7,495,866,000 and $6,298,359,000, respectively, of which sale of U.S. government and government agency obligations aggregated $212,150,000. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .30% to .52% for the period from August 1, 1993 to October 31, 1993 and .285% to .520% from November 1, 1993 to July 31, 1994. In the event that these rates were lower than the contractual rates in effect during those periods, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .20%. For the period, the management fee was equivalent to an annual rate of .52% of average net assets. The Board of Trustees approved a new group fee rate schedule with rates ranging from .27% to .52%. Effective August 1, 1994, FMR has voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. 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 $7,670,000 on sales of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives fees based on the type, size, number of accounts and the number of transactions made by shareholders. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $3,869,000 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 $987,000 under this arrangement. 6. SECURITY LENDING. The fund loaned securities to certain brokers who paid the fund negotiated lenders' fees. These fees are included in interest income. The fund receives U.S. Treasury obligations and/or cash as collateral against the loaned securities, in an amount at least equal to 102% of the market value of the loaned securities at the inception of each loan. This collateral must be maintained at not less than 100% of the market value of the loaned securities during the period of the loan. At period end, there were no loans outstanding. 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 with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES DOLLAR AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Amli Residential Properties Trust (SBI) $ - $ - $ 167 $ 17,103 Aztar Corp. (a) 3,841 - - 15,949 Carson Pirie Scott & Co. (a) 2,586 - - 22,138 Cephalon, Inc. (a) 927 - - 7,200 Storage Equities, Inc. 897 - 483 19,393 Summit Care Corp. - 753 - - Summit Property Trust (SBI) - - 379 13,404 TNT Freightways Corp. 110 278 444 26,714 TOTALS $ 8,361 $ 1,031 $ 1,473 $ 121,901 (a) Non-income producing REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Growth & Income Portfolio: We have audited the accompanying statement of assets and liabilities of Fidelity Securities Fund: Fidelity Growth & Income Portfolio, including the schedule of portfolio investments, as of July 31, 1994, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 1994 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Securities Fund: Fidelity Growth & Income Portfolio as of July 31, 1994, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts September 2, 1994 DISTRIBUTIONS The Board of Trustees of Fidelity Securities Fund: Fidelity Growth & Income Portfolio voted to pay on September 6, 1994, to shareholders of record at the opening of business on September 2, 1994, a distribution of $0.84 derived from capital gains realized from sales of portfolio securities and a dividend of $0.10 from net investment income. 9.5% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax. 41% of the dividends distributed during the fiscal year qualifies for the dividends received deduction for corporate shareholders. The fund will notify shareholders in January 1995 of these percentages for use in preparing 1994 tax returns. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call -- you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios.(registered trademark) 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 2249 Galiano Street Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. 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Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 1903 East Ninth Street Cleveland, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 1010 Lamar Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 175 East 400 South Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Steven Kaye, Vice President Gary L. French, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer Arthur S. Loring, Secretary Robert H. Morrison, Manager, Security Transactions BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN The Chase Manhattan Bank, N.A. New York, NY FIDELITY GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Fidelity Fifty Growth Company Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (registered trademark) DIVIDEND GROWTH FUND ANNUAL REPORT JULY 31, 1994 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 26 The auditor's opinion. ACCOUNTANTS 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, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: The first half of 1994 was an unsettling time for many investors. After three years of a nearly perfect environment for stock market investing, stock prices generally fell from February through June. Investors disagree about whether this decline represents only a short-term correction or signals the beginning of a longer bear market. One can collect statistics to support either opinion, but of course, nobody knows for sure what will happen to stock prices in the months ahead. We do know, however, that market declines are a normal part of stock market investing. We have historically seen corrections of 10% or more every two years. That's why I thought this might be a good time to review three basic investment principles that have proven helpful to successful stock market investors in every market cycle. First, take a long-term approach when investing in stocks and stock funds. If you can afford to leave your money invested through the market's inevitable ups and downs, you will greatly reduce your vulnerability to any single decline. Over time, stock prices have gone up - and have significantly outperformed other types of investments and stayed ahead of inflation. But in the short-term, because of their volatility, stocks have greater risk. Second, you can further manage risk by diversifying your investments. A stock mutual fund is already diversified, because it invests in many different companies. You can increase your diversification by investing in a number of different stock funds, or in different investment categories, such as bonds. You should also keep money you'll need in the near future in a more stable investment. Finally, it makes good sense to follow a regular investment plan, investing a set amount of money at the same time each month or quarter. That way, you can avoid getting caught up in the excitement of a rapidly-rising market - and won't end up buying all your shares at market highs. This strategy won't assure a profit or protect you from a loss in a declining market, but it should help you lower the average cost of your purchases. For this to be effective, you must continue to buy shares in both up and down markets. If you have questions, please call us at 1-800-544-8888. We would be happy to send you a Fidelity FundMatch kit, which can help you determine the mix of investments that is right for you. You might also find it convenient to set up a regular investment plan using the Fidelity Automatic Account Builder.SM We look forward to hearing from 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1994 PAST 1 LIFE OF YEAR FUND Dividend Growth 9.51% 18.27% S&P 500(registered trademark) 5.16% 9.53% Average Growth Fund 3.91% 8.07% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, or since the fund started on April 27, 1993. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, you would have $1,050. You can compare these figures to the performance of the Standard & Poor's Composite Index of 500 stocks - a common proxy for the U.S. stock market. You can also compare them to the average growth fund, which reflects the performance of 501 growth funds tracked by Lipper Analytical Services. Both benchmarks include reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1994 PAST 1 LIFE OF YEAR FUND Dividend Growth 9.51% 14.21% S&P 500(registered trademark) 5.16% 7.47% Average Growth Fund 3.91% 6.36% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Fidelity Dividend Growth S&P 500 04/27/93 10000.00 10000.00 04/30/93 10150.00 10155.08 05/31/93 10480.00 10427.23 06/30/93 10700.00 10457.47 07/31/93 10800.00 10415.64 08/31/93 11550.00 10810.40 09/30/93 11820.00 10727.16 10/31/93 12080.00 10949.21 11/30/93 11680.00 10845.19 12/31/93 12171.52 10976.42 01/31/94 12493.14 11349.62 02/28/94 12302.18 11042.04 03/31/94 11715.48 10560.61 04/30/94 11786.36 10695.78 05/31/94 11604.10 10871.20 06/30/94 11310.45 10604.85 07/31/94 11826.86 10952.69 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Dividend Growth Fund on April 27, 1993, when the fund started. As the chart shows, by July 31, 1994, the value of your investment would have grown to $11,827 - a 18.27% increase on your initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends reinvested, the same $10,000 investment would have grown to $10,953 - a 9.53% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP After generally falling through much of 1994, U.S. stock prices rebounded in July on the strength of improving corporate earnings. Rising interest rates caused the stock market to stumble from February through June. Stocks largely took their cue from bonds, which fell sharply due to concerns that the strengthening economy might trigger higher inflation. Late in the period, a weakening U.S. dollar put additional downward pressure on stocks. The Standard & Poor's 500 index had a total return of 5.16% for the 12 months ended July 31, 1994, mainly due to gains made in 1993. Cyclical stocks - those whose prices tend to move in tandem with the economy - were among the market leaders. These included such sectors as chemicals, metals and paper. Market laggards included most consumer nondurables - especially retail, beverage and drug companies. In addition, rising interest rates hurt such rate-sensitive sectors as insurance and utilities. Aside from Japanese stocks, which made strong gains due to a strengthening economy and yen, most foreign markets suffered corrections in 1994. However, strong gains in 1993 helped drive the Morgan Stanley EAFE (Europe, Australia, Far East) index to a 14.13% total return for the 12 months ended July 31. The Morgan Stanley Emerging Markets Free Index was up 40.62%, again due to strong performance in 1993. An interview with Fergus Shiel, Portfolio Manager of Fidelity Dividend Growth Fund Q. HOW HAS THE FUND PERFORMED, FERGUS? A. Very well. The fund had a total return of 9.51% for the year ended July 31, 1994, which compares to a 3.91% total return for the average growth fund tracked by Lipper Analytical Services. Q. WHY DID THE FUND DO SO WELL? A. It's difficult for me to speak to the fund's performance before April, when I took over the fund from Abby Johnson, who is now managing Fidelity OTC Portfolio. Abby did a great job last year in a very different investing environment, one in which investing in rapid growth stocks was rewarded. This year's market has rewarded a more conservative investor, and I've put more of the fund in larger, more stable companies which tend to have more predictable earnings. Q. WHY HAVE THE LARGER COMPANIES BEEN A BETTER INVESTMENT IN THE CURRENT ENVIRONMENT? A. It's less likely these companies will tumble in price because they are usually involved in a number of enterprises, and if one section of their business falters there are others that can help stabilize earnings. It has been a very jittery market through the first half of 1994, so I've moved toward these potentially more stable quality stocks. Q. WHAT ARE SOME OF THE STOCKS YOU'VE INVESTED IN? A. Philip Morris is one of the fund's top investments. The stock is selling at a very reasonable price and it looks like the company will increase the dividend in August. I've also invested in two regional telephone companies, Ameritech and Southwestern Bell. Their subscriber bases are growing and they're benefiting from more reasonable regulations. Both show the potential for strong cash flows and earnings growth, which give them the opportunity to increase dividends. Ericsson is the fund's top investment as of July 31, 1994. This Swedish company is one of the world's largest providers of wireless communications technology. Its subscriber and systems markets are both growing. The company has slowed its research and development costs, which should help its earnings. Q. IN FACT, TECHNOLOGY HAS GROWN TO BE THE FUND'S LARGEST SECTOR AT 16.8%. WHERE HAVE YOU FOUND OPPORTUNITIES? A. Although I build the fund stock by stock, many technology companies have excellent prospects for earnings growth, in part because of continued strong demand for personal computers. Two such companies are database software producer Oracle Systems and semiconductor manufacturer Advanced Micro Devices. In addition, the recent correction in this sector has lowered many stock valuations - prices compared to other measures such as earnings - to very attractive levels. Q. WHAT STOCKS HAVE DISAPPOINTED THIS PERIOD? A. Powersoft - a software firm - was one. Management's outlook was less upbeat than stock market expectations, so its stock price corrected sharply. Technology stocks can be sensitive when sales slow down due to saturation or competition. A similar situation occurred with Sybase, another software company where a specific quarter did not meet expectations. However, due to its long-term outlook, the fund still owns shares in Sybase. Custom Chrome - a manufacturer of accessory parts for Harley Davidson motorcycles - had pricing problems and was a disappointment in another sector. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. I think it's going to be a stock picker's market, but there are going to be opportunities to make money and buy cheaply. I'll just have to be vigilant and sell quickly if a stock seems to be going wrong, because the market will probably be unforgiving. At the end of the year there's a tendency for people to get optimistic, so we could see an upswing then. The beauty of a smaller fund like Dividend Growth is that I can more easily reposition it when market conditions change. Q. FERGUS, HOW IS YOUR INVESTING STYLE DIFFERENT FROM THAT OF THE PREVIOUS MANAGER, ABBY JOHNSON? A. That's nearly impossible for me to say, because last year's market and this year's are radically different. However, Abby and I have worked together, visiting companies and covering some of the same industry groups when we were analysts. I would say our approaches are probably more similar than different. FUND FACTS GOAL: to increase the value of the fund's shares by investing mainly in companies that have the potential to increase their dividends or begin paying dividends START DATE: April 27, 1993 SIZE: as of July 31, 1994, more than $72 million MANAGER: Fergus Shiel, since April 1994; manager, Fidelity Select Telecommunications Portfolio, June 1992 - April 1994; Select Broadcast and Media Portfolio, June 1990 - September 1991 and February 1993 - June 1993; Select Consumer Products Portfolio, June 1991 - June 1992; joined Fidelity in 1989 (checkmark) FERGUS SHIEL ON PICKING STOCKS: "I look for a number of things when picking stocks. I look for situations where earnings growth is more rapid than people would expect. I also look for turnarounds, companies that seem to be coming back from hard times. An example is Armco Steel, where management has streamlined operations and sold unprofitable parts of its operation. Most importantly, I look for a strong cash flow, which gives a company the opportunity to pay or increase its dividend, buy up its shares, or make acquisitions." (solid bullet) Many of the fund's holdings have changed, which often happens when a fund undergoes a managerial shift. (solid bullet) The fund had an increase in cash holdings during the period as a result of the management transition. However, as of July 31, 1994, cash was down to 0.8% of the fund. (solid bullet) The fund has the authority to use derivatives, but had no derivative investments as of July 31, 1994. DISTRIBUTIONS 85% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders. The fund will notify shareholders in January 1995 of these percentages for use in preparing 1994 income tax returns. INVESTMENT CHANGES TOP TEN STOCKS AS OF JULY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Ericsson (L.M.) Telephone Co. Class B ADR 3.8 -- Armco, Inc. 3.3 -- Philip Morris Companies, Inc. 3.1 0.2 LCI International, Inc. 2.8 0.2 RJR Nabisco Holdings Corp. 2.6 -- Glenayre Technologies, Inc. 2.3 0.6 Oracle Systems Corp. 2.0 -- Manpower, Inc. 1.9 -- ALC Communications Corp. 1.8 0.1 CDI Corp. 1.7 -- TOP FIVE INDUSTRIES AS OF JULY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE INDUSTRIES 6 MONTHS AGO Technology 16.8 6.9 Utilities 10.3 10.1 Basic Industries 9.5 2.8 Retail & Wholesale 8.1 3.9 Nondurables 7.7 3.5 ASSET ALLOCATION AS OF JULY 31, 1994* AS OF JANUARY 31, 1994** Row: 1, Col: 1, Value: 1.8 Row: 1, Col: 2, Value: 98.2 Row: 1, Col: 1, Value: 5.8 Row: 1, Col: 2, Value: 1.7 Row: 1, Col: 3, Value: 50.0 Row: 1, Col: 4, Value: 42.5 Stocks 99.2% Bonds - Short-term Investments 0.8% FOREIGN INVESTMENTS 12.6% Stocks 92.5% Bonds 1.7% Short-term Investments 5.8% FOREIGN INVESTMENTS 9.0% * ** INVESTMENTS JULY 31, 1994 Showing Percentage of Total Value of Investments COMMON STOCKS - 98.7% SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - 9.5% CHEMICALS & PLASTICS - 2.1% Praxair, Inc. 22,300 $ 501,750 Sterling Chemical, Inc. (a) 40,000 365,000 Witco Corp. 21,300 620,363 1,487,113 IRON & STEEL - 6.5% Armco, Inc. (a) 402,400 2,364,100 Insteel Industries, Inc. 30,000 262,500 Kentucky Electric Steel, Inc. (a) 55,000 666,875 Nucor Corp. 15,000 1,035,000 Steel of West Virginia, Inc. (a) 24,000 294,000 4,622,475 PACKAGING & CONTAINERS - 0.0% Ball Corp. 6 158 PAPER & FOREST PRODUCTS - 0.9% Drypers Corp. (a) 30,000 292,500 Jefferson Smurfit Corp. (a) 20,000 357,500 650,000 TOTAL BASIC INDUSTRIES 6,759,746 CONGLOMERATES - 0.3% GenCorp, Inc. 20,000 252,500 CONSTRUCTION & REAL ESTATE - 2.9% BUILDING MATERIALS - 0.6% York International Corp. 10,000 392,500 ENGINEERING - 2.3% Glenayre Technologies, Inc. (a) 33,300 1,648,350 TOTAL CONSTRUCTION & REAL ESTATE 2,040,850 DURABLES - 1.4% AUTOS, TIRES, & ACCESSORIES - 0.9% TRW, Inc. 9,000 627,750 HOME FURNISHINGS - 0.4% Haverty Furniture Companies, Inc. 23,000 287,500 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED TEXTILES & APPAREL - 0.1% Dominion Textile, Inc. (a) 18,000 $ 90,893 TOTAL DURABLES 1,006,143 ENERGY - 6.5% COAL - 0.4% Pittston Company Services Group 10,000 300,000 ENERGY SERVICES - 1.9% Baker Hughes, Inc. 5,000 105,625 Computalog Ltd. (a) 56,000 439,315 Enserv Corp. (a) 45,800 446,023 Halliburton Co. 5,000 170,000 Rowan Companies, Inc. (a) 20,000 165,000 1,325,963 OIL & GAS - 4.2% Ashland Oil, Inc. 10,000 357,500 Beau Canada Exploration 426,900 714,451 Canadian National Resources Ltd. (a)(b) 3,000 42,471 Cogas Energy Corp. Ltd. (a) 121,500 438,232 Crown Central Petroleum Corp. Class A. (a) 10,000 173,750 Richland Petroleum Corp. Class A. (a) 134,100 785,979 Rio Alto Exploration Ltd. (a)(b) 2,000 12,624 Rio Alto Exploration Ltd. (a) 900 5,681 Ulster Petroleums Ltd. (a) 160,000 478,990 3,009,678 TOTAL ENERGY 4,635,641 FINANCE - 6.2% BANKS - 0.6% Bank South Corp. 20,000 397,500 CREDIT & OTHER FINANCE - 1.2% American Express Co. 33,000 874,500 FEDERAL SPONSORED CREDIT - 2.0% Federal Home Loan Mortgage Corporation 14,180 843,710 Federal National Mortgage Association 7,000 607,250 1,450,960 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED INSURANCE - 0.8% Allstate Corp. 22,600 $ 565,000 SECURITIES INDUSTRY - 1.6% Merrill Lynch & Co., Inc. 30,000 1,098,750 TOTAL FINANCE 4,386,710 HEALTH - 5.0% DRUGS & PHARMACEUTICALS - 0.7% American Cyanamid Co. 8,000 485,000 MEDICAL EQUIPMENT & SUPPLIES - 4.3% ADAC Laboratories 15,000 95,625 Becton, Dickinson & Co. 9,000 379,125 Circon Corp. (a) 15,000 142,500 Datascope Corp. (a) 10,000 160,000 Medtronic, Inc. 4,000 356,500 Mentor Corp. (a) 55,000 904,063 Moore Medical Corp. 20,300 309,575 Namic USA Corp. (a) 2,500 21,875 Nellcor, Inc. (a) 3,200 86,400 Protocol Systems, Inc. (a) 1,300 9,425 St. Jude Medical, Inc. 10,000 317,500 Utah Medical Products, Inc. 32,100 260,813 3,043,401 TOTAL HEALTH 3,528,401 INDUSTRIAL MACHINERY & EQUIPMENT - 6.4% ELECTRICAL EQUIPMENT - 2.7% California Amplifier, Inc. (a) 170,100 701,663 Itel Corp. (a) 25,400 860,425 Philips NV 13,000 401,375 1,963,463 INDUSTRIAL MACHINERY & EQUIPMENT - 3.7% Bearings, Inc. 10,000 317,500 CMI Corp. Oklahoma Class A 60,000 427,500 Imo Industries, Inc. (a) 44,800 532,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED Nokia AB Free shares 2,500 $ 240,929 Nokia Corp. sponsored ADR. (a) 15,600 766,350 Park-Ohio Industries, Inc. (a) 24,600 344,400 2,628,679 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 4,592,142 MEDIA & LEISURE - 5.7% BROADCASTING - 0.3% Multimedia, Inc. (a) 8,000 242,000 LEISURE DURABLES & TOYS - 2.8% Brunswick Corp. 26,000 620,750 Coleman, Inc. (a) 25,000 821,875 Outboard Marine Corp. 25,000 562,500 2,005,125 PUBLISHING - 0.6% Lee Enterprises, Inc. 12,000 414,000 RESTAURANTS - 2.0% Brinker International, Inc. (a) 5,900 132,013 Consolidated Products, Inc. (a) 40,000 395,000 Ground Round Restaurants, Inc. (a) 140,000 892,500 1,419,513 TOTAL MEDIA & LEISURE 4,080,638 NONDURABLES - 7.7% FOODS - 1.0% Chiquita Brands International, Inc. 18,800 232,650 Michael Foods, Inc. 40,000 515,000 747,650 TOBACCO - 6.7% Philip Morris Companies, Inc. 40,000 2,200,000 RJR Nabisco Holdings Corp. (a) 300,000 1,837,500 UST, Inc. 25,000 721,875 4,759,375 TOTAL NONDURABLES 5,507,025 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - 8.1% APPAREL STORES - 1.6% Burlington Coat Factory Warehouse Corp. (a) 18,100 $ 393,675 Filene's Basement Corp. (a) 20,000 185,000 Gymboree Corp. (a) 4,600 188,600 Harolds Stores, Inc. (a) 31,800 393,525 1,160,800 GROCERY STORES - 0.9% Stop & Shop Companies, Inc. (a) 20,000 510,000 Super Rite Corp. (a) 10,000 122,500 632,500 RETAIL & WHOLESALE, MISC - 5.6% Best Products, Inc. (a) 10,000 76,250 Circuit City Stores, Inc. 22,600 494,375 Finish Line, Inc. Class A. (a) 25,000 218,750 Gander Mountain Inc. (a) 32,000 392,000 Lillian Vernon Corp. 65,000 1,121,250 Lowe's Companies, Inc. 14,000 504,000 Micro Warehouse, Inc. 31,400 690,800 Rex Stores Corp. (a) 30,000 498,750 3,996,175 TOTAL RETAIL & WHOLESALE 5,789,475 SERVICES - 6.4% ADVERTISING - 2.3% ADVO-Systems, Inc. 44,700 748,725 Omnicom Group, Inc. 9,200 468,050 WPP Group PLC ADR 120,000 397,500 1,614,275 SERVICES - 4.1% CDI Corp. (a) 90,000 1,226,250 Children's Discovery Center A.(a) 30,000 412,500 Manpower, Inc. 55,000 1,320,000 2,958,750 TOTAL SERVICES 4,573,025 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - 16.8% COMMUNICATIONS EQUIPMENT - 5.0% Aspect Telecommunications Corp. (a) 27,600 $ 821,100 Ericsson (L.M.) Telephone Co. Class B ADR 50,000 2,725,000 3,546,100 COMPUTER SERVICES & SOFTWARE - 7.8% Compuware Corp. (a) 8,900 350,438 EIS International, Inc. (a) 75,000 740,625 LEGENT Corp. (a) 16,000 380,000 Oracle Systems Corp. (a) 37,000 1,415,250 Peoplesoft, Inc. (a) 24,000 834,000 Platinum Technology, Inc. (a) 40,100 621,550 Sybase, Inc. (a) 14,000 551,250 Walker Interactive Systems, Inc. (a) 49,200 344,400 Wonderware Corp. 21,100 311,225 5,548,738 ELECTRONIC INSTRUMENTS - 0.9% Lam Research Corp. (a) 6,000 169,500 Novellus System, Inc. (a) 6,000 220,500 Varian Associates, Inc. 7,000 252,875 642,875 ELECTRONICS - 3.1% Advanced Micro Devices, Inc. (a) 19,800 534,600 Intel Corp. 5,000 296,250 LSI Logic Corp. (a) 12,900 349,913 Micron Technology, Inc. 20,000 747,500 Motorola, Inc. 5,000 265,000 2,193,263 TOTAL TECHNOLOGY 11,930,976 TRANSPORTATION - 5.5% AIR TRANSPORTATION - 2.6% Atlantic Southeast Airlines, Inc. 7,100 205,013 Comair Holdings, Inc. 8,600 201,025 Delta Air Lines, Inc. 10,000 481,250 KLM Royal Dutch Airlines. (a) 20,500 635,500 KLM Royal Dutch Airlines Ord. (a) 3,900 120,402 SkyWest, Inc. 7,000 186,813 1,830,003 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - CONTINUED TRUCKING & FREIGHT - 2.9% Carolina Freight Corp. 105,000 $ 971,250 Landair Services, Inc. (a) 9,000 171,000 Landstar System, Inc. (a) 30,000 945,000 2,087,250 TOTAL TRANSPORTATION 3,917,253 UTILITIES - 10.3% CELLULAR - 0.3% LIN Broadcasting Corp. 2,000 250,000 TELEPHONE SERVICES - 10.0% ALC Communications Corp. (a) 40,000 1,295,000 Ameritech Corp. 17,100 701,100 BellSouth Corp. 8,000 500,000 Comsat Corp., Series 1 15,000 391,875 LCI International, Inc. (a) 110,000 2,007,500 Pacific Telesis Group 15,000 491,250 Rochester Telephone Corp. 42,400 1,022,900 Southwestern Bell Corp. 12,000 504,000 Sprint Corporation 5,000 183,125 Telephone & Data Systems, Inc. 48 1,956 7,098,706 TOTAL UTILITIES 7,348,706 TOTAL COMMON STOCKS (Cost $67,462,384) 70,349,231 NONCONVERTIBLE PREFERRED STOCKS - 0.5% INDUSTRIAL MACHINERY & EQUIPMENT - 0.5% Nokia (Cost $332,957) 3,600 346,933 REPURCHASE AGREEMENTS - 0.8% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements, (U.S. Treasury obligations), in a joint trading account at 4.23% dated 7/29/94 due 8/1/94 $ 551,194 $ 551,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $68,346,341) $ 71,247,164 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $55,095 or 0.1% of net assets. OTHER INFORMATION Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 87.4% Canada 4.8 Sweden 3.8 Finland 1.9 Netherlands 1.6 Others (individually less than 1%) 0.5 TOTAL 100.0% INCOME TAX INFORMATION At July 31, 1994, the aggregate cost of investment securities for income tax purposes was $68,879,642. Net unrealized appreciation aggregated $2,367,522, of which $4,343,041 related to appreciated investment securities and $1,975,519 related to depreciated investment securities. At July 31, 1994, the fund had a capital loss carryover of approximately $1,099,000 which will expire on July 31, 2002. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994 ASSETS Investment in securities, at value (including repurchase $ 71,247,164 agreements of $551,000) (cost $68,346,341) (Notes 1 and 2) - See accompanying schedule Cash 848 Receivable for investments sold 3,214,724 Receivable for fund shares sold 998,273 Dividends receivable 28,071 Interest receivable 514 TOTAL ASSETS 75,489,594 LIABILITIES Payable for investments purchased $ 2,612,982 Payable for fund shares redeemed 387,559 Accrued management fee 45,707 Other payables and accrued expenses 88,089 TOTAL LIABILITIES 3,134,337 NET ASSETS $ 72,355,257 Net Assets consist of (Note 1): Paid in capital $ 71,067,668 Undistributed net investment income 8,641 Distributions in excess of net realized gain (loss) on (1,621,875) investments and foreign currency transactions Net unrealized appreciation (depreciation) on 2,900,823 investments NET ASSETS, for 6,195,979 shares outstanding $ 72,355,257 NET ASSET VALUE, offering price and redemption price per $11.68 share ($72,355,257 (divided by) 6,195,979 shares)
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1994 INVESTMENT INCOME $ 868,809 Dividends Interest 265,184 TOTAL INCOME 1,133,993 EXPENSES Management fee (Note 4) 462,784 Basic fee Performance adjustment 31,912 Transfer agent fees (Note 4) 336,727 Accounting fees and expenses (Note 4) 49,300 Non-interested trustees' compensation 413 Custodian fees and expenses 57,554 Registration fees 68,707 Audit 25,438 Legal 339 Interest (Note 6) 2,541 Reports to shareholders 5,000 Miscellaneous 17,155 Total expenses before reductions 1,057,870 Expense reductions (Note 5) (20,476) 1,037,394 NET INVESTMENT INCOME 96,599 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1, 2 AND 3) Net realized gain (loss) on: Investment securities (287,624) Foreign currency transactions (9,106) (296,730) Change in net unrealized appreciation (depreciation) on 2,287,585 investment securities NET GAIN (LOSS) 1,990,855 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 2,087,454 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 27,1993 JULY 31, 1994 (COMMENCEMENT OF OPERATIONS) JULY 31, 1993 INCREASE (DECREASE) IN NET ASSETS Operations $ 96,599 $ (17,672) Net investment income (loss) Net realized gain (loss) (296,730) 1,020 Change in net unrealized appreciation (depreciation) 2,287,585 613,238 NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,087,454 596,586 FROM OPERATIONS Distributions to shareholders (74,046) - From net investment income In excess of net realized gain (1,012,776) - TOTAL DISTRIBUTIONS (1,086,822) - Share transactions 192,121,803 20,226,698 Net proceeds from sales of shares Reinvestment of distributions 1,069,824 - Cost of shares redeemed (140,293,684) (2,366,602) Net increase (decrease) in net assets resulting from 52,897,943 17,860,096 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS 53,898,575 18,456,682 NET ASSETS Beginning of period 18,456,682 - End of period (including under (over) distribution of net $ 72,355,257 $ 18,456,682 investment income of $8,641 and $(17,672), respectively) OTHER INFORMATION Shares Sold 16,269,312 1,934,498 Issued in reinvestment of distributions 89,434 - Redeemed (11,871,410) (225,855) Net increase (decrease) 4,487,336 1,708,643
FINANCIAL HIGHLIGHTS
YEAR ENDED APRIL 27, 1993 JULY 31, 1994 (COMMENCEMEN T OF OPERATIONS) JULY 31, 1993 SELECTED PER-SHARE DATA Net asset value, beginning of period $ 10.80 $ 10.00 Income from Investment Operations Net investment income .02 (.01) Net realized and unrealized gain (loss) 1.01 .81 Total from investment operations 1.03 .80 Less Distributions From net investment income (.01) - In excess of net realized gain (.14) - Total distributions (.15) - Net asset value, end of period $ 11.68 $ 10.80 TOTAL RETURN B, C 9.51% 8.00% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 72,355 $ 18,457 Ratio of expenses to average net assets 1.40% 2.50% A, D Ratio of expenses to average net assets before expense 1.43% 4.18% A, reductions D Ratio of net investment income to average net assets .13% (.73)% A Portfolio turnover rate 291% 90% A
A ANNUALIZED B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS). D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1994 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Dividend Growth Fund (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange), are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the 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. Effective August 1, 1993, the fund adopted Statement of Position (SOP) 93-4: Foreign Currency Accounting and Financial Statement Presentation for Investment Companies. In accordance with this SOP, reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts , disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. Further, as permitted under the SOP, the effects of changes in foreign currency exchange rates on investments in securities are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on investment in 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 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 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED securities where the ex-dividend date may have passed, are recorded as soon as the fund is informed of the ex-dividend date. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions, 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 may include temporary book and tax basis differences which will reverse in a subsequent period. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign currency contracts. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset, otherwise gain (loss) is recognized on settlement date. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The fund's investment adviser, Fidelity Management & Research Company (FMR), is responsible for determining that the value of these underlying securities remains at least equal to the resale price. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other affiliated entities of FMR, may transfer uninvested cash 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $249,183,406 and $197,894,507 respectively, of which U.S. government and government agency obligations aggregated $174,805 and $170,735, 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 .30% to .52% for the period from August 1, 1993 to October 31, 1993 and .285% to .520% for the period from November 1, 1993 to July 31, 1994. In the event that these rates were lower than the contractual rates in effect during those periods, FMR voluntarily implemented the above rates as they resulted in the same or a lower management fee. The annual individual fund fee rate is .30%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus).20%) based on the fund's investment perform-ance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annual rate of .67% of average net assets after the performance adjustment. The Board of Trustees has approved a new group fee rate schedule with rates ranging from .27% to .52%. Effective August 1, 1994, FMR voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives fees based on the type, size, number of accounts and the number of transactions made by shareholders. FSC pays for typesetting, printing and mail- ing of all shareholder reports, except proxy statements. BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $151,676 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 $20,476 under this arrangement. 6. BANK BORROWINGS. The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, the fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $3,237,000 and $2,532,600, respectively. The weighted average interest rate was 3.625%.Interest expense includes $2,541 paid under the bank borrowing program. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Dividend Growth Fund: We have audited the accompanying statement of assets and liabilities of Fidelity Securities Fund: Fidelity Dividend Growth Fund, including the schedule of portfolio investments, as of July 31, 1994, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year then ended and for the period April 27, 1993(commencement of operations) to July 31, 1993. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 1994 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Securities Fund: Fidelity Dividend Growth Fund as of July 31, 1994, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year in the period then ended and for the period April 27, 1993 (commencement of operations) to July 31, 1993, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts September 2, 1994 TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call -- you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios.(registered trademark) 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 2249 Galiano Street Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 1 West Pennsylvania Ave. Towson, MD 7401 Wisconsin Avenue Bethesda, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 101 Cambridge Street Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 1903 East Ninth Street Cleveland, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 1010 Lamar Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 175 East 400 South Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Gary L. French, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer Arthur S. Loring, Secretary Robert H. Morrison, Manager, Security Transactions BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Fidelity Fifty Growth Company Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (registered trademark) OTC PORTFOLIO ANNUAL REPORT JULY 31, 1994 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 24 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 28 Notes to the financial statements. REPORT OF INDEPENDENT 33 The auditor's opinion. ACCOUNTANTS 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, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: The first half of 1994 was an unsettling time for many investors. After three years of a nearly perfect environment for stock market investing, stock prices generally fell from February through June. Investors disagree about whether this decline represents only a short-term correction or signals the beginning of a longer bear market. One can collect statistics to support either opinion, but of course, nobody knows for sure what will happen to stock prices in the months ahead. We do know, however, that market declines are a normal part of stock market investing. We have historically seen corrections of 10% or more every two years. That's why I thought this might be a good time to review three basic investment principles that have proven helpful to successful stock market investors in every market cycle. First, take a long-term approach when investing in stocks and stock funds. If you can afford to leave your money invested through the market's inevitable ups and downs, you will greatly reduce your vulnerability to any single decline. Over time, stock prices have gone up - and have significantly outperformed other types of investments and stayed ahead of inflation. But in the short-term, because of their volatility, stocks have greater risk. Second, you can further manage risk by diversifying your investments. A stock mutual fund is already diversified, because it invests in many different companies. You can increase your diversification by investing in a number of different stock funds, or in different investment categories, such as bonds. You should also keep money you'll need in the near future in a more stable investment. Finally, it makes good sense to follow a regular investment plan, investing a set amount of money at the same time each month or quarter. That way, you can avoid getting caught up in the excitement of a rapidly-rising market - and won't end up buying all your shares at market highs. This strategy won't assure a profit or protect you from a loss in a declining market, but it should help you lower the average cost of your purchases. For this to be effective, you must continue to buy shares in both up and down markets. If you have questions, please call us at 1-800-544-8888. We would be happy to send you a Fidelity FundMatch kit, which can help you determine the mix of investments that is right for you. You might also find it convenient to set up a regular investment plan using the Fidelity Automatic Account Builder.SM We look forward to hearing from 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND OTC -0.36% 69.40% 402.33% OTC (incl. 3% sales charge) -3.35% 64.31% 387.26% NASDAQ 2.48% 59.12% 193.47% Average Mid-Cap Fund 3.33% 72.43% 243.26% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 31, 1984. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, you would have $1,050. You can compare these figures to the performance of the NASDAQ Composite Index - - a common proxy for over-the-counter stocks. You can also compare them to the average mid-cap fund, which reflects the performance of 79 mid-cap funds tracked by Lipper Analytical Services. Unlike most other funds in this category, this fund invests in large companies as well as small ones. Both benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND OTC -0.36% 11.12% 18.33% OTC (incl. 3% sales charge) -3.35% 10.44% 17.96% NASDAQ 2.48% 9.74% 11.88% Average Mid-Cap Fund 3.33% 11.22% 12.74% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER 10 YEARS Total MonthEnd Value 31-Dec-84 9700.00 Jan-85 11546.67 Feb-85 12618.93 Mar-85 12797.64 Apr-85 12926.71 May-85 13800.40 Jun-85 14048.61 Jul-85 14654.24 Aug-85 14763.45 Sep-85 13780.55 Oct-85 14622.58 Nov-85 15546.76 Dec-85 16357.99 Jan-86 17518.35 Feb-86 18791.66 Mar-86 19736.38 Apr-86 20177.93 May-86 20670.83 Jun-86 20845.40 Jul-86 19048.38 Aug-86 19993.10 Sep-86 17949.63 Oct-86 18830.55 Nov-86 18542.89 Dec-86 18222.04 Jan-87 20467.99 Feb-87 22658.62 Mar-87 22603.30 Apr-87 22348.83 May-87 22547.98 Jun-87 23001.59 Jul-87 24107.97 Aug-87 25236.48 Sep-87 25081.58 Oct-87 17525.02 Nov-87 16462.90 Dec-87 18512.98 Jan-88 19170.54 Feb-88 20447.74 Mar-88 20915.62 Apr-88 21547.89 May-88 21358.21 Jun-88 22774.51 Jul-88 22698.63 Aug-88 22154.88 Sep-88 23002.12 Oct-88 22989.48 Nov-88 22243.40 Dec-88 22744.01 Jan-89 24210.53 Feb-89 24146.21 Mar-89 25201.08 Apr-89 26436.05 May-89 27619.56 Jun-89 27555.24 Jul-89 28764.48 Aug-89 30050.91 Sep-89 30222.48 Oct-89 29203.45 Nov-89 29471.61 Dec-89 29656.45 Jan-90 27550.75 Feb-90 28316.46 Mar-90 29391.39 Apr-90 28537.34 May-90 30407.43 Jun-90 30466.33 Jul-90 30068.75 Aug-90 27477.13 Sep-90 25964.93 Oct-90 25417.34 Nov-90 27181.80 Dec-90 28247.41 Jan-91 30471.86 Feb-91 32833.42 Mar-91 34676.97 Apr-91 34616.03 May-91 36307.22 Jun-91 34555.08 Jul-91 36992.83 Aug-91 38943.03 Sep-91 38600.80 Oct-91 40279.09 Nov-91 38374.87 Dec-91 42133.68 Jan-92 43953.01 Feb-92 44038.02 Mar-92 42626.77 Apr-92 41368.54 May-92 41963.65 Jun-92 41045.48 Jul-92 41912.64 Aug-92 40875.45 Sep-92 42137.04 Oct-92 43707.25 Nov-92 46792.26 Dec-92 48428.32 Jan-93 48749.29 Feb-93 46842.37 Mar-93 48466.08 Apr-93 47050.05 May-93 48315.04 Jun-93 48371.68 Jul-93 48900.33 Aug-93 49806.59 Sep-93 51175.43 Oct-93 51850.40 Nov-93 50480.00 Dec-93 52464.08 Jan-94 53876.75 Feb-94 53311.68 Mar-94 51181.82 Apr-94 49769.16 May-94 49508.36 Jun-94 47682.77 Jul-94 48725.96 Total MonthEnd Value 31-Dec-84 9700.00 Jan-85 11546.67 Feb-85 12618.93 Mar-85 12797.64 Apr-85 12926.71 May-85 13800.40 Jun-85 14048.61 Jul-85 14654.24 Aug-85 14763.45 Sep-85 13780.55 Oct-85 14622.58 Nov-85 15546.76 Dec-85 16357.99 Jan-86 17518.35 Feb-86 18791.66 Mar-86 19736.38 Apr-86 20177.93 May-86 20670.83 Jun-86 20845.40 Jul-86 19048.38 Aug-86 19993.10 Sep-86 17949.63 Oct-86 18830.55 Nov-86 18542.89 Dec-86 18222.04 Jan-87 20467.99 Feb-87 22658.62 Mar-87 22603.30 Apr-87 22348.83 May-87 22547.98 Jun-87 23001.59 Jul-87 24107.97 Aug-87 25236.48 Sep-87 25081.58 Oct-87 17525.02 Nov-87 16462.90 Dec-87 18512.98 Jan-88 19170.54 Feb-88 20447.74 Mar-88 20915.62 Apr-88 21547.89 May-88 21358.21 Jun-88 22774.51 Jul-88 22698.63 Aug-88 22154.88 Sep-88 23002.12 Oct-88 22989.48 Nov-88 22243.40 Dec-88 22744.01 Jan-89 24210.53 Feb-89 24146.21 Mar-89 25201.08 Apr-89 26436.05 May-89 27619.56 Jun-89 27555.24 Jul-89 28764.48 Aug-89 30050.91 Sep-89 30222.48 Oct-89 29203.45 Nov-89 29471.61 Dec-89 29656.45 Jan-90 27550.75 Feb-90 28316.46 Mar-90 29391.39 Apr-90 28537.34 May-90 30407.43 Jun-90 30466.33 Jul-90 30068.75 Aug-90 27477.13 Sep-90 25964.93 Oct-90 25417.34 Nov-90 27181.80 Dec-90 28247.41 Jan-91 30471.86 Feb-91 32833.42 Mar-91 34676.97 Apr-91 34616.03 May-91 36307.22 Jun-91 34555.08 Jul-91 36992.83 Aug-91 38943.03 Sep-91 38600.80 Oct-91 40279.09 Nov-91 38374.87 Dec-91 42133.68 Jan-92 43953.01 Feb-92 44038.02 Mar-92 42626.77 Apr-92 41368.54 May-92 41963.65 Jun-92 41045.48 Jul-92 41912.64 Aug-92 40875.45 Sep-92 42137.04 Oct-92 43707.25 Nov-92 46792.26 Dec-92 48428.32 Jan-93 48749.29 Feb-93 46842.37 Mar-93 48466.08 Apr-93 47050.05 May-93 48315.04 Jun-93 48371.68 Jul-93 48900.33 Aug-93 49806.59 Sep-93 51175.43 Oct-93 51850.40 Nov-93 50480.00 Dec-93 52464.08 Jan-94 53876.75 Feb-94 53311.68 Mar-94 51181.82 Apr-94 49769.16 May-94 49508.36 Jun-94 47682.77 Jul-94 48725.96 $10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity OTC Portfolio on December 31, 1984, when the fund began, and paid a 3% sales charge. As the chart shows, by July 31, 1994, the value of your investment would have grown to $48,726 - a 387.26% increase on your initial investment. For comparison, look at how the NASDAQ did over the same period. The same $10,000 investment would have grown to $29,347 - a 193.47% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP After generally falling through much of 1994, U.S. stock prices rebounded in July on the strength of improving corporate earnings. Rising interest rates caused the stock market to stumble from February through June. Stocks largely took their cue from bonds, which fell sharply due to concerns that the strengthening economy might trigger higher inflation. Late in the period, a weakening U.S. dollar put additional downward pressure on stocks. The Standard & Poor's 500 index had a total return of 5.16% for the 12 months ended July 31, 1994, mainly due to gains made in 1993. Cyclical stocks - those whose prices tend to move in tandem with the economy - were among the market leaders. These included such sectors as chemicals, metals and paper. Market laggards included most consumer nondurables - especially retail, beverage and drug companies. In addition, rising interest rates hurt such rate-sensitive sectors as insurance and utilities. Aside from Japanese stocks, which made strong gains due to a strengthening economy and yen, most foreign markets suffered corrections in 1994. However, strong gains in 1993 helped drive the Morgan Stanley EAFE (Europe, Australia, Far East) index to a 14.13% total return for the 12 months ended July 31. The Morgan Stanley Emerging Markets Free Index was up 40.62%, again due to strong performance in 1993. An interview with Abigail Johnson, Portfolio Manager of Fidelity OTC Portfolio Q. ABBY, HOW DID THE FUND DO? A. After a successful run in 1993, small stocks have mostly suffered in 1994. The fund had a total return of -0.36% for the 12 months ended July 31, 1994. That trailed the NASDAQ Composite Index, which returned 2.48% during the same period. Q. GRANTED YOU'VE ONLY BEEN MANAGING THE FUND SINCE MID-APRIL, BUT WHY DID IT TRAIL THE INDEX? A. In late 1993 and early 1994, the fund under-performed the index for several reasons. The fund emphasized investments in the financial, health care and transportation industries, all of which had relatively weak performance. In addition, the fund was under-weighted in the technology sector, as compared to the index, which did well during that period. Over the past few months, the fund's performance has improved relative to the index, although it has continued to lag. Broadly speaking, when interest rates rose and stocks corrected earlier this year, those of smaller, fast-growing companies were hit harder than larger companies. Many investors fled to the relative safety of blue-chip stocks when they weren't selling stock investments altogether. Also, the past few months have been a time of transition for the fund. I've been making many changes, and I'm just now nearing the point at which I think the fund is positioned for better performance. Q. WHAT HAS BEEN YOUR STRATEGY? A. First, I've increased the fund's investment in technology stocks from 12.0% on January 31 to 23.7% on July 31. These companies are the heart and soul of the over-the-counter market. Many are capitalizing on the trend in American business toward improving productivity through increased spending on technology, and I want the fund to be there. In fact, I quickly moved two of the biggest names in the NASDAQ index - Intel and Microsoft - right to the top of the list of the fund's largest investments. Intel is the world's leading producer of semiconductors, and I'm confident about the personal computer market's acceptance of its new product, the Pentium. While Intel's stock has sputtered lately, Microsoft has boosted the fund's performance. The company has very high profit margins, and is launching an exciting new product line next year. Q. CONVERSELY, THE FUND'S STAKE IN HEALTH CARE HAS FALLEN FROM 15.6% TO 7.7% OVER THE PAST SIX MONTHS. WHAT'S THE STORY THERE? A. As with technology, I've tried to make the size of the fund's health care investment more closely reflect that of the index. As a quick aside, I'm allowed to invest up to 35% of the fund in non-OTC, or "listed" stocks - - those traded on other U.S. or foreign exchanges. However, I don't see much relative advantage to keeping more than about a 10% stake in listed stocks right now. In addition, I want the fund to mirror more closely the make-up of the OTC market going forward. When I began managing the fund, it had a pretty large investment in listed stocks - many of which were in the health care sector - and selling them reduced the fund's overall health care investment. Of the health care stocks the fund now owns, I've tried to steer toward companies that might be least impacted by potential reform. I believe that these include smaller companies that manufacture medical and other technological products. If their products are better and cheaper than anything else on the market, these companies should do well regardless of reform. Beyond these stocks, U.S. Healthcare - a rapidly growing health maintenance organization (HMO) - was the fund's largest health care investment at the end of July. Q. YOU MENTIONED LIMITING NON-OTC STOCKS. WHAT TYPES OF THESE STOCKS WILL THE FUND INVEST IN? A. When the fund invests in listed stocks, I believe they should be names that retain the spirit of the over-the-counter market. By this, I mean growth-oriented companies that would generally fall into some of the OTC market's larger sectors. Motorola - one of the fund's top 10 investments on July 31 - is a good example. The company is experiencing exciting growth in the semiconductor and telecommunications industries and has many of the same characteristics as the OTC market's technology stocks. In addition, I'll keep my eyes open for opportunities in foreign stocks, although I don't expect to invest very heavily overseas. Conversely, listed stocks I'll probably stay away from include those of drug companies, utilities and large conglomerates, unless they appear extremely compelling compared to opportunities in the OTC market. Again, I want the fund's listed stocks to mirror the spirit of the OTC market, and currently these industries are not traded over-the-counter. Q. WHAT OTHER TRAITS WILL THE FUND REFLECT WHEN YOU'RE FINISHED RESTRUCTURING? A. I'm working to increase the fund's liquidity - its ability to trade in and out of stocks in a reasonable period. I plan to do this by more heavily emphasizing mid- to large-sized OTC stocks - especially among the fund's top investments - and diversifying bets among the smallest companies. In addition, I've already begun increasing the number of stocks in the fund. Every year we hear about the stock of a fast-growing OTC company that catches fire and quickly shoots upward. I always want the fund to own that stock, and I think casting a wider net increases my chances. Now I realize that this strategy also increases the likelihood of owning some mediocre stocks, but I feel confident that our research and analysis capabilities will help limit the disappointments. Q. SPEAKING OF DISAPPOINTMENTS, WHAT WERE THE BIGGEST RECENTLY? A. Much of the technology sector suffered a correction over the past few months and the fund felt the effects. This is not unusual; the technology sector is historically volatile. The trigger came when computer networking company Cisco Systems reported first quarter earnings that - although strong - fell below analysts' expectations. Sybase - a database software company - also corrected hard recently. In fact, the prices of several technology stocks fell despite excellent earnings growth, and I think that it may be just a matter of time until prices more accurately reflect the strong earnings potential of these companies. In addition, there were a few unrelated stocks that hurt performance. Zebra Technologies, which makes the machines on which those little bar code stickers are printed, suffered from delays in new products. Also, Snapple Beverage's stock fell on investor concerns about future earnings growth. Q. LET'S TALK ABOUT THE FUTURE. WHAT'S ON THE HORIZON? A. Over the past year, the strengthening economy has caused investors to favor cyclical stocks, those whose prices tend to move in step with the economy, over growth stocks - companies with fast-growing earnings. I think as the economic expansion slowed a bit, the pendulum gradually started to swing back toward growth stocks, which is a good sign for the fund. But interest rates are a big variable. If rates can stabilize and the economy remains reasonably strong, I think investors will favor companies that are taking steps internally to produce strong earnings growth over companies that rely more heavily on a strengthening economy to help them out. Hopefully, I can pinpoint those companies that are poised for growth before the rest of the market. FUND FACTS GOAL: to increase the value of the fund's shares over the long term by investing mainly in stocks traded on the over-the-counter market START DATE: December 31, 1984 SIZE: as of July 31, 1994, more than $1.2 billion MANAGER: Abigail Johnson, since April 1994; manager Fidelity Dividend Growth Fund, April 1993 - April 1994; Fidelity's Select Developing Communications Portfolio, June 1991 - February 1993; Select Telecommunications Portfolio, September 1991 - May 1992; Select Automation & Machinery, Capital Goods, and Industrial Technology Portfolios, October 1988 - July 1992; joined Fidelity in 1988 (checkmark) ABIGAIL JOHNSON ON HER INVESTING STYLE: "I usually look for stocks whose earnings are growing faster than their valuations (prices relative to earnings) suggest they are. I'm biased toward companies with good cash flow and solid balance sheets. I'll investigate turnaround stories, but will lean more toward stories that document good, solid growth. "I plan to spend a lot of time analyzing the biggest names in the OTC market - the Intels and the Microsofts. These are often stocks of more established companies with solid track records of earnings growth. In addition, they trade frequently, which offers the fund liquidity. When there are opportunities in that group, I'll jump quickly. I don't want any of NASDAQ's high-profile stocks to make significant moves without my being there." (solid bullet) Finance was the fund's second largest sector investment on July 31. One of the fund's top 10 investments - - Fifth Third Bancorp - has a growing financial processing operation and a very small lending volume. This usually helps its earnings remain less sensitive to changes in interest rates. (solid bullet) The fund has the authority to use derivative instruments such as forward foreign currency contracts and futures, but hasn't made much use of them. On July 31, the fund had no significant investments in derivatives. INVESTMENT CHANGES TOP TEN STOCKS AS OF JULY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Intel Corp. 3.9 2.6 Microsoft Corp. 2.7 1.9 U.S. Healthcare, Inc. 2.1 2.8 Oracle Systems Corp. 1.9 - Tele-Communications, Inc. Class A 1.6 2.0 Fifth Third Bancorp 1.2 1.1 Amgen, Inc. 1.1 1.2 State Street Boston Corp. 1.0 1.6 Wisconsin Central Transportation 0.9 0.9 Corp. Motorola, Inc. 0.9 - TOP FIVE INDUSTRIES AS OF JULY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE INDUSTRIES 6 MONTHS AGO Technology 23.7 12.0 Finance 12.6 10.3 Health 7.7 15.6 Media & Leisure 5.5 11.1 Utilities 4.4 1.1 ASSET ALLOCATION AS OF JULY 31, 1994* AS OF JANUARY 31, 1994** Row: 1, Col: 1, Value: 23.9 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 36.1 Row: 1, Col: 4, Value: 40.0 Row: 1, Col: 1, Value: 21.0 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 29.0 Row: 1, Col: 4, Value: 50.0 Stocks 76.1% Short-term Investments 23.9% FOREIGN INVESTMENTS 4.4% Stocks 79.0% Short-term Investments 21.0% FOREIGN INVESTMENTS 9.0% * ** INVESTMENTS JULY 31, 1994 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 76.1% SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - 3.7% CHEMICALS & PLASTICS - 0.6% OM Group, Inc. 153,100 $ 3,024 Petrolite Corp. 105,800 3,491 Triple S Plastics, Inc. (a) 135,300 1,725 8,240 IRON & STEEL - 1.4% Gibraltar Steel Corp. (a) 199,200 2,341 Huntco, Inc. Class A 70,000 1,811 Kentucky Electric Steel, Inc. (a) 154,400 1,872 Schnitzer Steel, Inc. Class A 324,100 8,508 Steel Technologies, Inc. 124,000 2,139 TriMas Corp. 17,100 395 17,066 METALS & MINING - 0.2% Foster LB Co. Class A (a) 25,000 87 Olympic Steel, Inc. (a) 190,000 2,660 2,747 PAPER & FOREST PRODUCTS - 1.5% Jefferson Smurfit Corp. (a) 105,000 1,877 Riverside Forest Products 321,000 5,731 Willamette Industries, Inc. 216,900 10,791 18,399 TOTAL BASIC INDUSTRIES 46,452 CONGLOMERATES - 0.1% Lancaster Colony Corp. 26,666 960 CONSTRUCTION & REAL ESTATE - 2.8% BUILDING MATERIALS - 0.6% Hoganas AB Class B Free shares 93,000 1,234 Tecumseh Products Co. Class A 120,500 6,025 7,259 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONSTRUCTION & REAL ESTATE - CONTINUED CONSTRUCTION - 1.3% Pulte Corp. 6,800 $ 155 Redman Industries (a) 148,800 2,678 Schuler Homes, Inc. (a) 372,800 8,574 Southern Energy Homes, Inc. (a) 376,000 4,888 16,295 ENGINEERING - 0.8% Glenayre Technologies, Inc. (a) 208,400 10,316 REAL ESTATE INVESTMENT TRUSTS - 0.1% RES Hotel Investors, Inc. 85,000 1,466 TOTAL CONSTRUCTION & REAL ESTATE 35,336 DURABLES - 2.9% AUTOS, TIRES, & ACCESSORIES - 0.7% Armor All Products Corp. 52,800 1,200 Deflectashield Corp. (a) 151,500 1,364 Jason, Inc. (a) 119,000 1,041 Spartan Motors, Inc. 200 3 Wabash National Corp. 105,000 3,780 Williams Controls, Inc. (a) 535,400 1,339 8,727 HOME FURNISHINGS - 0.5% Bassett Furniture Industries, Inc. 104,400 3,079 LADD Furniture, Inc. 90,100 676 Pulaski Furniture Corp. 15,200 274 Rowe Furniture Corp. 113,350 992 Stanley Furniture (a) 63,100 726 5,747 TEXTILES & APPAREL - 1.7% Cygne Designs, Inc. (a) 61,400 1,381 Galey & Lord, Inc. (a) 235,600 4,859 Interface, Inc. Class A 202,800 2,586 Justin Industries, Inc. 381,000 4,096 Mohawk Industries, Inc. (a) 245,000 3,690 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED TEXTILES & APPAREL - CONTINUED Quaker Fabric Corp. (a) 94,700 $ 1,231 Westpoint Stevens, Inc. Class A (a) 253,000 3,890 21,733 TOTAL DURABLES 36,207 ENERGY - 0.2% ENERGY SERVICES - 0.0% Marine Drilling Cos., Inc. (a) 20,000 106 Noble Drilling Corp. (a) 10,000 71 Offshore Logistics, Inc. (a) 21,450 271 448 OIL & GAS - 0.2% Coda Energy, Inc. (a) 196,700 1,253 PT Tri Polyta Indonesia sponsored ADR 41,000 923 2,176 TOTAL ENERGY 2,624 FINANCE - 12.6% BANKS - 9.3% B B & T Financial Corp. 75,000 2,323 Bank Atlantic Bancorp, Inc. 26,000 364 Bank of New Hampshire Corp. 110,000 2,805 BanPonce Corp. 281,761 9,087 Boatmen's Bancshares, Inc. 112,100 3,839 CPB, Inc. 147,800 3,991 Central Fidelity Banks, Inc. 7,500 242 Chittenden Corp. 281,875 6,131 Colonial BancGroup, Inc. Class A 12,300 277 Commerce Bank (b) 212,887 7,824 Dauphin Deposit Corp. 39,900 1,037 Deposit Guaranty Corp. 25,000 825 Fifth Third Bancorp 290,300 15,023 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED BANKS - CONTINUED First American Corp. 177,447 $ 5,878 First Commerce Bancshares, Inc.: Class A 115,600 1,792 Class B 455,900 5,357 First Security Corp. 129,900 3,994 First Tennessee National Corp. 135,000 6,109 First Western Bancorp 211,175 5,966 Grenda Sunburst System Corp. 14,000 466 Hancock Holding Co. 50,000 1,469 Liberty Bancorporation, Inc. 54,700 1,737 Northern Trust Corp. 147,850 5,507 Regions Financial Corp. 128,200 4,567 SouthTrust Corp. 222,500 4,617 State Street Boston Corp. 336,600 12,917 Trico Bancshares 20,000 360 West One Bancorp 30,000 938 Zions Bancorporation 32,200 1,244 116,686 INSURANCE - 1.1% Allied Group, Inc. 148,500 4,381 Commerce Group, Inc. 104,100 1,874 SAFECO Corp. 146,300 8,101 14,356 SAVINGS & LOANS - 2.1% Astoria Financial Corp. (a) 36,100 1,212 BSB Bancorp, Inc. 4,300 118 Bay Ridge Bancorp, Inc. (a) 49,200 726 Brooklyn Bancorp, Inc. (a) 9,500 325 Charter One Financial Corp. 332,900 7,074 Collective Bancorp, Inc. 182,800 3,679 Commercial Federal Corp. (a) 158,700 3,968 Conservative Savings Corp. (b) 152,600 1,946 Main Street Community Bancorp 45,000 754 Quaker City Bancorp. (a) 100,000 1,056 Reliance BanCorp, Inc. (a) 10,000 136 Roosevelt Financial Group, Inc. 55,000 935 SFFed Corp. 41,400 859 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED SAVINGS & LOANS - CONTINUED WFS BanCorp, Inc. (a) 35,000 $ 508 Washington Mutual Savings Bank 174,000 3,502 26,798 SECURITIES INDUSTRY - 0.1% Concord Holding Corp. (a) 229,500 1,377 TOTAL FINANCE 159,217 HEALTH - 7.7% DRUGS & PHARMACEUTICALS - 3.1% Amgen, Inc. (a) 279,200 13,870 Biogen, Inc. (a) 100,000 4,349 Cell Genesys, Inc. (a) 191,000 1,624 Centocor, Inc. (a) 50,000 594 Cephalon, Inc. (a) 23,700 231 Noven Pharmaceuticals, Inc. (a) 236,400 2,719 Perspective Biosystems, Inc. (a) 40,000 500 Sepracor, Inc. (a) 748,600 4,024 Somatix Therapy Corp. (a) 248,900 1,307 Telor Ophthalmic Pharmaceuticals, Inc. (a)(b) 500,000 2,063 Theratech, Inc. (a) 48,500 570 Vertex Pharmaceuticals, Inc. (a) 70,000 788 Watson Pharmaceuticals, Inc. (a) 116,500 2,010 Zenith Laboratories, Inc. (a) 285,200 4,635 39,284 MEDICAL EQUIPMENT & SUPPLIES - 1.8% Advanced Technology Laboratories, Inc. (a) 3,000 41 American Medical Electronics, Inc. (a) 150,000 1,200 Baxter International, Inc. 166,600 4,394 Cardinal Health, Inc. 47,125 1,817 Datascope Corp. (a) 175,200 2,803 Healthdyne, Inc. (a) 10,400 69 Mitek Surgical Products, Inc. (a) 20,000 355 Nellcor, Inc. (a) 25,500 689 Puritan Bennett Corp. 52,900 913 Spacelabs Medical, Inc. (a) 85,000 1,891 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) HEALTH - CONTINUED MEDICAL EQUIPMENT & SUPPLIES - CONTINUED St. Jude Medical, Inc. 213,500 $ 6,779 U.S. Surgical Corp. 50,000 1,113 Zoll Medical Corp. (a) 28,900 253 22,317 MEDICAL FACILITIES MANAGEMENT - 2.8% Abbey Healthcare Group, Inc. (a) 61,200 949 Advantage Health Corp. (a) 100,600 2,012 Homedco Group, Inc. (a) 108,800 3,210 Oxford Health Plans, Inc. (a) 39,700 2,322 Quorum Health Group, Inc. (a) 11,000 209 U.S. Healthcare, Inc. 699,700 26,501 35,203 TOTAL HEALTH 96,804 HOLDING COMPANIES - 0.2% Nolato AB B Free shares 296,500 2,139 INDUSTRIAL MACHINERY & EQUIPMENT - 2.7% ELECTRICAL EQUIPMENT - 0.3% Genlyte Group, Inc. (a) 5,000 25 Holophane Corp. (a) 162,200 3,041 Spectrum Control, Inc. (a) 250,000 656 3,722 INDUSTRIAL MACHINERY & EQUIPMENT - 2.4% ATS Automation (a)(b) 493,100 3,557 Applied Power, Inc. Class A 87,400 1,857 Brenco, Inc. 108,000 1,310 Enerflex Systems Ltd. 371,500 5,025 Greenfield Industries, Inc. 128,200 2,692 NN Ball & Roller, Inc. (a) 238,400 4,708 Stewart & Stevenson Services, Inc 181,800 7,045 Welbilt Corp. (a) 159,900 3,758 29,952 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 33,674 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - 5.5% BROADCASTING - 2.8% American Telecasting, Inc. (a) 56,500 $ 692 Comcast Corp. Class A (Special) 65,000 1,081 Evergreen Media Corp. Class A. (a) 54,200 935 Infinity Broadcasting Corp. (a) 115,300 3,329 International Cabletel, Inc. (a) 81,900 1,761 Peoples Choice TV Corp. (a) 3,800 81 QVC Network, Inc. (a) 30,000 1,358 SFX Broadcasting, Inc. (a) 134,500 2,051 TCA Cable TV, Inc. 185,000 4,116 Tele-Communications, Inc. Class A (a) 863,600 20,133 35,537 ENTERTAINMENT - 0.5% American Classic Voyages Co. 116,800 1,884 Live Entertainment of Canada, Inc. (a) 280,300 2,780 Players International, Inc. (a) 69,300 1,230 5,894 LEISURE DURABLES & TOYS - 1.5% Arctco, Inc. 358,900 10,588 Aritmos AB Free (a) 150,000 2,550 Callaway Golf Co. 98,300 3,514 Kompan International AS Class B 9,000 1,807 18,459 LODGING & GAMING - 0.2% President Riverboat Casinos, Inc. (a) 252,000 1,764 Primadonna Resorts, Inc. (a) 25,000 631 Station Casinos, Inc. (a) 46,700 525 Supertel Hospitality, Inc. (a) 13,300 180 3,100 PUBLISHING - 0.4% American Greetings Corp. Class A 80,000 2,340 Steck-Vaughn Publishing Corp. (a) 248,200 2,172 4,512 RESTAURANTS - 0.1% Bertucci's, Inc. (a) 141,700 1,293 TOTAL MEDIA & LEISURE 68,795 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) NONDURABLES - 2.4% AGRICULTURE - 0.5% Delta & Pine Land Co. 176,200 $ 3,116 Kanthal AB B Free shares 225,200 2,727 5,843 BEVERAGES - 1.1% Dr. Pepper/Seven-Up Companies, Inc. (a) 116,200 2,643 LVMH 8,250 1,326 Mondavi Robert Corp. Class A (a) 296,000 2,072 Snapple Beverage Corp. (a) 383,500 7,670 13,711 FOODS - 0.7% Michael Foods, Inc. 258,600 3,330 Odwalla, Inc. (a) 74,500 913 Tyson Foods, Inc. 184,600 4,453 8,696 TOBACCO - 0.1% Monk Austin, Inc. 150,000 1,950 TOTAL NONDURABLES 30,200 RETAIL & WHOLESALE - 2.5% APPAREL STORES - 0.1% Cato Corp. Class A 94,800 972 Ross Stores, Inc. 35,400 535 1,507 GENERAL MERCHANDISE STORES - 0.6% Casey's General Stores, Inc. 162,500 1,991 Freds, Inc. Class A 79,200 871 Price/Costco, Inc. 310,000 4,650 7,512 GROCERY STORES - 0.7% Food Lion, Inc. Class B 115,000 690 Quality Food Centers, Inc. 165,000 3,609 Starbucks Corp. (a) 173,900 5,043 9,342 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - 1.1% Books-A-Million, Inc. (a) 20,900 $ 496 Cameron Ashley, Inc. (b) 325,000 3,616 Futures Shops Ltd. (a) 211,400 2,955 Good Guys, Inc. (a) 155,800 1,909 Hechinger Co. Class A 52,000 644 Micro Warehouse, Inc. 18,000 396 Rex Stores Corp. (a) 70,800 1,177 Sunglass Hut International, Inc. (a) 70,400 2,270 13,463 TOTAL RETAIL & WHOLESALE 31,824 SERVICES - 0.6% LEASING & RENTAL - 0.3% Hollywood Entertainment Corp. (a) 145,200 3,158 PRINTING - 0.1% Cyrk, Inc. (a) 57,800 1,423 SERVICES - 0.2% Careerstaff Unlimited, Inc. (a) 4,000 56 Norrell Corp. GA 9,000 128 Zebra Technologies Corp. Class A (a) 72,500 2,592 2,776 TOTAL SERVICES 7,357 TECHNOLOGY - 23.7% COMMUNICATIONS EQUIPMENT - 3.9% Aspect Telecommunications Corp. (a) 220,100 6,547 Cisco Systems, Inc. (a) 184,400 3,872 DSC Communications Corp. (a) 265,500 6,505 Digital Systems International, Inc. (a) 161,800 647 Ericsson (L.M.) Telephone Co. Class B ADR 190,600 10,388 General Instrument Corp. (a) 148,400 8,997 Network General Corp. (a) 61,500 992 Newbridge Networks Corp. (a) 54,500 2,286 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMMUNICATIONS EQUIPMENT - CONTINUED 3Com Corp. (a) 142,200 $ 7,590 Wellfleet Communications, Inc. (a) 98,400 1,980 49,804 COMPUTER SERVICES & SOFTWARE - 8.6% Alantec Corp. (a) 15,000 206 Banyan Systems, Inc. (a) 250,000 3,938 Boole & Babbage, Inc. (a) 29,200 810 Broderbund Software, Inc. (a) 17,100 829 Compuware Corp. (a) 4,800 189 Crosscommunications Corp. (a) 207,700 2,077 Electronic Arts. (a) 311,500 4,439 Frame Technology Corp. (a) 147,000 1,507 Integrated Systems, Inc. (a) 27,300 307 Intelligent Electronics, Inc. 25,000 359 Legent Corp. (a) 239,000 5,676 Lotus Development Corp. (a) 40,800 1,326 MicroAge, Inc. (a) 200 2 Microsoft Corp. (a) 653,200 33,640 Novell, Inc. (a) 305,000 4,956 Oracle Systems Corp. (a) 637,900 24,400 Parametric Technology Corp. (a) 323,680 8,011 Peoplesoft, Inc. (a) 29,500 1,025 Platinum Technology, Inc. (a) 37,500 581 Powersoft Corp. (a) 19,400 834 Softdesk, Inc. (a) 171,700 1,932 State of The Art, Inc. (a) 62,500 422 Sybase, Inc. (a) 160,000 6,300 Triconex Corp. (a) 127,400 2,007 VMark Software, Inc. (a) 76,200 1,381 Wonderware Corp. (a) 67,800 1,000 108,154 COMPUTERS & OFFICE EQUIPMENT - 1.9% Apple Computer, Inc. 100,000 3,368 Canon, Inc. ADR 5 shares 25,000 2,166 Creative Technologies, Corp. (a) 7,000 146 Exabyte (a) 25,000 391 Micom Communication Corp. (a) 95,533 1,003 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - CONTINUED Norand Corp. (a) 212,800 $ 6,597 Seagate Technology (a) 50,000 1,331 Sequent Computer Systems, Inc. (a) 75,000 1,050 Sun Microsystems, Inc. (a) 50,000 1,113 Syquest Technology, Inc. (a) 127,600 1,196 Tech Data Corp. (a) 305,500 4,888 Telxon Corp. 18,200 255 23,504 ELECTRONIC INSTRUMENTS - 1.1% Analogic Corp. (a) 188,500 3,015 Applied Materials, Inc. (a) 197,800 8,852 Aseco Corp. (a) 10,900 74 Sensonor AS 300,000 1,607 13,548 ELECTRONICS - 8.2% Allgon AB B Free shares 352,500 4,450 California Micro Devices Corp. (a) 63,200 1,430 Cirrus Logic, Inc. (a) 65,000 1,905 Intel Corp. 837,900 49,646 Linear Technology Corp. 234,300 9,372 Maxim Integrated Products, Inc. (a) 102,600 4,950 Methode Electronics, Inc. Class A 414,600 7,152 Microchip Technology, Inc. (a) 145,100 4,643 Molex, Inc. 143,000 5,783 Motorola, Inc. 210,000 11,130 Robinson Nugent, Inc. (b) 301,500 1,884 Xilinx, Inc. (a) 7,300 274 Zilog, Inc. (a) 26,300 736 103,355 TOTAL TECHNOLOGY 298,365 TRANSPORTATION - 4.1% AIR TRANSPORTATION - 0.5% Amtran, Inc. (a) 198,100 1,782 Atlantic Southeast Airlines, Inc. 43,600 1,259 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - CONTINUED AIR TRANSPORTATION - CONTINUED Great Lakes Aviation (a) 370,400 $ 2,408 Mesa Airlines, Inc. (a) 124,219 1,320 6,769 RAILROADS - 1.4% Johnstown America Industries, Inc. (a) 69,000 1,449 MK Rail Corp. 275,000 4,125 Wisconsin Central Transportation Corp. (a) 290,600 11,406 16,980 TRUCKING & FREIGHT - 2.2% Arnold Industries, Inc. 199,600 3,718 Builders Transport, Inc. (a) 191,200 2,533 Landair Services, Inc. (a) 249,100 4,733 Landstar System, Inc. (a) 162,100 5,106 Mark VII, Inc. (a) 160,900 1,971 Roadway Services, Inc. 61,000 3,698 TNT Freightways Corp. 71,600 1,772 Werner Enterprises, Inc. 170,300 4,428 27,959 TOTAL TRANSPORTATION 51,708 UTILITIES - 4.4% CELLULAR - 3.3% A Plus Communications, Inc. (a) 82,000 921 Arch Communications Group, Inc. (a) 50,000 825 Cellular Communications, Inc. Series A (redeemable) (a) 156,400 8,152 Cellular Communications Puerto Rico, Inc. (a) 50,000 1,238 IDB Communications Group, Inc. 100,000 938 LIN Broadcasting Corp. (a) 75,000 9,375 McCaw Cellular Communications, Inc. Class A (a) 200,000 10,625 Metrocall, Inc. (a) 8,300 110 Nextel Communications, Inc. Class A (a) 50,000 1,394 Paging Network, Inc. (a) 35,000 932 Premier Page Co. (a) 27,000 240 Qualcomm, Inc. (a) 175,000 3,150 Vanguard Cellular Systems, Inc. Class A 111,500 4,209 42,109 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - 1.1% Incomnet, Inc. (a) 15,000 $ 152 LCI International, Inc. (a) 77,700 1,418 LDDS Communications, Inc. (a) 259,500 5,060 MCI Communications Corp. 307,400 6,993 13,623 TOTAL UTILITIES 55,732 TOTAL COMMON STOCKS (Cost $920,239) 957,394 U.S. TREASURY OBLIGATIONS - 14.5% PRINCIPAL AMOUNT (000S) U.S. Treasury Bills, yields at date of purchase 4.23%-4.72%, 9/29/94-12/8/94 (Cost $182,619) $ 185,000 182,845 REPURCHASE AGREEMENTS - 9.4% MATURITY AMOUNT (000S) Investments in repurchase agreements, (U.S. Treasury obligations), in a joint trading account at 4.23% dated 7/29/94 due 8/1/94 $ 118,564 118,522 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,221,380) $ 1,258,761 LEGEND 7. Non-income producing. 8. Affiliated company (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At July 31, 1994, the aggregate cost of investment securities for income tax purposes was $1,229,990,000. Net unrealized appreciation aggregated $28,771,000, of which $94,926,000 related to appreciated investment securities and $66,155,000 related to depreciated investment securities. The fund hereby designates $51,548,000 as a capital gain dividend for the purpose of the dividend paid deduction. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JULY 31, 1994 ASSETS Investment in securities, at value (including repurchase $ 1,258,761 agreements of $118,522) (cost $1,221,380) (Notes 1 and 2) - See accompanying schedule Cash 1 Receivable for investments sold 7,524 Receivable for fund shares sold 2,148 Dividends receivable 371 Other receivables 894 TOTAL ASSETS 1,269,699 LIABILITIES Payable for investments purchased $ 33,106 Payable for fund shares redeemed 5,741 Accrued management fee 488 Other payables and accrued expenses 505 TOTAL LIABILITIES 39,840 NET ASSETS $ 1,229,859 Net Assets consist of (Note 1): Paid in capital $ 1,200,195 Accumulated undistributed net gain (loss) on (7,717) investments Net unrealized appreciation (depreciation) on 37,381 investments NET ASSETS, for 54,853 shares outstanding $ 1,229,859 NET ASSET VALUE and redemption price per share $22.42 ($1,229,859 (divided by) 54,853 shares) Maximum offering price per share (100/97.00 of $22.42) $23.11
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1994 INVESTMENT INCOME $ 7,965 Dividends (including $597 received from affiliated issuers) (Note 6) Interest 9,618 TOTAL INCOME 17,583 EXPENSES Management fee (Note 4) 8,733 Basic fee Performance adjustment (2,190) Transfer agent fees (Note 4) 3,898 Accounting fees and expenses (Note 4) 545 Non-interested trustees' compensation 8 Custodian fees and expenses 179 Registration fees 72 Audit 56 Legal 10 Interest (Note 5) 22 Reports to shareholders 141 Miscellaneous 31 Total expenses before reductions 11,505 Expense reductions (Note 7) (126) 11,379 NET INVESTMENT INCOME 6,204 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1, 2 AND 3) Net realized gain (loss) on: Investment securities (including realized loss of 72,019 $14,255 on sales of investment in affiliated issuers) Foreign currency transactions (5) 72,014 Change in net unrealized appreciation (depreciation) on (82,465) investment securities NET GAIN (LOSS) (10,451) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ (4,247) OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED JULY 31, 1994 JULY 31, 1993 INCREASE (DECREASE) IN NET ASSETS Operations $ 6,204 $ 6,368 Net investment income Net realized gain (loss) 72,014 139,113 Change in net unrealized appreciation (depreciation) (82,465) 32,204 NET INCREASE (DECREASE) IN NET ASSETS RESULTING (4,247) 177,685 FROM OPERATIONS Distributions to shareholders (6,136) (11,708) From net investment income From net realized gain (169,881) (94,542) TOTAL DISTRIBUTIONS (176,017) (106,250) Share transactions 622,732 908,205 Net proceeds from sales of shares Reinvestment of distributions 169,434 103,397 Cost of shares redeemed (709,063) (793,452) Net increase (decrease) in net assets resulting from 83,103 218,150 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS (97,161) 289,585 NET ASSETS Beginning of period 1,327,020 1,037,435 End of period (including undistributed net investment $ 1,229,859 $ 1,327,020 income of $14,971, for 1993) OTHER INFORMATION Shares Sold 25,273 36,509 Issued in reinvestment of distributions 7,025 4,491 Redeemed (28,688) (31,846) Net increase (decrease) 3,610 9,154
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1994 1993 1992 1991 1990 SELECTED PER-SHARE DATA Net asset value, beginning of $ 25.90 $ 24.65 $ 24.28 $ 20.42 $ 22.36 period Income from Investment Operations Net investment income .12 .06 .08 .19 .51 Net realized and unrealized (.08) 3.68 2.92 4.30 .47 gain (loss) Total from investment .04 3.74 3.00 4.49 .98 operations Less Distributions From net investment income (.12) (.25) (.12) (.05) (.51) From net realized gain (3.40) (2.24) (2.51) (.58) (2.41) Total distributions (3.52) (2.49) (2.63) (.63) (2.92) Net asset value, end of period $ 22.42 $ 25.90 $ 24.65 $ 24.28 $ 20.42 TOTAL RETURN A, B (.36)% 16.67% 13.30% 23.03% 4.53% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,230 $ 1,327 $ 1,037 $ 864 $ 697 (in millions) Ratio of expenses to average .88%C 1.08% 1.17% 1.29% 1.35% net assets Ratio of expenses to average .89%C 1.08% 1.17% 1.29% 1.35% net assets before expense reductions Ratio of net investment income .48% .53% .59% 1.00% 2.30% to average net assets Portfolio turnover rate 222% 213% 245% 198% 212%
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. C SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1994 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity OTC Portfolio (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange), are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the 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. Effective August 1,1993, the fund adopted Statement of Position (SOP) 93-4: Foreign Currency Accounting and Financial Statement Presentation for Investment Companies. In accordance with this SOP, reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. Further, as permitted under the SOP, the effects of changes in foreign currency exchange rates on investments in securities are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on investment in 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 all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED as the fund is informed of the ex-dividend date. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for losses deferred due to wash sales, nontaxable dividends, and foriegn currency transactions. 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. 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. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective August 1, 1993, the fund adopted Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the fund changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts as of July 31,1993 have been reclassified to reflect an increase in paid in capital of $97,714,000, a decrease in undistributed net investment income of $14,971,000 and a decrease in accumulated net realized gain on investments of $82,743,000. 2. OPERATING POLICIES. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The fund's investment adviser, Fidelity Management & Research Company (FMR), is responsible for determining that the value of these underlying securities remains at least equal to the resale price. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the fund, along with other registered investment companies having management contracts with FMR, may transfer uninvested cash balances into a joint trading account. These balances are invested in 2. OPERATING POLICIES - CONTINUED JOINT TRADING ACCOUNT - CONTINUED one or more repurchase agreements that are collateralized by U.S. Treasury or Federal Agency obligations. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $2,239,348,000 and $2,285,462,000, 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 .30% to .52% for the period from August 1, 1993 to October 31, 1993 and .285% to .520% for the period from November 1, 1993 to July 31, 1994. In the event that these rates were lower than the contractual rates in effect during those periods, FMR voluntarily implemented the above rates as they resulted in the same or a lower management fee. The annual individual fund fee rate is .35%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus).20%) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annual rate of .50% of average net assets after the performance adjustment. The Board of Trustees has approved a new group fee rate schedule with rates ranging from .27% to .52%. Effective August 1, 1994, FMR has voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an affiliate of FMR and the general distributor of the fund, received sales charges of $697,000 on sales of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives fees based on the type, size, number of accounts and the number of transactions made by shareholders. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING 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 $140,000 for the period. 5. BANK BORROWINGS. The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, the fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $99,837,000 and $21,056,000, respectively. The weighted average interest rate was 5.28%. 6. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET AFFILIATES COST COST INCOME VALUE ATS Automation (a) $ 121 $ 57,730 $ - $ 3,557 Advantage Health Corp. (a) 1,115 5,945 - - Amtran, Inc. (a) 534 1,423 - - Atchison Casting 2,515 2,615 - - Beamscope Canada (a) 2,278 2,839 - - Benefon Oy 900 6,063 - - Brothers Gormet Coffees, Inc. 7,910 9,641 - - Cameron Ashley, Inc. - - - 3,616 Canadian Foremost Ltd. (a) 756 917 - - Coastal Banc Savings Association - 1,582 - - Cognex Corp. 2,966 4,081 - - Comair Holdings, Inc. 12,235 15,862 172 - Commerce Bank 1,213 295 125 7,824 Conservative Savings Corp. - - 21 1,946 Doro Telefoni AB. - 874 - - Duty Free International, Inc. 9,074 15,192 226 - Gilead Sciences, Inc. 4,116 6,069 - - Hallmark Technologies, Inc.. 402 - - - Irwin Financial Corp. - 1,098 11 - Longhorn Steaks 99 1,268 - - Mesa Airlines, Inc. (a) 18,641 21,983 - - Metropolitan Bancorp - 1,499 - - Mitek Surgical Products, Inc. (a) 442 4,935 - - Orbital Sciences Corp. 5,511 13,065 - - PDA Engineering - 964 - - Rand A Technology Corp. - 2,309 - - Riverside Forest Products - 1,842 - - Robinson Nugent, Inc. 130 - 27 1,884 Sterling Bancshares, Inc. - 1,130 15 - SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES - CONTINUED PURCHASE SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Summit Bancorp, Inc. Washington $ - $ 610 $ - $ - Telor Ophthalmic Pharmaceuticals, Inc. (a) 169 - - 2,063 Total Pharmaceutical Care, Inc. - 3,618 - - Williams Controls, Inc. (a) 545 525 - - TOTALS $ 71,672 $ 185,974 $ 597 $ 20,890 (a) non-income producing 7. EXPENSE REDUCTIONS. FMR has directed certain portfolio trades to brokers who paid a portion of the fund's expenses. For the period, the fund's expenses were reduced by $126,000 under this arrangement. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity OTC Portfolio: We have audited the accompanying statement of assets and liabilities of Fidelity Securities Fund: Fidelity OTC Portfolio, including the schedule of portfolio investments, as of July 31, 1994, and the related statement of operations for the year then ended the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 1994, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Securities Fund: Fidelity OTC Portfolio as of July 31, 1994, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts September 2, 1994 DISTRIBUTIONS A total of 3.35% of the dividends distributed during the fiscal year were derived from interest on U.S. government securities which is generally exempt from state income tax. A total of 10% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders. The fund will notify shareholders in January 1995 of these percentages for use in preparing 1994 income tax returns. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 2249 Galiano Street Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 1 West Pennsylvania Ave. Towson, MD 7401 Wisconsin Avenue Bethesda, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 101 Cambridge Street Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 1903 East Ninth Street Cleveland, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 1010 Lamar Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 175 East 400 South Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call -- you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios.(registered trademark) 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President William J. Hayes, Vice President Abigail P. Johnson, Vice President Gary L. French, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer Arthur S. Loring, Secretary Robert H. Morrison, Manager, Security Transactions BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Fidelity Fifty Growth Company Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Stock Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY (registered trademark) BLUE CHIP GROWTH FUND ANNUAL REPORT JULY 31, 1994 CONTENTS PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies. PERFORMANCE 4 How the fund has done over time. FUND TALK 6 The manager's review of fund performance, strategy and outlook. INVESTMENT CHANGES 10 A summary of major shifts in the fund's investments over the past six months. INVESTMENTS 11 A complete list of the fund's investments with their market values. FINANCIAL STATEMENTS 25 Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights. NOTES 29 Notes to the financial statements. REPORT OF INDEPENDENT 34 The auditor's opinion. ACCOUNTANTS 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, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. PRESIDENT'S MESSAGE DEAR SHAREHOLDER: The first half of 1994 was an unsettling time for many investors. After three years of a nearly perfect environment for stock market investing, stock prices generally fell from February through June. Investors disagree about whether this decline represents only a short-term correction or signals the beginning of a longer bear market. One can collect statistics to support either opinion, but of course, nobody knows for sure what will happen to stock prices in the months ahead. We do know, however, that market declines are a normal part of stock market investing. We have historically seen corrections of 10% or more every two years. That's why I thought this might be a good time to review three basic investment principles that have proven helpful to successful stock market investors in every market cycle. First, take a long-term approach when investing in stocks and stock funds. If you can afford to leave your money invested through the market's inevitable ups and downs, you will greatly reduce your vulnerability to any single decline. Over time, stock prices have gone up - and have significantly outperformed other types of investments and stayed ahead of inflation. But in the short-term, because of their volatility, stocks have greater risk. Second, you can further manage risk by diversifying your investments. A stock mutual fund is already diversified, because it invests in many different companies. You can increase your diversification by investing in a number of different stock funds, or in different investment categories, such as bonds. You should also keep money you'll need in the near future in a more stable investment. Finally, it makes good sense to follow a regular investment plan, investing a set amount of money at the same time each month or quarter. That way, you can avoid getting caught up in the excitement of a rapidly-rising market - and won't end up buying all your shares at market highs. This strategy won't assure a profit or protect you from a loss in a declining market, but it should help you lower the average cost of your purchases. For this to be effective, you must continue to buy shares in both up and down markets. If you have questions, please call us at 1-800-544-8888. We would be happy to send you a Fidelity FundMatch kit, which can help you determine the mix of investments that is right for you. You might also find it convenient to set up a regular investment plan using the Fidelity Automatic Account Builder.SM We look forward to hearing from 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. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (or income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Blue Chip Growth 14.95% 133.73% 217.86% Blue Chip Growth (incl. 3% sales charge) 11.50% 126.72% 208.32% S&P 500(registered trademark) 5.16% 54.91% 129.52% Average Growth Fund 3.91% 54.10% 269.22% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 31, 1987. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, you would have $1,050. You can compare these figures to the performance of the Standard & Poor's 500 Composite Stock Price Index - a common proxy for the U.S. stock market. You can also compare them to the average growth fund, which reflects the performance of over 501 growth funds tracked by Lipper Analytical Services. Both benchmarks include reinvested dividends and capital gains, if any, and exclude the effects of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JULY 31, 1994 PAST 1 PAST 5 LIFE OF YEAR YEARS FUND Blue Chip Growth 14.95% 18.51% 19.19% Blue Chip Growth (incl. 3% sales charge) 11.50% 17.79% 18.64% S&P 500(registered trademark) 5.16% 9.15% 13.65% Average Growth Fund 3.91% 8.76% 12.49% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. $10,000 OVER LIFE OF FUND Blue ChipS&P 500 12/31/87 9700.00 10000.00 01/31/88 9767.90 10421.00 02/29/88 10185.00 10906.62 03/31/88 9816.40 10569.60 04/30/88 9797.00 10686.93 05/31/88 9797.00 10779.90 06/30/88 10359.60 11274.70 07/31/88 10155.90 11231.86 08/31/88 9729.10 10849.97 09/30/88 10165.60 11312.18 10/31/88 10146.20 11626.66 11/30/88 9961.90 11460.40 12/31/88 10272.95 11660.96 01/31/89 11031.74 12514.54 02/28/89 10700.99 12202.93 03/31/89 10953.92 12487.26 04/30/89 11702.99 13135.34 05/31/89 12461.79 13667.32 06/30/89 12024.02 13589.42 07/31/89 13191.40 14816.55 08/31/89 13512.43 15106.95 09/30/89 13846.76 15045.01 10/31/89 13640.68 14695.97 11/30/89 13876.20 14995.77 12/31/89 13995.40 15355.66 01/31/90 12823.32 14325.30 02/28/90 13170.97 14510.09 03/31/90 13826.54 14894.61 04/30/90 13697.41 14522.25 05/31/90 15246.94 15938.17 06/30/90 15594.59 15829.79 07/31/90 15227.07 15779.13 08/31/90 13915.94 14352.70 09/30/90 13258.57 13653.72 10/31/90 13178.88 13595.01 11/30/90 14015.63 14473.25 12/31/90 14485.44 14877.05 01/31/91 15619.78 15525.69 02/28/91 16824.39 16635.78 03/31/91 17667.62 17038.36 04/30/91 17476.89 17079.26 05/31/91 18400.42 17817.08 06/30/91 17476.89 17001.06 07/31/91 19012.77 17793.31 08/31/91 19845.96 18215.01 09/30/91 19534.96 17910.82 10/31/91 19926.87 18150.82 11/30/91 19504.82 17419.34 12/31/91 22424.75 19412.12 01/31/92 21719.25 19051.05 02/29/92 21820.04 19298.72 03/31/92 21225.41 18922.39 04/30/92 21507.60 19478.71 05/31/92 21951.06 19574.15 06/30/92 21316.11 19282.50 07/31/92 22192.95 20071.15 08/31/92 21961.14 19659.70 09/30/92 22252.77 19891.68 10/31/92 22561.69 19961.30 11/30/92 23745.90 20641.98 12/31/92 23808.72 20895.88 01/31/93 23860.87 21071.40 02/28/93 23704.44 21357.97 03/31/93 24851.59 21808.63 04/30/93 25247.88 21280.86 05/31/93 26572.33 21851.19 06/30/93 26822.62 21914.55 07/31/93 26822.62 21826.90 08/31/93 28491.21 22654.14 09/30/93 29084.10 22479.70 10/31/93 29409.19 22945.03 11/30/93 28515.19 22727.05 12/31/93 29642.52 23002.05 01/31/94 30819.88 23784.12 02/28/94 30844.41 23139.57 03/31/94 29875.54 22130.68 04/30/94 30758.56 22413.96 05/31/94 31151.02 22781.54 06/30/94 30071.77 22223.40 07/31/94 30832.15 22952.32 $10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity Blue Chip Growth Fund on December 31, 1987, when the fund began, and paid a 3% sales charge. As the chart shows, by July 31, 1994, the value of your investment would have grown to $30,832 - a 208.32% increase on your initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends reinvested, the same $10,000 investment would have grown to $22,952 - a 129.52% increase. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. In turn, the share price and return of a fund that invests in stocks will vary. That means if you sell your shares during a market downturn, you might lose money. But if you can ride out the market's ups and downs, you may have a gain. (checkmark) FUND TALK: THE MANAGER'S OVERVIEW MARKET RECAP After generally falling through much of 1994, U.S. stock prices rebounded in July on the strength of improving corporate earnings. Rising interest rates caused the stock market to stumble from February through June. Stocks largely took their cue from bonds, which fell sharply due to concerns that the strengthening economy might trigger higher inflation. Late in the period, a weakening U.S. dollar put additional downward pressure on stocks. The Standard & Poor's 500 index had a total return of 5.16% for the 12 months ended July 31, 1994, mainly due to gains made in 1993. Cyclical stocks - those whose prices tend to move in tandem with the economy - were among the market leaders. These included such sectors as chemicals, metals and paper. Market laggards included most consumer nondurables - especially retail, beverage and drug companies. In addition, rising interest rates hurt such rate-sensitive sectors as insurance and utilities. Aside from Japanese stocks, which made strong gains due to a strengthening economy and yen, most foreign markets suffered corrections in 1994. However, strong gains in 1993 helped drive the Morgan Stanley EAFE (Europe, Australia, Far East) index to a 14.13% total return for the 12 months ended July 31. The Morgan Stanley Emerging Markets Free Index was up 40.62%, again due to strong performance in 1993. An interview with Michael Gordon, Portfolio Manager of Fidelity Blue Chip Growth Fund Q. MICHAEL, HOW DID THE FUND PERFORM? A. Very well. For the year ended July 31, 1994, the fund returned 14.95%, soundly beating the average growth fund, which had a total return of 3.91% for the past year, and the Standard and Poor's 500 index, which returned 5.16% for the same period. Q. WHAT WAS BEHIND THIS OUTSTANDING PERFORMANCE? A. Good stock selection was a big part of it. I tend to be a bottom-up investor, which means I usually look for specific companies -not sectors - that I expect to be top performers. Over the past year, the stocks I picked generally outperformed the stocks in the S&P 500. In addition, when many of those stocks tumbled over the past six months, most of the fund's stocks held steady. Q. WHAT DID YOU LOOK FOR IN THE STOCKS YOU CHOSE? A. As always, I looked for large, high-quality companies that I thought had the best risk/reward opportunities. This means I tried to buy companies that were selling at a discount to their earnings growth rate but had excellent growth potential. I also was interested in stocks where Fidelity could have an edge. This happens when our internal research department - which I depend on heavily - has an opinion that's different from the larger investment community in direction or magnitude. For example, our internal research people thought IBM, one of the fund's top 10 stocks at the end of the period, was an outstanding buy when you added up its cost cutting and expected revenue growth. And so far they've been right. Over the period, IBM's earnings growth was way ahead of what Wall Street thought it would be. Q. DID LOW STOCK PRICES DURING THE PERIOD AFFECT WHICH STOCKS YOU BOUGHT? A. Yes. I bought more growth and technology stocks recently because I thought they provided the greatest risk/reward opportunities. As a result, the fund's investments were more aggressive than they had been in the past. My strategy is to be flexible and open to whatever stocks offer the fund good investment opportunities, and I expect that the fund's makeup will probably change sometime in the future as new investment opportunities arise. Q. I KNOW YOU FOCUS ON STOCK PICKING, BUT THE FUND IS HEAVILY WEIGHTED IN SOME SECTORS, SUCH AS TECHNOLOGY, WHICH MADE UP 31.4% OF THE FUND AT THE END OF JULY. WHAT'S BEHIND THIS? A. The fund's stake in technology, its largest sector, has more than doubled over the past year. This happened largely because some technology stocks experienced phenomenal earnings growth, yet their prices declined because of the skittish market. As a result, I bought them. Many of these technology companies are appealing because their products can provide companies with huge enhancements to productivity. They also can offer a tremendous return on investment. A good example is Compuware, one of the fund's top 10 stocks at the end of the period, which sells software products to help companies test and debug their mainframe computers. Compuware estimates that its customers make back 100% of the purchase price of their products within six months. Another technology company that's among the fund's top 10 stocks, Motorola, experienced significant growth because it had tremendous products in the cellular and semiconductor markets, and these markets were growing rapidly. Q. ANOTHER INCREASE WAS IN THE FINANCIAL SECTOR, WHICH MADE UP 8.4% OF THE FUND A YEAR AGO AND 14.0% AT THE END OF THIS PERIOD. WHY DID THIS SECTOR LOOK GOOD? A. In late 1993, I sold nearly all of the fund's financial stocks to take profits. Over the past six months, financial stocks started to look good again because they were inexpensive. Prices of financial stocks were destroyed due in part to the rise in interest rates; however their fundamentals -or business prospects - remained largely intact. This environment made specific financial stocks, especially some brokerage stocks, excellent buys. For instance, Merrill Lynch's stock price dropped dramatically but the company still turned in solid earnings. What I saw in this company was a great franchise that could be a good long-term opportunity at an excellent price. Q. LET'S SWITCH DIRECTION A BIT. IN THE LAST SHAREHOLDERS' REPORT YOU SAID THAT YOU WERE INVESTING IN THE BLUE-CHIP STOCKS OF TOMORROW. DOES THAT STILL HOLD TRUE? A. I think it's more accurate to say that I'm investing in an expanded universe, including blue chips of the future along with traditional blue-chip stocks. Keep in mind that while some of the fund's stocks may not seem like traditional blue chips because they aren't household names, they are blue-chip stocks with capitalizations of $200 million or above that are listed in the S&P 500 or Dow Jones Industrial Average. For instance, the Canadian company Renaissance Energy - an unfamiliar name to most shareholders - is considered by many investors to be one of the top companies in the energy field. I'd like to emphasize that at least 65% of the fund is invested in stocks with market capitalizations of a billion dollars or more. Q. MICHAEL, DERIVATIVES HAVE BEEN IN THE NEWS A LOT LATELY. DOES THE FUND OWN THEM? A. For the most part, this is a plain vanilla stock fund. However, the fund does own some forward foreign currency contracts that were used to hedge against the yen. I held these contracts to protect the value of my Japanese investments - which were purchased in yen - from a rising dollar. The value of these contracts declined due to the strength of the yen versus the dollar. But basically, I see it as a wash since the value of my Japanese stocks went up when the yen strengthened. It's true that the value of my Japanese holdings would have increased if I hadn't hedged the yen, but I wasn't willing to make that move and possibly expose the fund to currency risk. Q. IN HINDSIGHT, DO YOU REGRET ANY OF YOUR INVESTMENT DECISIONS? A. Sure. In terms of overall decisions, I wish I'd never bought electric utilities, which experienced a significant correction during the past six months. Other than that, the mistakes I made were on a stock-by-stock basis. For instance, even though I think its long-term prospects are strong, I regret not selling Lotus, a computer software company, before its stock price fell dramatically in the first quarter of 1994. Q. WHAT DO YOU THINK SHAREHOLDERS CAN EXPECT GOING FORWARD OVER THE NEXT FEW MONTHS? A. As I look ahead, I'm very excited about the fund. While I can't predict how the stock market will perform, I think the fund is positioned to do well if we move back into a more favorable market. That's because right now the fund owns more companies that are growing their earnings rapidly and selling at attractive prices than it ever has since I began managing the fund. FUND FACTS GOAL: to increase the value of the fund's shares over the long term by investing in large, successful growth companies at the top of their industries. START DATE: December 31, 1987 SIZE: as of July 31, 1994, more than $2.2 billion MANAGER: Michael Gordon, since January 1993; previously managed Fidelity Select Chemicals (August 1992 - January 1993) and Fidelity Select Biotechnology Portfolios (May 1990 - August 1992); joined Fidelity in 1987 (checkmark) MICHAEL GORDON ON PICKING FOREIGN BLUE CHIPS: "Many Americans assume that most blue-chip companies are in the United States. For example, if you asked most people to tell you the name of a blue-chip oil company, they would probably mention U.S.-based Exxon, as opposed to one of my top stocks, British Petroleum, which is a larger company. My outlook tends to be more international. I look for good buying opportunities all over the world. "In Japan, Suzuki Motor, one of the fund's investments, is a strong company that certainly fits the description of any American blue-chip company. It looks good because it's cutting costs dramatically and growing sales. In addition, it's one of the cheapest stocks in the Japanese auto sector. "I also like Canadian oil companies, such as Renaissance Energy and Pancanadian. For a number of reasons - including extremely high oil reserves -Canadian oil companies have turned in a better performance than oil companies just about anywhere else in the world." (solid bullet) The fund had about 20.6% invested in foreign stocks, which compares to 12.8% six months ago. Foreign investments can involve risks that domestic investments don't, such as political and economic risks, as well as the risk of currency fluctuation. INVESTMENT CHANGES TOP TEN STOCKS AS OF JULY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE STOCKS 6 MONTHS AGO Oracle Systems Corp. 3.3 - Lowe's Companies, Inc. 3.0 1.9 Motorola, Inc. 2.7 0.9 International Business Machines 2.7 0.4 Corp. British Petroleum PLC 2.6 1.9 Oxford Health Plans, Inc. 2.4 - Compuware Corp. 1.7 0.5 Dean Witter Discover & Co. 1.7 - Sears, Roebuck & Co. 1.7 0.1 Nucor Corp. 1.6 0.5 TOP FIVE INDUSTRIES AS OF JULY 31, 1994 % OF FUND'S % OF FUND'S INVESTMENTS INVESTMENTS IN THESE INDUSTRIES 6 MONTHS AGO Technology 31.4 15.0 Energy 15.4 17.3 Finance 14.0 0.6 Retail & Wholesale 9.0 5.4 Basic Industries 5.9 7.0 ASSET ALLOCATION AS OF JULY 31, 1994* AS OF JANUARY 31, 1994** Row: 1, Col: 1, Value: 2.5 Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 3, Value: 50.0 Row: 1, Col: 4, Value: 47.5 Row: 1, Col: 1, Value: 14.3 Row: 1, Col: 2, Value: 5.6 Row: 1, Col: 3, Value: 50.0 Row: 1, Col: 4, Value: 40.1 Stocks 97.5% Bonds 0.0% Short-term Investments 2.5% FOREIGN INVESTMENTS 20.6% Stocks 80.1% Bonds 5.6% Short-term Investments 14.3% FOREIGN INVESTMENTS 12.8% ** * INVESTMENTS JULY 31, 1994 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.0% SHARES VALUE (NOTE 1) (000S) BASIC INDUSTRIES - 5.9% CHEMICALS & PLASTICS - 1.6% Albemarle Corp. 48,000 $ 834 du Pont (E.I.) de Nemours & Co. 400 24 FMC Corp. 95,900 5,634 Hanna (M.A.) Co. 530,500 14,058 OM Group, Inc. 5,000 99 Shinetsu Chemical 686,000 14,214 Union Carbide Corp. 10,000 283 Wellman, Inc. 10,000 288 35,434 IRON & STEEL - 2.1% Birmingham Steel Corp. 132,600 3,381 Huntco, Inc. Class A 175,000 4,528 Inland Steel Industries, Inc. (a) 99,800 3,792 Nucor Corp. 537,300 37,074 48,775 METALS & MINING - 0.4% Alcan Aluminium Ltd. 387,100 9,494 Aluminum Co. of America 1,000 78 Inco Ltd. 10,000 274 Reynolds Metals Co. 600 30 9,876 PAPER & FOREST PRODUCTS - 1.8% Abitibi-Price, Inc. (a) 611,600 7,611 Avenor, Inc. (a) 55,400 859 Bowater, Inc. 237,300 6,377 Champion International Corp. 171,500 5,874 Georgia-Pacific Corp. 8,000 516 Jefferson Smurfit Corp. (a) 146,000 2,610 QUNO Corp. (c) 7,600 130 Stone Consolidated Corp. (a) 23,000 274 Stone Container Corp. (a) 584,000 9,636 Temple-Inland, Inc. 68,100 3,482 Union Camp Corp. 28,700 1,356 Weyerhaeuser Co. 25,300 1,063 39,788 TOTAL BASIC INDUSTRIES 133,873 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) CONGLOMERATES - 0.0% ITT Corp. 3,400 $ 292 United Technologies Corp. 4,600 277 569 CONSTRUCTION & REAL ESTATE - 1.7% BUILDING MATERIALS - 0.5% Armstrong World Industries, Inc. 233,300 11,490 Medusa Corp. 1,100 28 11,518 CONSTRUCTION - 0.0% Centex Corp. 2,900 73 Clayton Homes, Inc. (a) 5,700 106 Pulte Corp. 36,000 819 998 ENGINEERING - 1.2% Fluor Corp. 290,000 15,805 Foster Wheeler Corp. 240,900 9,907 Glenayre Technologies, Inc. 15,000 713 26,425 TOTAL CONSTRUCTION & REAL ESTATE 38,941 DURABLES - 5.8% AUTOS, TIRES, & ACCESSORIES - 4.6% Bridgestone Corp. 462,000 7,584 Chrysler Corp. 21,600 1,040 Echlin, Inc. 475,100 15,084 Ford Motor Co. 49,200 1,562 General Motors Corp. 104,000 5,343 Goodyear Tire & Rubber Co. 1,300 46 Honda Motor Co. Ltd. 1,235,000 21,387 Smith (A.O.) Corp. Class B 7,800 218 Suzuki Motor Corp. 2,237,000 29,334 Toyota Motor Corp. 1,022,000 21,688 103,286 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) DURABLES - CONTINUED CONSUMER ELECTRONICS - 0.5% Matsushita Electric Industrial Co. Ltd. 755,000 $ 12,394 Sony Corp. 8,000 470 12,864 TEXTILES & APPAREL - 0.7% Cygne Designs, Inc. (a) 500,300 11,257 Fruit of the Loom, Inc. Class A (a) 4,600 109 NIKE, Inc. Class B 500 31 Nisshinbo Industries 219,000 2,455 Toyobo Co. 294,000 1,363 15,215 TOTAL DURABLES 131,365 ENERGY - 15.4% ENERGY SERVICES - 3.9% Dual Drilling Co. 196,600 2,458 Energy Service Co., Inc. (a) 490,200 8,517 Enterra Corp. (a) 18,400 368 Global Industries Ltd. (a) 540,000 10,530 Global Marine, Inc. (a) 2,523,400 11,671 Hornbeck Offshore Services, Inc. (a) 240,000 3,480 Input/Output, Inc. 76,400 1,547 Marine Drilling Cos., Inc. (a) 1,786,200 9,489 Nabors Industries, Inc. (a) 486,300 3,343 Newpark Resources, Inc. (a) 25,000 419 Noble Drilling Corp. (a) 1,165,700 8,306 Nowsco Well Service Ltd. 619,800 10,619 Offshore Logistics, Inc. (a) 10,000 126 Production Operators Corp. 24,000 588 Schlumberger Ltd. 29,100 1,717 Tidewater, Inc. 665,700 15,810 Weatherford International, Inc. (a) 10,000 126 89,114 OIL & GAS - 11.5% Amerada Hess Corp. 576,800 29,994 Anadarko Petroleum Corp. 5,700 273 Anderson Exploration Ltd. (a) 764,400 9,374 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) ENERGY - CONTINUED OIL & GAS - CONTINUED Apache Corp. 518,900 $ 13,297 Barrington Petroleum Ltd. (a) 920,600 4,483 Blue Range Resource Corp. Class A (a) 1,263,300 9,797 British Petroleum PLC ADR 782,700 59,485 Burlington Resources, Inc. 3,800 149 Canadian Natural Resources Ltd. (a) 513,900 7,275 Devon Energy Corp. 124,900 2,529 Dorset Exploration Ltd. (a) 440,000 3,968 Enron Oil & Gas Co. 20,200 401 Grad & Walker Energy Corp. 393,500 3,903 Intensity Resources Ltd. 2,889,600 6,670 Jordan Petroleum Ltd. Class A (a) 1,060,300 8,414 Mark Resources, Inc. (a) 1,896,000 12,993 Newfield Exploration Co. (a) 6,100 147 Noble Affiliates, Inc. 144,008 3,924 Northrock Resources Ltd. (a) 258,100 2,048 Northstar Energy Corp. (a) 918,400 9,938 PT Tri Polyta Indonesia sponsored ADR 74,000 1,665 Pancanadian Petroleum Ltd. 242,200 7,360 Parker & Parsley Petroleum Co. 371,500 9,380 Petro-Canada 202,100 1,658 Poco Petroleum Ltd. (a) 826,900 5,592 Renaissance Energy Ltd. (a) 220,000 4,682 Renaissance Energy Ltd. (a)(c) 50,000 1,064 Rio Alto Exploration Ltd. (a) 1,181,700 7,459 Stampeder Exploration Ltd. (a) 292,700 1,240 Transwest Energy, Inc. 936,500 1,878 Unocal Corp. 962,300 27,907 258,947 TOTAL ENERGY 348,061 FINANCE - 14.0% BANKS - 1.6% Banc One Corp. 13,900 464 Bank of Boston Corp. 78,066 2,059 BankAmerica Corp. 10,000 482 Bankers Trust New York Corp. 60,000 4,020 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED BANKS - CONTINUED Boatmen's Bancshares, Inc. 29,300 $ 1,004 Citicorp 301 12 Comerica, Inc. 55,300 1,645 First Bank System, Inc. 10,000 365 First Fidelity Bancorporation 7,570 354 First Union Corp. 9,600 434 Fleet Financial Group, Inc. 40,312 1,456 Huntington Bancshares, Inc. 1,221 25 Keycorp. 73,700 2,395 Mercantile Bancorporation, Inc. 5,700 208 Morgan (J.P.) & Co., Inc. 77,646 4,892 National City Bancorporation (a) 44,000 682 National City Corp. 12,800 344 NationsBank Corp. 142,074 7,921 Norwest Corp. 10,000 261 PNC Financial Corp. 16,500 474 Shawmut National Corp. 226,556 4,814 Star Banc Corp. 22,500 872 35,183 CREDIT & OTHER FINANCE - 2.6% American Express Co. 645,500 17,106 Dean Witter Discover & Co. 962,837 38,634 Equitable Companies, Inc. 150,000 3,281 59,021 FEDERAL SPONSORED CREDIT - 2.5% Federal Home Loan Mortgage Corporation 401,500 23,889 Federal National Mortgage Association 376,400 32,653 56,542 INSURANCE - 2.1% Allstate Corp. 3,200 80 American International Group, Inc. 40,000 3,770 CIGNA Corp. 181,500 12,433 Travelers, Inc. (The) 932,066 30,875 47,158 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) FINANCE - CONTINUED SECURITIES INDUSTRY - 5.2% Bear Stearns Companies, Inc. 432,055 $ 6,967 Daiwa Securities 301,000 4,821 Edwards (A.G.), Inc. 271,000 4,743 Lehman Brothers Holdings, Inc. 1,026,300 16,164 Merrill Lynch & Co., Inc. 479,500 17,562 Morgan Stanley Group, Inc. 315,600 19,133 Nikko Securities 90,000 1,117 Nomura Securities Ltd. 873,000 19,313 Paine Webber Group, Inc. 1,184,650 19,102 Schwab (Charles) Corp. 305,000 8,159 117,081 TOTAL FINANCE 314,985 HEALTH - 4.2% DRUGS & PHARMACEUTICALS - 0.2% Biogen, Inc. 10,000 435 Elan Corp. PLC: ADR (a) 68,200 2,327 (1 Advanced Therapeutic Systems Unit Common & 1 ADR warrant) 47,562 1,141 3,903 MEDICAL EQUIPMENT & SUPPLIES - 0.0% McKesson Corp. 200 20 MEDICAL FACILITIES MANAGEMENT - 4.0% Columbia/HCA Healthcare Corp. 186,390 7,549 Health Management Associates, Inc. Class A (a) 53,400 1,115 Healthwise America, Inc. 20,100 432 Humana, Inc. (a) 241,300 4,524 Oxford Health Plans, Inc. (a)(d) 932,100 54,528 U.S. Healthcare, Inc. 23,350 884 United HealthCare Corp. 466,800 21,239 90,271 TOTAL HEALTH 94,194 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) INDUSTRIAL MACHINERY & EQUIPMENT - 3.0% ELECTRICAL EQUIPMENT - 1.6% American Superconductor Corp. (a) 1,000 $ 27 C COR Electronics, Inc. (a)(d) 334,000 8,434 Corning, Inc. 481,700 15,294 General Electric Co. 1,000 50 Hitachi Koki Co. Ord. 6,000 61 Mitsubishi Electric Co. Ord. 440,000 3,026 Scientific-Atlanta, Inc. 288,400 10,022 36,914 INDUSTRIAL MACHINERY & EQUIPMENT - 1.4% Caterpillar, Inc. 112,000 12,138 Clark Equipment Co. (a) 800 55 Deere & Co. 3,300 231 Nokia AB: free shares 80,000 7,710 sponsored ADR (a) 170,700 8,386 Parker-Hannifin Corp. 76,300 3,290 Regal-Beloit Corp. 900 25 31,835 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 68,749 MEDIA & LEISURE - 1.3% BROADCASTING - 0.1% Infinity Broadcasting Corp. (a) 71,000 2,050 LEISURE DURABLES & TOYS - 0.9% Brunswick Corp. 621,400 14,836 Fleetwood Enterprises, Inc. 246,700 5,767 20,603 LODGING & GAMING - 0.0% International Game Technology Corp. 1,000 20 La Quinta Motor Inns, Inc. 900 26 Marcus Corp. 5,000 135 Mirage Resorts, Inc. (a) 300 6 187 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) MEDIA & LEISURE - CONTINUED RESTAURANTS - 0.3% Apple South, Inc. 460,300 $ 7,020 Boston Chicken, Inc. (a) 5,700 227 7,247 TOTAL MEDIA & LEISURE 30,087 PRECIOUS METALS - 0.0% American Barrick Resources Corp. 10,000 225 Homestake Mining Co. 700 13 238 RETAIL & WHOLESALE - 9.0% APPAREL STORES - 1.4% AnnTaylor Stores Corp. (a) 434,600 17,873 Burlington Coat Factory Warehouse Corp. (a) 98,400 2,140 Gap, Inc. 1,600 62 Gymboree Corp. (a) 145,900 5,982 Talbots, Inc. 153,400 5,005 31,062 DRUG STORES - 0.0% General Nutrition Companies, Inc. (a) 4,200 82 GENERAL MERCHANDISE STORES - 2.3% Dayton Hudson Corp. 36,900 3,044 Michaels Stores, Inc. (a) 400,400 12,412 Sears, Roebuck & Co. 796,400 37,630 53,086 GROCERY STORES - 0.0% Safeway, Inc. (a) 600 15 RETAIL & WHOLESALE, MISCELLANEOUS - 5.3% Bed Bath & Beyond, Inc. (a) 15,900 481 Best Buy Co., Inc. (a) 13,400 328 Circuit City Stores, Inc. 26,500 580 Hanover Direct, Inc. (a) 64,500 270 Lillian Vernon Corp. 147,000 2,536 Lowe's Companies, Inc. 1,865,400 67,154 Micro Warehouse, Inc. (a) 843,100 18,548 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) RETAIL & WHOLESALE - CONTINUED RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED Musicland Stores Corp. (a) 10,300 $ 187 Petsmart, Inc. (a) 467,500 14,376 Spiegel, Inc. Class A 187,900 2,678 Staples, Inc. (a) 113,000 2,938 Viking Office Products, Inc. (a) 391,000 9,091 119,167 TOTAL RETAIL & WHOLESALE 203,412 SERVICES - 2.3% ADVERTISING - 0.0% Omnicom Group, Inc. 9,300 473 LEASING & RENTAL - 0.8% Hollywood Entertainment Corp. (a)(d) 814,050 17,706 PRINTING - 0.0% Alco Standard Corp. 1,700 103 SERVICES - 1.5% Manpower, Inc. 719,000 17,256 Western Atlas, Inc. 329,800 16,037 33,293 TOTAL SERVICES 51,575 TECHNOLOGY - 31.4% COMMUNICATIONS EQUIPMENT - 4.5% Cabletron Systems, Inc. (a) 141,400 14,246 Cisco Systems, Inc. (a) 1,500 32 DSC Communications Corp. (a) 400 10 Ericsson (L.M.) Telephone Co. Class B: ADR 565,700 30,831 free shares 201,800 10,709 General Instrument Corp. (a) 497,500 30,161 3Com Corp. (a) 293,600 15,671 US Robotics, Inc. (a) 13,100 357 Wellfleet Communications, Inc. (a) 14,200 286 102,303 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTER SERVICES & SOFTWARE - 13.4% Adobe Systems, Inc. 705,400 $ 21,867 Alantec Corp. 60,000 825 Banyan Systems, Inc. (a) 7,400 117 Broderbund Software, Inc. (a)(d) 490,200 23,775 Computer Task Group, Inc. 102,900 1,003 Compuware Corp. (a) 996,900 39,253 Electronic Arts (a) 610,000 8,693 Gupta Corp. (a) 1,800 22 Informix Corp. (a) 2,900 58 LEGENT Corp. (a) 62,800 1,492 Lotus Development Corp. (a) 361,245 11,740 Microsoft Corp. (a) 27,200 1,401 Oracle Systems Corp. (a) 1,960,100 74,974 Parametric Technology Corp. (a) 6,300 156 Peoplesoft, Inc. (a) 489,300 17,003 Platinum Technology, Inc. (a)(d) 1,083,700 16,797 Powersoft Corp. (a) 493,400 21,216 Sierra On-Line, Inc. 20,000 380 Stratacom, Inc. (a) 364,100 11,196 Sybase, Inc. (a) 918,100 36,150 Wall Data, Inc. (a) 35,000 1,251 Wonderware Corp. (a)(d) 816,200 12,039 301,408 COMPUTERS & OFFICE EQUIPMENT - 5.1% ADAPTEC, Inc. (a) 2,900 53 Apple Computer, Inc. 130,000 4,379 Canon, Inc. 737,000 12,615 Casio Computer Co. Ltd. Ord. 34,000 415 Compaq Computer Corp. (a) 42,000 1,328 Conner Peripherals, Inc. (a) 8,100 98 Creative Technologies, Corp. (a) 3,000 63 EMC Corp. (a) 584,300 8,691 Exabyte (a) 15,500 242 Fore Systems, Inc. (a) 2,000 63 Hewlett-Packard Co. 5,000 388 International Business Machines Corp. 983,100 60,706 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TECHNOLOGY - CONTINUED COMPUTERS & OFFICE EQUIPMENT - CONTINUED Seagate Technology (a) 7,400 $ 197 Silicon Graphics, Inc. (a) 1,133,300 26,774 Xerox Corp. 900 92 116,104 ELECTRONIC INSTRUMENTS - 0.9% Applied Materials, Inc. (a) 45,400 2,032 KLA Instruments Corp. (a) 397,000 15,880 Lam Research Corp. (a) 6,600 186 Megatest Corp. (a) 48,000 798 Teradyne, Inc. (a) 63,600 1,606 20,502 ELECTRONICS - 7.4% Advanced Micro Devices, Inc. (a) 400 11 Altera Corp. (a) 900 21 Analog Devices, Inc. (a) 3,400 90 Atmel Corp. (a) 508,000 12,446 Bell Microproducts, Inc. (a) 305,800 3,173 CTS Corp. 4,400 124 Cascade Communications Corp. 5,600 84 Cirrus Logic, Inc. (a) 153,600 4,502 Cypress Semiconductor Corp. (a) 439,700 7,420 Hitachi Ltd. 2,520,000 24,342 Integrated Device Technology, Inc. (a) 44,100 750 Intel Corp. 389,400 23,072 LSI Logic Corp. (a) 458,100 12,426 Microchip Technology, Inc. 30,000 960 Micron Technology, Inc. 7,600 284 Motorola, Inc. 1,157,000 61,321 National Semiconductor Corp. (a) 78,100 1,318 Texas Instruments, Inc. 177,300 13,940 VLSI Technology, Inc. (a) 2,900 42 166,326 PHOTOGRAPHIC EQUIPMENT - 0.1% Eastman Kodak Co. 30,000 1,451 TOTAL TECHNOLOGY 708,094 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) TRANSPORTATION - 2.0% AIR TRANSPORTATION - 0.6% KLM Royal Dutch Airlines (a): Ord. 213,000 $ 6,576 Reg. 197,200 6,113 12,689 RAILROADS - 1.4% Burlington Northern, Inc. 6,700 348 CSX Corp. 261,300 20,283 Canadian Pacific Ltd. Ord. 25,000 367 Conrail, Inc. 2,900 156 Illinois Central Corp., Series A 29,700 947 Santa Fe Pacific Corp. 424,900 8,764 30,865 TRUCKING & FREIGHT - 0.0% Federal Express Corp. (a) 400 27 Landstar System, Inc. (a) 3,000 95 Swift Transportation Co., Inc. (a) 13,000 479 TNT Freightways Corp. 1,150 28 629 TOTAL TRANSPORTATION 44,183 UTILITIES - 1.0% CELLULAR - 0.7% Airtouch Communications (a) 582,900 15,155 Cellular Communications, Inc. Class P (a) 15,000 800 15,955 ELECTRIC UTILITY - 0.1% Entergy Corp. 1,900 48 Fuji Electric Co., Ltd. 475,000 2,743 2,791 TELEPHONE SERVICES - 0.2% Ameritech Corp. 44,800 1,837 BellSouth Corp. 1,800 112 Pacific Telesis Group 5,000 164 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) (000S) UTILITIES - CONTINUED TELEPHONE SERVICES - CONTINUED Southwestern Bell Corp. 47,600 $ 1,999 U.S. West, Inc. 10,000 403 4,515 TOTAL UTILITIES 23,261 TOTAL COMMON STOCKS (Cost $2,073,758) 2,191,587 PREFERRED STOCKS - 0.5% ENERGY - 0.0% OIL & GAS - 0.0% Gulf Canada Resources, Ltd. (a) (b) 2,315 6 INDUSTRIAL MACHINERY & EQUIPMENT - 0.5% Nokia 108,900 10,495 TOTAL PREFERRED STOCKS (Cost $9,679) 10,501 REPURCHASE AGREEMENTS - 2.5% MATURITY AMOUNT (000S) Investments in repurchase agreements, (U.S. Treasury obligations), in a joint trading account at 4.23%, dated 7/29/94 due 8/1/94 $ 56,694 56,674 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $2,140,111) $ 2,258,762 FORWARD FOREIGN CURRENCY CONTRACTS AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED DATE(S) VALUE GAIN/(LOSS) CONTRACTS TO BUY 20,039,871 JPY 8/18/94 to 10/11/94 $ 200,945 $ (2,768) (Payable amount $203,713) THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 8.9% CONTRACTS TO SELL 38,020,521 JPY 8/18/94 to 11/2/94 $ 380,924 (7,518) (Receivable amount $373,406) THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN SECURITIES - 16.9% $ (10,286) CURRENCY ABBREVIATION JPY - Japanese yen LEGEND 1. Non-income producing 2. Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Gulf Canada Resource, Ltd. 10/15/93 $ 6,000 3. 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 $1,194,000 or 0.1% of net assets. 4. Affiliated company (see Note 7 of Notes to Financial Statements). OTHER INFORMATION Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 79.4% Japan 7.9 Canada 6.2 United Kingdom 2.6 Sweden 1.8 Finland 1.2 Others (individually less than 1%) 0.9 TOTAL 100.0% INCOME TAX INFORMATION At July 31,1994, the aggregate cost of investment securities for income tax purposes was $2,152,072,000. Net unrealized appreciation aggregated $106,690,000, of which $152,959,000 related to appreciated investment securities and $46,269,000 related to depreciated investment securities. The fund hereby designates $5,187,000 as a capital gain dividend for the purpose of the dividend paid deduction. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER SHARE AMOUNTS) JULY 31, 1994 ASSETS Investment in securities, at value (including repurchase $ 2,258,762 agreements of $56,674) (cost $2,140,111) (Notes 1 and 2) - See accompanying schedule Cash 1 Receivable for investments sold 67,521 Unrealized appreciation on foreign currency contracts 116 (Note 2) Receivable for fund shares sold 27,463 Dividends receivable 1,575 Other receivables 50 TOTAL ASSETS 2,355,488 LIABILITIES Payable for investments purchased $ 97,873 Unrealized depreciation on foreign currency contracts 10,402 (Note 2) Payable for fund shares redeemed 16,117 Accrued management fee 1,237 Other payables and accrued expenses 1,341 TOTAL LIABILITIES 126,970 NET ASSETS $ 2,228,518 Net Assets consist of (Note 1): Paid in capital $ 2,071,190 Undistributed net investment income 10,286 Accumulated undistributed net realized gain (loss) on 38,676 investments and foreign currency transactions Net unrealized appreciation (depreciation) on 108,366 investments and assets and liabilities in foreign currencies NET ASSETS, for 88,660 shares outstanding $ 2,228,518 NET ASSET VALUE and redemption price per share $25.14 ($2,228,518 (divided by) 88,660 shares) Maximum offering price per share (100/97.00 of $25.14) $25.92
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1994 INVESTMENT INCOME $ 13,355 Dividends Interest (Note 5) 6,057 TOTAL INCOME 19,412 EXPENSES Management fee (Note 4) 8,499 Basic fee Performance adjustment 1,080 Transfer agent fees (Note 4) 5,838 Accounting fees and expenses (Note 4) 560 Non-interested trustees' compensation 7 Custodian fees and expenses 280 Registration fees 709 Audit 49 Legal 7 Interest (Note 6) 5 Reports to shareholders 212 Miscellaneous 16 Total expenses before reductions 17,262 Expense reductions (Note 8) (659) 16,603 NET INVESTMENT INCOME 2,809 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1, 2 AND 3) Net realized gain (loss) on: Investment securities 103,621 Foreign currency transactions 608 104,229 Change in net unrealized appreciation (depreciation) on: Investment securities 41,009 Assets and liabilities in foreign currencies (10,285) 30,724 NET GAIN (LOSS) 134,953 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ 137,762 OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED JULY 31, 1994 JULY 31, 1993 INCREASE (DECREASE) IN NET ASSETS Operations $ 2,809 $ 2,728 Net investment income Net realized gain (loss) 104,229 121,482 Change in net unrealized appreciation (depreciation) 30,724 (10,298) NET INCREASE (DECREASE) IN NET ASSETS RESULTING 137,762 113,912 FROM OPERATIONS Distributions to shareholders (332) (3,304) From net investment income From net realized gain (147,694) (14,111) TOTAL DISTRIBUTIONS (148,026) (17,415) Share transactions 2,243,190 575,636 Net proceeds from sales of shares Reinvestment of distributions 141,684 16,191 Cost of shares redeemed (933,920) (376,470) Net increase (decrease) in net assets resulting from 1,450,954 215,357 share transactions TOTAL INCREASE (DECREASE) IN NET ASSETS 1,440,690 311,854 NET ASSETS Beginning of period 787,828 475,974 End of period (including undistributed net investment $ 2,228,518 $ 787,828 income of $2,390 and $770, respectively) OTHER INFORMATION Shares Sold 89,635 24,389 Issued in reinvestment of distributions 5,832 734 Redeemed (37,436) (16,108) Net increase (decrease) 58,031 9,015
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1994 1993 1992 1991 1990 SELECTED PER-SHARE DATA Net asset value, beginning of $ 25.72 $ 22.02 $ 18.94 $ 15.33 $ 13.56 period Income from Investment Operations Net investment income .12 .10 .09 .12 .12 Net realized and unrealized 3.43 4.36 3.07 3.64 1.94 gain (loss) Total from investment 3.55 4.46 3.16 3.76 2.06 operations Less Distributions From net investment income (.01) (.14) (.08) (.15) (.12) From net realized gain (4.12) (.62) - - (.17) Total distributions (4.13) (.76) (.08) (.15) (.29) Net asset value, end of period $ 25.14 $ 25.72 $ 22.02 $ 18.94 $ 15.33 TOTAL RETURN A, B 14.95% 20.86% 16.73% 24.86% 15.43% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 2,229 $ 788 $ 476 $ 219 $ 131 (in millions) Ratio of expenses to average 1.22% 1.25% 1.27% 1.26% 1.26% net assets Ratio of expenses to average 1.27% 1.25% 1.27% 1.26% 1.26% net assets before expense reductions Ratio of net investment income .21% .46% .55% .80% 1.14% to average net assets Portfolio turnover rate 271% 319% 71% 99% 68%
A THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS.) B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. NOTES TO FINANCIAL STATEMENTS For the period ended July 31, 1994 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Blue Chip Growth Fund (the fund) is a fund of Fidelity Securities Fund (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The following summarizes the significant accounting policies of the fund: SECURITY VALUATION. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange), are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the 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. Effective August 1, 1993, the fund adopted Statement of Position (SOP) 93-4: Foreign Currency Accounting and Financial Statement Presentation for Investment Companies. In accordance with this SOP, reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. Further, as permitted under the SOP, the effects of changes in foreign currency exchange rates on investments in securities are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but 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 all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INVESTMENT INCOME - CONTINUED as the fund is informed of the ex-dividend date. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions and losses deferred due to wash sales. The fund also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income 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. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective August 1, 1993, the fund adopted Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the fund changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts as of August 1, 1993 have been reclassified to reflect an increase in paid in capital of $6,281,000, a decrease in undistributed net investment income of $686,000, and a decrease in accumulated net realized gain on investments of $5,595,000. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign currency contracts. These contracts involve market risk in excess of the amount reflected in the fund's Statement of Assets and Liabilities. The face or contract amount in U.S. dollars, as reflected in the schedule of investments under the caption "Forward Foreign Currency Contracts," 2. OPERATING POLICIES - CONTINUED FORWARD FOREIGN CURRENCY CONTRACTS - CONTINUED reflects the total exposure the fund has in that particular currency contract. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset, otherwise gain (loss) is recognized on settlement date. REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The fund's investment adviser, Fidelity Management & Research Company (FMR), is responsible for determining that the value of these underlying securities remains at least equal to the resale price. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the fund, along with other affiliated entities of FMR, may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. 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. RESTRICTED SECURITIES. The fund is permitted to invest in privately placed restricted securities. These securities may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, restricted securities (excluding 144A issues) amounted to $6,000 or 0% of net assets. 3. PURCHASES AND SALES OF INVESTMENTS. Purchases and sales of securities, other than short-term securities, aggregated $4,691,175,000 and $3,326,733,000, 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 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED 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 .30% to .52% for the period from August 1, 1993 to October 31, 1993 and .285% to .52% for the period from November 1, 1993 to July 31, 1994. In the event that these rates were lower than the contractual rates in effect during those periods, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .30%. The basic fee is subject to a performance adjustment (up to a maximum of (plus/minus) .20%) based on the fund's investment performance as compared to the appropriate index over a specified period of time. For the period, the management fee was equivalent to an annual rate of .70% of average net assets. The Board of Trustees has approved a new group fee rate schedule with rates ranging from .27% to .52%. Effective August 1, 1994, FMR voluntarily agreed to implement this new group fee rate schedule as it results in the same or a lower management fee. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of the fund. FDC is paid a 3% sales charge on sales of shares of the fund. Prior to October 12, 1990, FDC was paid a 2% sales charge and a 1% deferred sales charge. Shares purchased before October 12, 1990 are subject to the deferred sales charge upon redemption. For the period, FDC received sales charges and deferred sales charges of $6,514,000 and $26,000, respectively, on sales of shares of the fund. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives fees based on the type, size, number of accounts and the number of transactions made by shareholders. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING 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 $2,220,000 for the period. 5. INTERFUND LENDING PROGRAM. The fund participated in the interfund lending program as a lender. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $61,041,000 and $29,690,000, respectively. 5. INTERFUND LENDING PROGRAM - CONTINUED The weighted average interest rate was 3.6%. Interest earned from the interfund lending program amounted to $ 45,000 and is included in interest income on the Statement of Operations. 6. BANK BORROWINGS. The fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, the fund must pledge to the bank securities having a market value inexcess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $14,683,000 and $10,040,000, respectively. The weighted average interest rate was 4.2%. 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 with companies which are or were affiliates are as follows: SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET AFFILIATES COST COST INCOME VALUE Broderbund Software, Inc. (a) $ - $ - - $ 23,775 C COR Electronics, Inc. (a) 2,476 - - 8,434 Hollywood Entertainment Corp. (a) - - - 17,706 Oxford Health Plans, Inc. (a) 6,127 - - 54,528 Platinum Technology, Inc. (a) 1,035 - - 16,797 Wonderware Corp. (a) 3,417 - - 12,039 TOTALS $ 13,055 $ - - $ 133,279 (a) non-income producing 8. 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 $659,000 under this arrangement. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees of Fidelity Securities Fund and the Shareholders of Fidelity Blue Chip Growth Fund: We have audited the accompanying statement of assets and liabilities of Fidelity Securities Fund: Fidelity Blue Chip Growth Fund, including the schedule of portfolio investments, as of July 31, 1994, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 1994 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Securities Fund: Fidelity Blue Chip Growth Fund as of July 31, 1994, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Boston, Massachusetts September 2, 1994 DISTRIBUTIONS The Board of Trustees of Fidelity Securities Fund: Fidelity Blue Chip Growth Fund voted to pay on September 6, 1994, to shareholders of record at the opening of business on September 2, 1994 a distribution of $.21 derived from capital gains realized from sales of portfolio securities. 7% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders. The fund will notify shareholders in January 1995 of the applicable percentage for use in preparing 1994 income tax returns. TO CALL FIDELITY FOR FUND INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call -- you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800- 544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this record-ed menu: PRESS For quotes on funds you own. 1. For an individual fund quote. 2. For the ten most frequently requested Fidelity fund quotes. 3. For quotes on Fidelity Select Portfolios.(registered trademark) 4. To change your Personal Identification Number (PIN). 5. To speak with a Fidelity representative. 6. (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC (PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1. For your most recent fund activity (purchases, redemptions, and dividends). 2. To change your Personal Identification Number (PIN). 3. To speak with a Fidelity representative. 4. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. FOR MORE INFORMATION ON ANY FIDELITY FUND INCLUDING MANAGEMENT FEES AND CHARGES, CALL 1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY. TO WRITE FIDELITY If more than one address is listed, please locate the address that is closest to you. We'll give your correspondence immediate attention and send you written confirmation upon completion of your request. (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES TO YOUR ACCOUNT (such as changing name, address, bank, etc.) Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0002 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 OVERNIGHT EXPRESS Fidelity Investments 100 Crosby Parkway - KP2C Covington, KY 41015-4399 SELLING SHARES Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 Fidelity Investments P.O. Box 30281 Salt Lake City, UT 84130-0281 OVERNIGHT EXPRESS Fidelity Investments Attn: Redemptions World Trade Center 164 Northern Avenue Boston, MA 02210 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 193 Boston, MA 02210-0193 (LETTER_GRAPHIC)(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT ACCOUNTS BUYING SHARES Fidelity Investments P.O. Box 770001 Cincinnati, OH 45277-0003 SELLING SHARES Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 GENERAL CORRESPONDENCE Fidelity Investments P.O. Box 660602 Dallas, TX 75266-0602 TO VISIT FIDELITY For directions and hours, please call 1-800-544-9797. ARIZONA 7373 N. Scottsdale Road Scottsdale, AZ CALIFORNIA 851 Hamilton Avenue Campbell, CA 527 North Brand Boulevard Glendale, CA 19100 Von Karman Avenue Irvine, CA 10100 Santa Monica Blvd. Los Angeles, CA 811 Wilshire Boulevard Los Angeles, CA 251 University Avenue Palo Alto, CA 1760 Challenge Way Sacramento, CA 7676 Hazard Center Drive San Diego, CA 455 Market Street San Francisco, CA 1400 Civic Drive Walnut Creek, CA COLORADO 1625 Broadway Denver, CO CONNECTICUT 185 Asylum Street Hartford, CT 265 Church Street New Haven, CT 300 Atlantic Street Stamford, CT DELAWARE 222 Delaware Avenue Wilmington, DE FLORIDA 4400 N. Federal Highway Boca Raton, FL 2249 Galiano Street Coral Gables, FL 4090 N. Ocean Boulevard Ft. Lauderdale, FL 4001 Tamiami Trail, North Naples, FL 1907 West State Road 434 Orlando, FL 2401 PGA Boulevard Palm Beach Gardens, FL 8065 Beneva Road Sarasota, FL 2000 66th Street, North St. Petersburg, FL GEORGIA 3525 Piedmont Road, N.E. Atlanta, GA 1000 Abernathy Road Atlanta, GA HAWAII 700 Bishop Street Honolulu, HI ILLINOIS 215 East Erie Street Chicago, IL One North Franklin Chicago, IL 540 Lake Cook Road Deerfield, IL 1415 West 22nd Street Oak Brook, IL 1700 East Golf Road Schaumburg, IL LOUISIANA 201 St. Charles Avenue New Orleans, LA MAINE 3 Canal Plaza Portland, ME MARYLAND 1 West Pennsylvania Ave. Towson, MD 7401 Wisconsin Avenue Bethesda, MD MASSACHUSETTS 470 Boylston Street Boston, MA 21 Congress Street Boston, MA 25 State Street Boston, MA 300 Granite Street Braintree, MA 101 Cambridge Street Burlington, MA 416 Belmont Street Worcester, MA MICHIGAN 280 North Woodward Ave. Birmingham, MI 26955 Northwestern Hwy. Southfield, MI MINNESOTA 38 South Sixth Street Minneapolis, MN MISSOURI 700 West 47th Street Kansas City, MO 200 North Broadway St. Louis, MO NEW JERSEY 60B South Street Morristown, NJ 501 Route 17, South Paramus, NJ 505 Millburn Avenue Short Hills, NJ NEW YORK 1050 Franklin Avenue Garden City, NY 999 Walt Whitman Road Melville, L.I., NY 71 Broadway New York, NY 350 Park Avenue New York, NY 10 Bank Street White Plains, NY NORTH CAROLINA 2200 West Main Street Durham, NC OHIO 600 Vine Street Cincinnati, OH 1903 East Ninth Street Cleveland, OH 28699 Chagrin Boulevard Woodmere Village, OH OREGON 121 S.W. Morrison Street Portland, OR PENNSYLVANIA 1735 Market Street Philadelphia, PA 439 Fifth Avenue Pittsburgh, PA TENNESSEE 5100 Poplar Avenue Memphis, TN TEXAS 10000 Research Boulevard Austin, TX 7001 Preston Road Dallas, TX 1155 Dairy Ashford Houston, TX 1010 Lamar Street Houston, TX 2701 Drexel Drive Houston, TX 400 East Las Colinas Blvd. Irving, TX 14100 San Pedro San Antonio, TX UTAH 175 East 400 South Street Salt Lake City, UT VERMONT 199 Main Street Burlington, VT VIRGINIA 8180 Greensboro Drive McLean, VA WASHINGTON 411 108th Avenue, N.E. Bellevue, WA 1001 Fourth Avenue Seattle, WA WASHINGTON, DC 1775 K Street, N.W. Washington, DC WISCONSIN 222 East Wisconsin Avenue Milwaukee, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA Fidelity Management & Research (U.K.) Inc., London England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, President J. Gary Burkhead, Senior Vice President Michael Gordon, Vice President William J. Hayes, Vice President Gary L. French, Treasurer John H. Costello, Assistant Treasurer Leonard M. Rush, Assistant Treasurer Arthur S. Loring, Secretary Robert H. Morrison, Manager, Security Transactions BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox* Phyllis Burke Davis* Richard J. Flynn* Edward C. Johnson 3d E. Bradley Jones* Donald J. Kirk* Peter S. Lynch Edward H. Malone* Marvin L. Mann* Gerald C. McDonough* Thomas R. Williams* GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIAN Brown Brothers Harriman & Co. Boston, MA FIDELITY GROWTH FUNDS Blue Chip Growth Fund Capital Appreciation Fund Contrafund Disciplined Equity Fund Dividend Growth Fund Emerging Growth Fund Fidelity Fifty Growth Company Fund Low-Priced Stock Fund Magellan(registered trademark) Fund Mid-Cap Stock Fund New Millennium(trademark) Fund OTC Portfolio Retirement Growth Fund Small Cap Growth Fund Stock Selector Trend Fund Value Fund THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0118 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) (registered trademark) * INDEPENDENT TRUSTEES AUTOMATED LINES FOR QUICKEST SERVICE -----END PRIVACY-ENHANCED MESSAGE-----