FIDELITY(REGISTERED TRADEMARK)
CONVERTIBLE SECURITIES
FUND
SEMIANNUAL REPORT
MAY 31, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 23 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 27 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
The technology sell-off that began in mid-March continued to hamper
equity markets, driving the tech-heavy NASDAQ index down more than 16%
year to date through the end of May. Broader equity indexes, including
the S&P 500(registered trademark), also were down, but not as much as
more concentrated performance measures. In bond markets, Treasuries
got a boost late in the period as economic reports showed the first
signs of a slowing economy.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY CONVERTIBLE SECURITIES 16.40% 33.69% 143.44% 391.03%
ML All US Convertible 9.46% 23.23% 126.32% 311.77%
Securities
Convertible Securities Funds 10.65% 24.06% 109.73% 251.05%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Merrill Lynch All U.S. Convertible Securities Index - a market
capitalization-weighted index of domestic corporate convertible
securities. To measure how the fund's performance stacked up against
its peers, you can compare it to the convertible securities funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 64 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY CONVERTIBLE SECURITIES 33.69% 19.48% 17.25%
ML All US Convertible 23.23% 17.75% 15.20%
Securities
Convertible Securities Funds 24.06% 15.53% 12.97%
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Convertible Securities ML All Conv. Sec. Index
00308 ML014
1990/05/31 10000.00 10000.00
1990/06/30 10111.65 10015.61
1990/07/31 10042.69 9865.88
1990/08/31 9378.93 9222.94
1990/09/30 8916.09 8854.24
1990/10/31 8741.44 8417.92
1990/11/30 9195.54 8889.85
1990/12/31 9476.64 9108.01
1991/01/31 10063.93 9574.73
1991/02/28 10713.50 10330.82
1991/03/31 10998.34 10615.96
1991/04/30 11124.35 10785.67
1991/05/31 11502.36 11129.99
1991/06/30 11283.96 10824.69
1991/07/31 11738.96 11079.10
1991/08/31 12184.86 11447.31
1991/09/30 12388.26 11468.28
1991/10/31 12921.68 11657.02
1991/11/30 12369.86 11490.72
1991/12/31 13147.65 12057.74
1992/01/31 13811.28 12598.76
1992/02/29 14263.32 12944.21
1992/03/31 14022.78 12862.76
1992/04/30 14139.32 13038.82
1992/05/31 14411.23 13269.50
1992/06/30 14325.24 13113.28
1992/07/31 14717.44 13532.85
1992/08/31 14433.09 13498.72
1992/09/30 14776.92 13778.00
1992/10/31 15123.33 13813.77
1992/11/30 15608.30 14205.71
1992/12/31 16042.70 14638.78
1993/01/31 16579.18 15111.19
1993/02/28 16290.31 15222.88
1993/03/31 17100.96 15803.39
1993/04/30 17257.28 15712.20
1993/05/31 17684.54 16071.46
1993/06/30 17664.30 16176.81
1993/07/31 17843.15 16236.95
1993/08/31 18263.98 16694.25
1993/09/30 18476.15 16859.58
1993/10/31 18900.89 17273.79
1993/11/30 18720.38 17034.66
1993/12/31 18896.35 17294.27
1994/01/31 19367.33 17745.55
1994/02/28 19057.17 17521.05
1994/03/31 18222.97 16797.31
1994/04/30 17921.00 16467.80
1994/05/31 17851.31 16462.59
1994/06/30 17837.87 16276.46
1994/07/31 18155.57 16565.33
1994/08/31 19120.41 16993.86
1994/09/30 19000.99 16776.83
1994/10/31 19120.12 16836.00
1994/11/30 18619.78 16321.81
1994/12/31 18564.55 16256.46
1995/01/31 18564.55 16373.18
1995/02/28 18951.31 16884.94
1995/03/31 19511.36 17343.37
1995/04/30 19950.92 17705.24
1995/05/31 20170.69 18194.07
1995/06/30 20675.22 18815.07
1995/07/31 21217.68 19451.51
1995/08/31 21464.26 19736.48
1995/09/30 21871.67 19993.17
1995/10/31 21336.69 19449.56
1995/11/30 21971.20 20195.57
1995/12/31 22162.46 20270.18
1996/01/31 22613.68 20895.24
1996/02/29 23158.11 21367.17
1996/03/31 23454.20 21590.21
1996/04/30 24003.70 21991.58
1996/05/31 24392.37 22477.65
1996/06/30 24122.57 22144.72
1996/07/31 22985.48 21201.35
1996/08/31 23621.71 22019.05
1996/09/30 24137.36 22625.42
1996/10/31 24424.55 22898.20
1996/11/30 25491.24 23671.85
1996/12/31 25497.02 23497.90
1997/01/31 26324.66 24182.63
1997/02/28 25830.98 24092.40
1997/03/31 24934.40 23575.45
1997/04/30 25286.83 23789.71
1997/05/31 26755.28 24996.42
1997/06/30 27554.55 25780.64
1997/07/31 28950.10 27252.33
1997/08/31 28816.48 27104.72
1997/09/30 30738.92 28357.77
1997/10/31 29153.36 27811.56
1997/11/30 29273.02 27865.36
1997/12/31 29183.20 28095.39
1998/01/31 29869.21 28181.88
1998/02/28 32161.69 29429.72
1998/03/31 33764.42 30511.75
1998/04/30 34371.58 30703.25
1998/05/31 33460.85 30025.03
1998/06/30 33987.92 30278.64
1998/07/31 33648.38 29797.77
1998/08/31 28351.56 26374.00
1998/09/30 29285.29 26900.38
1998/10/31 30518.36 27595.18
1998/11/30 31871.30 28913.26
1998/12/31 33935.23 30604.90
1999/01/31 35110.52 32114.64
1999/02/28 33435.96 30992.62
1999/03/31 35411.90 32275.09
1999/04/30 36970.91 33585.20
1999/05/31 36729.64 33415.65
1999/06/30 38872.65 34647.40
1999/07/31 38368.30 34426.31
1999/08/31 37789.22 33992.26
1999/09/30 37689.46 34215.95
1999/10/31 39306.87 35556.95
1999/11/30 42184.36 37616.64
1999/12/31 48895.07 42712.07
2000/01/31 49280.15 42701.82
2000/02/29 56119.53 46294.34
2000/03/31 55446.01 46228.50
2000/04/30 51108.53 43040.77
2000/05/31 49103.47 41176.64
IMATRL PRASUN SHR__CHT 20000531 20000620 144544 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Convertible Securities Fund on May 31, 1990. As
the chart shows, by May 31, 2000, the value of the investment would
have grown to $49,103 - a 391.03% increase on the initial investment.
For comparison, look at how the Merrill Lynch All U.S. Convertible
Securities Index did over the same period. With dividends and capital
gains, if any, reinvested, the same $10,000 would have grown to
$41,177 - a 311.77% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
U.S. equity investors faced a steadily
declining market during the latter
part of the six-month period that
ended May 31, 2000, after
experiencing continued growth the
prior three months. Two chief
catalysts - a tightening of monetary
policy by the Federal Reserve Board
and the bursting of a speculative
bubble in technology stocks -
sparked a sustained pullback among
the major U.S. equity indexes that
began in March. The tech-heavy
NASDAQ Composite Index reached
a high of 5048 on March 10 before
quickly retreating below the 4000
level. The NASDAQ dropped to
3401 on the final day of the period,
gaining a modest 2.05% return for
the six-month period. The Standard
& Poor's 500SM Index - an index
of 500 widely held stocks - fared
slightly better in returning 2.90%.
Another index of well-established
stocks - the blue chips' Dow Jones
Industrial Average - surged higher
during the NASDAQ's sharp
plummet in April, but the brief rally
wasn't enough to significantly offset
earlier losses, and the Dow returned
-2.55% for the period. The Russell
2000(Registered trademark) Index - a barometer of
small-cap stocks - outperformed the
major indexes of larger companies
with a 5.50% return. As the period
drew to a close, weaker trading
volume suggested investors were
mixed about the direction of U.S.
stocks, and whether the three
interest-rate hikes levied by the
Fed during the period had begun
to cool off the overheated economy.
(photograph of Beso Sikharulidze)
An interview with Beso Sikharulidze, Portfolio Manager of Fidelity
Convertible Securities Fund
Q. HOW DID THE FUND PERFORM, BESO?
A. For the six months that ended May 31, 2000, the fund returned
16.40%, topping the Merrill Lynch All U.S. Convertible Securities
Index, which returned 9.46%. The convertible securities funds average
tracked by Lipper Inc. returned 10.65% during the same time frame. For
the 12 months that ended May 31, 2000, the fund returned 33.69%, while
the Merrill Lynch index and Lipper average posted returns of 23.23%
and 24.06%, respectively.
Q. WHAT FACTORS ALLOWED THE FUND TO OUTPACE BOTH ITS BENCHMARK AND ITS
PEERS DURING THE SIX-MONTH PERIOD?
A. The fund was rewarded for strong stock picking and its overexposure
to the fastest-growing segments of the market - namely technology and
telecommunications - relative to the index and a generally less
growth-oriented peer group. We garnered much of our advantage over the
index from having more of the higher-quality tech names that held on
to more of their gains during the sharp correction in the spring.
Veritas Software, EMC and Comverse are a few names that quickly come
to mind.
Q. WHAT CHANGES DID YOU MAKE IN TERMS OF THE FUND'S ASSET ALLOCATION?
A. I pared back the fund's exposure to pure equities, as many of the
companies I liked began to issue convertible securities. New issues
emerged in droves earlier in the period during the market's dramatic
upswing, with many tech-oriented companies in particular offering
convertibles as a cheaper way to raise capital. This action afforded
us the opportunity to participate in the high-growth areas without
having to own the stocks themselves, while benefiting from the
downside protection and yield that convertibles had to offer. Finding
the optimal mix of securities required us to take profits in some of
our convertible holdings along the way that were acting more
equity-like, and replace them with less volatile issues. In so doing,
we weathered the downturn much better than the average aggressive
diversified stock fund.
Q. WHAT WERE SOME OF YOUR OTHER STRATEGIES THAT HELPED SHAPE FUND
PERFORMANCE?
A. Although we remained underweighted in finance, we focused our
attention on a couple of large, high-quality issues that came to
market during the period. Taking a major position in MetLife proved
particularly beneficial, as this security stormed out of the gates on
strong demand for investment-grade convertible bonds. The fund's
health care investments also added appreciably to performance. I feel
that my years following this sector served me well, as I was able to
add a number of traditional names to the portfolio at extremely
attractive valuations. I also included several quality biotechnology
stocks such as ImClone Systems and Millennium Pharmaceuticals into the
mix, which helped. My focus rested primarily on firms with strong
product pipelines that were well-positioned leaders in the genomics
space.
Q. WHAT HOLDINGS CONTRIBUTED THE MOST TO PERFORMANCE? WHICH PROVED TO
BE DISAPPOINTMENTS?
A. Data storage management software provider Veritas enjoyed record
revenue growth spurred by booming demand for storage due to the
Internet. Comverse, a provider of communications and multimedia
systems, also benefited from strong top-line growth. Another
beneficiary of robust global wireless demand, Qualcomm, continued to
enjoy its leadership position in digital wireless technology. Calpine,
the nation's fastest growing independent power company, also was a big
contributor, proving that some old economy stocks could still deliver
good growth. The fund no longer held Qualcomm or Calpine at the close
of the period. On the flip side, a number of the fund's tech holdings
were hit exceptionally hard during the correction, namely Vitesse,
DoubleClick, Redback and Legato. I sold off the fund's stake in Legato
during the period. Apparel retailer Ann Taylor slipped on poor sales
and earnings disappointments.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook remains positive, as I feel technology will continue to
power the economy and set the tone in the marketplace. Not
surprisingly, I'm bullish on convertibles as well, since tech makes up
almost half of the entire market. I believe there are still a lot of
good bargains out there given the recent sell-off, and I plan to take
full advantage of them in the coming months. As a bottom-up investor,
I'll focus my energy on the individual security level, since that's
where we find the most value for the shareholder.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: to provide high total
return through a
combination of current
income and capital
appreciation by investing
mainly in securities that are
convertible into common
stock
FUND NUMBER: 308
TRADING SYMBOL: FCVSX
START DATE: January 5, 1987
SIZE: as of May 31, 2000,
more than $1.6 billion
MANAGER: Beso Sikharulidze,
since 1999; manager,
Fidelity Advisor Health Care
Fund, 1997-1999; several
Fidelity Select Portfolios,
1993-1999; research
analyst, 1992-1999; joined
Fidelity in 1992
BESO SIKHARULIDZE ON RECENT
THEMES IN THE CONVERTIBLE
SECURITIES MARKET:
"Technology has brought forth
the new economy and, with it, has
dramatically reshaped the
convertible securities market. As
the balance of power shifts toward
the tech sector, so has the fund's
focus. Consequently, the fund has
become much more aggressive in
nature, allowing investors greater
exposure to rallies in the growth
arena with the added benefit of a
yield cushion to help temper
downside volatility. In the past,
funds that invested in convertible
securities were, on average,
low-volatility vehicles that
comprised mostly value-oriented
equities.
"With tech stocks recoiling during
the spring in response to rising
interest rates and valuation
concerns, the market began to
focus more intently on quality and,
most importantly, earnings. So, I
spent a lot of time scrutinizing the
fund's holdings, trying to weed out
issues that I didn't have complete
and utter conviction in. What
resulted was a more concentrated
portfolio of leading names from
the areas of the market with the
highest growth potential, namely
communications semiconductors,
data storage and fiber-optic
networking."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN INVESTMENTS AS OF MAY
31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Vitesse Semiconductor Corp. 3.6 0.0
4% 3/15/05
Comverse Technology, Inc. 3.3 1.7
4.5% 7/1/05
MetLife, Inc. $4.00 3.2 0.0
AES Trust VII $3.00 2.8 0.0
MediaOne Group, Inc. $3.04 2.2 1.2
Calpine Capital Trust II $2.75 2.2 0.0
America Online, Inc. 0% 12/6/19 2.2 0.0
EMC Corp. 1.8 0.0
Oak Industries, Inc. 4.875% 1.8 0.3
3/1/08
SDL, Inc. 1.8 0.0
24.9 3.2
TOP FIVE MARKET SECTORS AS OF
MAY 31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Technology 35.6 25.3
Media & Leisure 12.8 21.3
Finance 11.9 8.3
Utilities 9.9 11.5
Health 8.8 5.0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF MAY 31, 2000 * AS OF NOVEMBER 30, 1999 **
Convertible Securities 82.4% Convertible Securities 76.0%
Stocks 10.0% Stocks 20.3%
Nonconvertible Bonds 0.5% Nonconvertible Bonds 0.6%
Short-Term Investments and Short-Term Investments and
Net Other Assets 7.1% Net Other Assets 3.1%
* FOREIGN INVESTMENTS 3.3% ** FOREIGN INVESTMENTS 3.7%
Row: 1, Col: 1, Value: 82.40000000000001 Row: 1, Col: 1, Value: 76.0
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 10.0 Row: 1, Col: 3, Value: 20.3
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.5 Row: 1, Col: 5, Value: 0.6000000000000001
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 7.1 Row: 1, Col: 8, Value: 3.1
</TABLE>
INVESTMENTS MAY 31, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 55.6%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 55.1%
BASIC INDUSTRIES - 0.4%
METALS & MINING - 0.4%
CommScope, Inc. 4% 12/15/06 - $ 6,000 $ 6,501
(e)
CONSTRUCTION & REAL ESTATE -
0.8%
CONSTRUCTION - 0.4%
Lennar Corp. 0% 7/29/18 Ba1 16,650 6,577
REAL ESTATE INVESTMENT TRUSTS
- 0.4%
Pinnacle Holdings, Inc. 5.5% - 8,500 6,970
9/15/07 (e)
TOTAL CONSTRUCTION & REAL 13,547
ESTATE
ENERGY - 1.7%
ENERGY SERVICES - 0.8%
Pride International, Inc. 0% B2 11,000 4,648
4/24/18
Transocean Sedco Forex, Inc. A3 13,900 8,166
0% 5/24/20
12,814
OIL & GAS - 0.9%
Anadarko Petroleum Corp. 0% Baa1 8,000 5,430
3/7/20
Kerr-McGee Corp. 5.25% 2/15/10 Baa2 7,500 8,775
14,205
TOTAL ENERGY 27,019
FINANCE - 0.4%
CREDIT & OTHER FINANCE - 0.4%
Elan Finance Corp. Ltd. Baa3 10,200 6,560
liquid yield option notes 0%
12/14/18 (e)
INSURANCE - 0.0%
Berkshire Hathaway, Inc. 1% Aaa 95 263
12/2/01
TOTAL FINANCE 6,823
HEALTH - 7.4%
DRUGS & PHARMACEUTICALS - 6.7%
Alkermes, Inc. 3.75% 2/15/07 - 9,100 6,507
(e)
Alpharma, Inc.:
3% 6/1/06 (e) B 960 1,517
5.75% 4/1/05 B 1,100 1,933
Centocor, Inc. 4.75% 2/15/05 AAA 6,000 7,545
CuraGen Corp. 6% 2/2/07 (e) CCC 8,000 5,080
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Dura Pharmaceuticals, Inc. B1 $ 1,000 $ 835
3.5% 7/31/02
Genzyme Corp. 5.25% 6/1/05 - 2,370 3,721
Human Genome Sciences, Inc. - 7,000 4,410
3.75% 3/15/07 (e)
IDEC Pharmaceuticals Corp. - 2,010 1,776
liquid yield option note 0%
2/16/19 (e)
ImClone Systems, Inc. 5.5% - 15,800 13,041
3/1/05 (e)
Integrated Process Equipment
Corp.:
6.25% 9/15/04 (e) B- 2,500 1,863
6.25% 9/15/04 B- 750 559
Invitrogen Corp. 5.5% 3/1/07 - 7,000 4,830
(e)
IVAX Corp. 5.5% 5/15/07 (e) - 8,000 9,640
Millennium Pharmaceuticals, CCC 8,250 9,513
Inc. 5.5% 1/15/07 (e)
Protein Design Labs, Inc. - 3,640 3,203
5.5% 2/15/07 (e)
Roche Holdings, Inc.:
liquid yield option note 0% - 23,500 11,236
5/6/12 (e)
0% 1/19/15 (e) - 6,225 4,472
Sepracor, Inc.:
5% 2/15/07 (e) - 2,000 2,400
7% 12/15/05 (e) - 5,000 8,244
7% 12/15/05 - 4,200 6,925
Vertex Pharmaceuticals, Inc. - 1,000 1,063
5% 3/14/07 (e)
110,313
MEDICAL FACILITIES MANAGEMENT
- 0.7%
HEALTHSOUTH Corp. 3.25% 4/1/03 Ba2 1,250 1,013
Total Renal Care Holdings, B3 6,446 3,964
Inc. 7% 5/15/09 (e)
Wellpoint Health Networks, Baa3 11,030 7,528
Inc. 0% 7/2/19
12,505
TOTAL HEALTH 122,818
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.4%
ELECTRICAL EQUIPMENT - 2.2%
ANTEC Corp. 4.5% 5/15/03 B2 1,970 4,216
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
ELECTRICAL EQUIPMENT -
CONTINUED
Oak Industries, Inc.:
4.875% 3/1/08 (e) A3 $ 500 $ 2,082
4.875% 3/1/08 B2 7,015 29,209
35,507
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
ASM Lithography Holding NV:
2.5% 4/9/05 (e) B2 NLG 500 431
2.5% 4/9/05 B2 NLG 3,750 3,234
3,665
TOTAL INDUSTRIAL MACHINERY & 39,172
EQUIPMENT
MEDIA & LEISURE - 7.4%
BROADCASTING - 7.1%
American Tower Corp.:
2.25% 10/15/09 (e) Caa1 7,100 8,227
5% 2/15/10 (e) B 12,000 11,100
6.25% 10/15/09 (e) Caa1 2,215 3,680
CD Radio, Inc. 8.75% 9/29/09 - 1,000 1,510
Clear Channel Communications, Baa3 17,500 16,997
Inc. 1.5% 12/1/02
Cox Communications, Inc. 1% Baa3 18,800 9,353
4/19/20
EchoStar Communications Corp. - 16,500 17,469
4.875% 1/1/07 (e)
Liberty Media Corp.:
3.75% 2/15/30 (e) Baa3 20,000 20,525
4% 11/15/29 (e) Baa3 14,000 18,935
NTL, Inc. 5.75% 12/15/09 (e) CCC+ 12,000 9,135
116,931
LODGING & GAMING - 0.2%
Four Seasons Hotels, Inc. 0% Ba2 9,000 3,087
9/23/29
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
News America Holdings, Inc. Baa3 $ 1,500 $ 1,385
liquid yield option notes 0%
3/11/13
Scholastic Corp. 5% 8/15/05 Baa3 1,000 942
(e)
2,327
TOTAL MEDIA & LEISURE 122,345
RETAIL & WHOLESALE - 1.2%
APPAREL STORES - 0.5%
AnnTaylor Stores Corp. 0.55% B2 19,660 8,716
6/18/19 (e)
GROCERY STORES - 0.5%
Koninklijke Ahold NV 4% - EUR 8,500 8,564
5/19/05 (e)
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.2%
Office Depot, Inc. 0% 11/1/08 Baa2 4,000 2,795
TOTAL RETAIL & WHOLESALE 20,075
SERVICES - 2.5%
ADVERTISING - 1.9%
DoubleClick, Inc. 4.75% B- 4,750 5,480
3/15/06
Getty Images, Inc. 5% 3/15/07 B2 7,000 5,408
(e)
Interpublic Group of Baa1 5,500 5,246
Companies, Inc. 1.87% 6/1/06
(e)
Omnicom Group, Inc. 2.25% Baa1 6,500 11,383
1/6/13
Young & Rubicam, Inc. 3% Baa3 3,800 3,601
1/15/05 (e)
31,118
SERVICES - 0.6%
ADT Operations, Inc. liquid Baa1 1,686 4,317
yield option notes 0%, 7/6/10
CheckFree Holdings Corp. 6.5% - 7,000 6,099
12/1/06 (e)
10,416
TOTAL SERVICES 41,534
TECHNOLOGY - 27.5%
COMMUNICATIONS EQUIPMENT - 4.0%
Comverse Technology, Inc. B+ 12,745 54,549
4.5% 7/1/05
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
COMMUNICATIONS EQUIPMENT -
CONTINUED
Level One Communications, A2 $ 1,250 $ 5,023
Inc. 4% 9/1/04
Tekelec 3.25% 11/2/04 (e) - 3,500 6,825
66,397
COMPUTER SERVICES & SOFTWARE
- 10.6%
Aether Systems, Inc. 6% - 23,000 19,262
3/22/05
Affymetrix, Inc. 4.75% - 7,000 4,620
2/15/07 (e)
Amazon.com, Inc. 4.75% 2/1/09 Caa3 10,550 7,965
America Online, Inc. 0% Ba3 71,000 35,589
12/6/19
At Home Corp. 4.75% 12/15/06 B3 6,000 4,042
(e)
Automatic Data Processing, Aa3 3,875 5,507
Inc. 0% 2/20/12
BEA Systems, Inc. 4% 12/15/06 - 19,600 23,888
(e)
Citrix Systems, Inc. 0% B 6,150 4,766
3/22/19
Critical Path, Inc. 5.75% - 13,600 8,679
4/1/05 (e)
EarthWeb, Inc. 7% 1/25/05 (e) - 7,500 3,221
Exodus Communications, Inc.:
4.75% 7/15/08 (e) - 5,867 6,817
4.75% 7/15/08 CCC 2,900 3,369
i2 Technologies, Inc. 5.25% - 3,250 5,068
12/15/06 (e)
Interliant, Inc. 7% 2/16/05 - 6,000 3,226
(e)
Mail.com, Inc. 7% 2/1/05 (e) - 3,240 1,401
Networks Associates, Inc. 0% - 5,250 1,824
2/13/18
Rational Software Corp. 5% - 5,000 6,069
2/1/07 (e)
Redback Networks, Inc. 5% - 13,970 10,207
4/1/07 (e)
Siebel Systems, Inc. 5.5% - 2,390 6,256
9/15/06 (e)
VERITAS Software B+ 4,050 13,274
Corp./VERITAS Operating
Corp. 1.856% 8/13/06
175,050
COMPUTERS & OFFICE EQUIPMENT
- 2.8%
Hewlett-Packard Co. 0% Aa3 9,750 7,111
10/14/17
Ingram Micro, Inc. 0% 6/9/18 Ba1 22,250 7,982
Juniper Networks, Inc. 4.75% - 15,950 12,929
3/15/07
MRV Communications, Inc. 5% Caa1 7,900 16,067
6/15/03
Safeguard Scientifics, Inc.:
5% 6/15/06 (e) - 400 582
5% 6/15/06 - 1,500 2,183
46,854
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.6%
Kulicke & Soffa Industries, B3 $ 4,000 $ 5,080
Inc. 4.75% 12/15/06 (e)
LAM Research Corp. 5% 9/1/02 B 3,800 4,731
9,811
ELECTRONICS - 9.5%
Advanced Micro Devices, Inc. Caa1 4,860 11,014
6% 5/15/05
Burr-Brown Corp. 4.25% - 15,000 17,400
2/15/07 (e)
Candescent Technologies Corp. - 5,500 3,960
7% 5/1/03 (e)
Cypress Semiconductor Corp. B2 5,250 6,077
4% 2/1/05
Lattice Semiconductor Corp. B- 3,500 5,530
4.75% 11/1/06 (e)
LSI Logic Corp.:
4.25% 3/15/04 (e) B1 480 1,639
4.25% 3/15/04 B1 5,450 18,612
S3, Inc. 5.75% 10/1/03 - 15,400 15,631
Semtech Corp. 4.5% 2/1/07 (e) CCC+ 8,500 7,374
STMicroelectronics NV 0% - 2,350 3,760
9/22/09
TriQuint Semiconductor, Inc. - 6,440 5,794
4% 3/1/07 (e)
Vitesse Semiconductor Corp. - 77,500 60,047
4% 3/15/05 (e)
156,838
TOTAL TECHNOLOGY 454,950
UTILITIES - 3.4%
CELLULAR - 2.4%
Nextel Communications, Inc.:
4.75% 7/1/07 (e) B1 1,680 3,463
4.75% 7/1/07 B1 1,500 3,092
5.25% 1/15/10 (e) B1 33,259 29,102
United States Cellular Corp. Baa1 5,800 3,480
0% 6/15/15
39,137
ELECTRIC UTILITY - 0.3%
AES Corp. 4.5% 8/15/05 B1 3,500 5,889
TELEPHONE SERVICES - 0.7%
Level 3 Communications, Inc. Caa1 1,340 1,109
6% 3/15/10
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (D) (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Telefonos de Mexico SA de CV BB+ $ 3,500 $ 4,119
4.25% 6/15/04
Versatel Telecom - EUR 7,500 6,186
International NV 4% 3/30/05
11,414
TOTAL UTILITIES 56,440
TOTAL CONVERTIBLE BONDS 911,224
NONCONVERTIBLE BONDS - 0.5%
UTILITIES - 0.5%
TELEPHONE SERVICES - 0.5%
WinStar Communications, Inc. B3 8,000 7,380
12.75% 4/15/10 (e)
TOTAL CORPORATE BONDS 918,604
(Cost $892,902)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 10.0%
SHARES
HEALTH - 1.0%
DRUGS & PHARMACEUTICALS - 1.0%
Eli Lilly & Co. 221,300 16,846
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Sensormatic Electronics Corp. 1,131 19
(a)(e)
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.8%
AT&T Corp. - Liberty Media 179,700 7,963
Group Class A (a)
Cablevision Systems Corp. 87,040 5,451
Class A (a)
Pegasus Communications Corp. 1,624 67
(a)
13,481
SERVICES - 0.1%
Vicinity Corp. 77,300 1,179
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - 7.4%
COMMUNICATIONS EQUIPMENT - 0.0%
Chromatis Networks, Inc. (f) 8,300 $ 146
Oni Systems Corp. 900 23
169
COMPUTER SERVICES & SOFTWARE
- 2.0%
CMGI, Inc. (a) 47,600 2,276
Mercury Interactive Corp. (a) 163,200 13,831
Micromuse, Inc. (a) 82,300 8,194
Packeteer, Inc. 20,000 259
SilverStream Software, Inc. 82,400 2,714
Software.com, Inc. 56,000 4,718
Vignette Corp. (a) 9,100 251
webMethods, Inc. 300 25
32,268
COMPUTERS & OFFICE EQUIPMENT
- 2.2%
EMC Corp. (a) 263,632 30,664
MRV Communications, Inc. (a) 224,400 5,975
36,639
ELECTRONICS - 3.2%
Bookham Technology PLC 41,900 2,040
sponsored ADR
E Tek Dynamics, Inc. (a) 22,600 4,154
Micron Technology, Inc. (a) 239,200 16,729
Motorola, Inc. 16,500 1,547
SDL, Inc. (a) 128,800 29,181
53,651
TOTAL TECHNOLOGY 122,727
UTILITIES - 0.7%
CELLULAR - 0.3%
Crown Castle International 85,000 2,226
Corp. (a)
Leap Wireless International, 2,942 129
Inc. (a)
SBA Communications Corp. 51,000 1,900
Class A
4,255
GAS - 0.4%
Enron Corp. 86,000 6,267
TELEPHONE SERVICES - 0.0%
McLeodUSA, Inc. Class A (a) 3,546 71
MGC Communications, Inc. (a) 1,533 63
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
TeraBeam Networks (f) 1,300 $ 20
WinStar Communications, Inc. 7,540 214
(a)
WinStar Communications, Inc. 6,387 188
556
TOTAL UTILITIES 11,078
TOTAL COMMON STOCKS 165,330
(Cost $137,872)
CONVERTIBLE PREFERRED STOCKS
- 27.3%
BASIC INDUSTRIES - 1.7%
CHEMICALS & PLASTICS - 1.1%
Sealed Air Corp. Series A, 327,100 17,745
$2.00
PACKAGING & CONTAINERS - 0.1%
Owens-Illinois, Inc. $2.375 84,000 2,100
PAPER & FOREST PRODUCTS - 0.5%
Georgia-Pacific Corp. $3.75 187,100 6,818
PEPS
International Paper Capital 41,000 1,661
Trust $2.625
8,479
TOTAL BASIC INDUSTRIES 28,324
ENERGY - 2.0%
OIL & GAS - 2.0%
Apache Corp. $2.015 ACES 90,100 4,742
EVI, Inc.:
$2.50 (e) 30,000 1,425
$2.50 205,000 9,738
The Coastal Corp.:
$1.20 PRIDES 139,700 4,874
$1.66 PRIDES 77,300 2,749
Tosco Financing Trust $2.875 115,000 5,786
Unocal Capital Trust Corp. 78,000 3,910
$3.125
33,224
CONVERTIBLE PREFERRED STOCKS
- CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 11.5%
CREDIT & OTHER FINANCE - 7.0%
AES Trust III $3.375 35,000 $ 2,415
AES Trust VII $3.00 (e) 800,000 45,800
Calpine Capital Trust $2.875 85,000 8,224
Calpine Capital Trust II 600,000 36,525
$2.75 (e)
DECS Trust V (Crown Castle 25,000 606
International Corp.) $1.39
DECS Trust VI (Metromedia 178,900 9,840
Fiber Network, Inc.) $2.46
Federal-Mogul Financing Trust 69,000 1,570
$3.50 (e)
ICG Funding LLC $3.375 110,000 4,826
Life Re Corp./Life Re Capital 70,000 5,311
Trust II $3.96
Union Pacific Capital Trust 28,200 1,199
$3.125
116,316
INSURANCE - 3.8%
Ace Ltd. $4.125 160,000 9,301
MetLife, Inc. $4.00 (a) 800,000 52,800
62,101
INVESTMENT COMPANIES - 0.7%
Amdocs Automatic Common 210,400 11,112
Exchange Securities Trust
$1.51 TRACES
SECURITIES INDUSTRY - 0.0%
Southwest Securities Group, 17,800 512
Inc. (Knight/Trimark Group,
Inc.) $2.83 DARTS
TOTAL FINANCE 190,041
HEALTH - 0.4%
DRUGS & PHARMACEUTICALS - 0.3%
Cephalon, Inc. $3.625 40,000 5,865
MEDICAL EQUIPMENT & SUPPLIES
- 0.1%
McKesson Financing Trust $2.50 46,500 1,375
TOTAL HEALTH 7,240
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Ingersoll Rand Co./Ingersoll 109,400 2,503
Rand Finance $1.68 Income
PRIDES
MEDIA & LEISURE - 4.6%
BROADCASTING - 4.1%
Adelphia Communications Corp. 13,800 1,916
$11.00
Cox Communications, Inc. 161,000 16,431
$6.858 PRIZES
CONVERTIBLE PREFERRED STOCKS
- CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Entercom Communication 40,000 $ 2,350
Capital Trust $3.13
MediaOne Group, Inc. $3.04 817,100 36,872
Pegasus Communications Corp. 53,900 4,299
$6.50 (e)
UnitedGlobalCom, Inc. $3.50 122,000 5,536
67,404
ENTERTAINMENT - 0.2%
Premier Parks, Inc. $4.05 PIES 69,400 3,192
PUBLISHING - 0.3%
Readers Digest Automatic 172,100 5,249
Common Exchange Securities
Trust $1.93 TRACES
RESTAURANTS - 0.0%
Wendys Financing I $2.50 10,000 469
TECONS
TOTAL MEDIA & LEISURE 76,314
NONDURABLES - 0.8%
BEVERAGES - 0.5%
Seagram Co. Ltd. $3.76 ACES 193,500 8,901
HOUSEHOLD PRODUCTS - 0.3%
Estee Lauder Co. $3.80 TRACES 58,000 4,408
TOTAL NONDURABLES 13,309
SERVICES - 0.1%
Cendant Corp.:
$3.75 Income PRIDES 70,900 1,482
$2.91 Growth PRIDES 50,000 960
2,442
TECHNOLOGY - 0.7%
COMPUTER SERVICES & SOFTWARE
- 0.7%
PSINet, Inc. $3.50 (e) 214,800 7,330
Verio, Inc. $3.375 (e) 71,500 4,281
11,611
UTILITIES - 5.3%
CELLULAR - 0.6%
Omnipoint Corp. $3.50 62,000 10,308
ELECTRIC UTILITY - 2.0%
Alliant Energy Resources, 104,000 6,890
Inc. $4.91 (e)
CONVERTIBLE PREFERRED STOCKS
- CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Houston Industries, Inc. 100,200 $ 13,114
(Time Warner, Inc.) $3.216
ACES
Reliant Energy, Inc. $1.165 156,000 12,022
32,026
GAS - 0.1%
Enron Corp. Series J, $10.50 1,100 2,189
TELEPHONE SERVICES - 2.6%
BroadWing, Inc. $3.375 38,000 1,682
Global Crossing Ltd. $16.88 47,600 10,211
Intermedia Communications, 139,300 4,562
Inc. Series D, $1.75
depositary shares
McLeodUSA, Inc. $16.87 9,100 4,861
MGC Communications, Inc. $3.62 80,000 3,210
NEXTLINK Communications, Inc. 46,500 7,550
$3.25
Qwest Trends Trust $2.04 (e) 75,000 5,044
WinStar Communications, Inc.:
$3.50 41,300 2,055
$72.50 (e) 3,900 3,396
42,571
TOTAL UTILITIES 87,094
TOTAL CONVERTIBLE PREFERRED 452,102
STOCKS
(Cost $401,542)
CASH EQUIVALENTS - 4.1%
Taxable Central Cash Fund, 67,828,401 67,828
6.37% (c) (Cost $67,828)
TOTAL INVESTMENT PORTFOLIO - 1,603,864
97.0%
(Cost $1,500,144)
NET OTHER ASSETS - 3.0% 49,793
NET ASSETS - 100% $ 1,653,657
</TABLE>
SECURITY TYPE ABBREVIATIONS
ACES - Automatic Common Exchange
Securities
DARTS - Derivatives Adjustable Ratio
Securities
DECS - Dividend Enhanced Convertible
Stock/Debt Exchangeable for
Common Stock
PEPS - Participating Equity
Preferred Shares/ Premium
Exchangeable Participating
Shares
PIES - Premium Income Equity
Securities
PRIDES - Preferred Redeemable
Increased Dividend Equity
Securities
PRIZES - Participating Redeemable
Indexed Zero-Premium
Exchangeable Securities
TECONS - Term Convertible Shares
TRACES - Trust Automatic Common
Exchange Securities
CURRENCY ABBREVIATIONS
EUR - European Monetary Unit
NLG - Dutch guilder
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Principal amount is stated in United States dollars unless
otherwise noted.
(e) 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 $597,199,000 or 36.1% of net assets.
(f) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Chromatis Networks, Inc. 5/19/00 $ 146
TeraBeam Networks 4/7/00 $ 20
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 1.8% AAA, AA, A 3.2%
Baa 7.9% BBB 7.2%
Ba 3.4% BB 3.1%
B 9.1% B 15.7%
Caa 3.0% CCC 4.4%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 22.7%. FMR has
determined that unrated debt securities that are lower quality account
for 22.7% of the total value of investment in securities.
INCOME TAX INFORMATION
At May 31, 2000, the aggregate cost of investment securities for
income tax purposes was $1,503,911,000. Net unrealized appreciation
aggregated $99,953,000, of which $239,516,000 related to appreciated
investment securities and $139,563,000 related to depreciated
investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT)
MAY 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 1,603,864
value (cost $1,500,144) -
See accompanying schedule
Receivable for investments 52,999
sold
Receivable for fund shares 2,172
sold
Dividends receivable 475
Interest receivable 9,034
Other receivables 31
TOTAL ASSETS 1,668,575
LIABILITIES
Payable to custodian bank $ 221
Payable for investments 12,695
purchased
Payable for fund shares 887
redeemed
Accrued management fee 793
Other payables and accrued 322
expenses
TOTAL LIABILITIES 14,918
NET ASSETS $ 1,653,657
Net Assets consist of:
Paid in capital $ 1,302,088
Undistributed net investment 7,335
income
Accumulated undistributed net 240,518
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 103,716
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 68,915 shares $ 1,653,657
outstanding
NET ASSET VALUE, offering $24.00
price and redemption price
per share ($1,653,657
(divided by) 68,915 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED MAY 31, 2000
(UNAUDITED)
INVESTMENT INCOME $ 9,271
Dividends
Interest 17,239
TOTAL INCOME 26,510
EXPENSES
Management fee Basic fee $ 3,818
Performance adjustment 825
Transfer agent fees 1,323
Accounting fees and expenses 190
Non-interested trustees' 5
compensation
Custodian fees and expenses 25
Registration fees 102
Audit 22
Legal 47
Miscellaneous 5
Total expenses before 6,362
reductions
Expense reductions (111) 6,251
NET INVESTMENT INCOME 20,259
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 250,318
Foreign currency transactions 221 250,539
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (90,622)
Assets and liabilities in 13 (90,609)
foreign currencies
NET GAIN (LOSS) 159,930
NET INCREASE (DECREASE) IN $ 180,189
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 2000 YEAR ENDED NOVEMBER 30, 1999
(UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 20,259 $ 30,248
income
Net realized gain (loss) 250,539 112,503
Change in net unrealized (90,609) 155,777
appreciation (depreciation)
NET INCREASE (DECREASE) IN 180,189 298,528
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (18,301) (32,773)
From net investment income
From net realized gain (93,806) (60,281)
TOTAL DISTRIBUTIONS (112,107) (93,054)
Share transactions Net 561,839 362,790
proceeds from sales of shares
Reinvestment of distributions 102,221 84,738
Cost of shares redeemed (292,432) (425,892)
NET INCREASE (DECREASE) IN 371,628 21,636
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 439,710 227,110
IN NET ASSETS
NET ASSETS
Beginning of period 1,213,947 986,837
End of period (including $ 1,653,657 $ 1,213,947
undistributed net investment
income of $7,335 and $5,377,
respectively)
OTHER INFORMATION
Shares
Sold 21,955 18,167
Issued in reinvestment of 4,415 4,632
distributions
Redeemed (11,588) (21,698)
Net increase (decrease) 14,782 1,101
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MAY 31, 2000 YEARS ENDED NOVEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 22.43 $ 18.61 $ 19.57 $ 18.64 $ 17.66 $ 15.63
of period
Income from Investment
Operations
Net investment income .32 D .57 D .60 D .64 D .83 .79
Net realized and unrealized 3.25 5.01 .86 1.90 1.79 1.94
gain (loss)
Total from investment 3.57 5.58 1.46 2.54 2.62 2.73
operations
Less Distributions
From net investment income (.30) (.62) (.58) (.80) (.74) (.70)
From net realized gain (1.70) (1.14) (1.84) (.81) (.90) -
Total distributions (2.00) (1.76) (2.42) (1.61) (1.64) (.70)
Net asset value, end of $ 24.00 $ 22.43 $ 18.61 $ 19.57 $ 18.64 $ 17.66
period
TOTAL RETURN B, C 16.40% 32.36% 8.88% 14.84% 16.02% 18.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,654 $ 1,214 $ 987 $ 1,029 $ 1,148 $ 1,049
(in millions)
Ratio of expenses to average .80% A .85% .79% .74% .85% .70%
net assets
Ratio of expenses to average .78% A, E .82% E .77% E .73% E .83% E .70%
net assets after expense
reductions
Ratio of net invest- ment 2.54% A 2.85% 3.21% 3.46% 4.48% 4.59%
income to average net assets
Portfolio turnover rate 251% A 246% 223% 212% 175% 203%
</TABLE>
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.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Convertible Securities Fund (the fund) is a fund of Fidelity
Financial Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Equity securities for which quotations
are readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Foreign equity securities are valued
based on quotations from the principal market in which such securities
are normally traded. If trading or events occurring in other markets
after the close of the principal market in which foreign securities
are traded, and before the close of the business of the fund, are
expected to materially affect the value of those securities, then they
are valued at their fair value taking this trading or these events
into account. Fair value is determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Securities (including restricted securities) for
which market quotations are not readily available are valued at their
fair value. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to
differing treatments for litigation proceeds, foreign currency
transactions, market discount, non-taxable dividends and losses
deferred due to wash sales and excise tax regulations. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income. Income distributions from the Cash Fund
are declared daily and paid monthly from net interest income. Income
distributions earned by the fund are recorded as interest income in
the accompanying financial statements.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, restricted securities (excluding 144A
issues) amounted to $166,000 or .01% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,059,444,000 and $1,862,621,000, 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 .2167% to
.5200% for the period. The annual individual fund fee rate is .20%. In
the event that these rates were lower than the contractual rates in
effect during the period, FMR voluntarily
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
implemented the above rates, as they resulted in the same or a lower
management fee. The basic fee is subject to a performance adjustment
(up to a maximum of (plus/minus).15% of the fund's average net assets
over the performance period) based on the fund's investment
performance as compared to the appropriate index over a specified
period of time. For the period, the management fee was equivalent to
an annualized rate of .58% of average net assets after the performance
adjustment.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of .17% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $5,000 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 $96,000 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $7,000 and $8,000, respectively, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Richard A. Spillane, Jr., Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
CVS-SANN-0700 106080
1.704534.102
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity(registered trademark) Fund
Global Balanced Fund
Growth & Income Portfolio
Growth & Income II Portfolio
Puritan(registered trademark) Fund
Real Estate Investment Portfolio
Utilities Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST(registered trademark)) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK)
EQUITY-INCOME II
FUND
SEMIANNUAL REPORT
MAY 31, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 19 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 23 Footnotes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
The technology sell-off that began in mid-March continued to hamper
equity markets, driving the tech-heavy NASDAQ index down more than 16%
year to date through the end of May. Broader equity indexes, including
the S&P 500(registered trademark), also were down, but not as much as
more concentrated performance measures. In bond markets, Treasuries
got a boost late in the period as economic reports showed the first
signs of a slowing economy.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY EQUITY-INCOME II 0.05% -0.48% 115.18% 438.97%
Russell 3000 Value 1.19% -1.68% 134.03% 369.42%**
Equity Income Funds Average 2.05% -0.62% 102.18% n/a
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or since the fund started on August 21, 1990. For example, if
you had invested $1,000 in a fund that had a 5% return over the past
year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the Russell 3000 Value Index
- a market capitalization-weighted index of value-oriented stocks of
U.S. domiciled corporations. To measure how the fund's performance
stacked up against its peers, you can compare it to the equity income
funds average, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Inc. The past six months average
represents a peer group of 246 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges. Lipper has created new comparison categories that
group funds according to portfolio characteristics and capitalization,
as well as by capitalization only. These averages are listed on page 5
of this report.*
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 2000 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY EQUITY-INCOME II -0.48% 16.56% 18.79%
Russell 3000 Value -1.68% 18.54% 17.19%**
Equity Income Funds Average -0.62% 14.99% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
** FROM AUGUST 31, 1990
$10,000 OVER LIFE OF FUND
Equity-Income II Russell 3000 Value
00319 RS008
1990/08/31 10000.00 10000.00
1990/09/28 9702.68 9497.73
1990/10/31 9702.68 9342.48
1990/11/30 10089.20 9986.36
1990/12/31 10357.84 10242.71
1991/01/31 10856.29 10723.91
1991/02/28 11823.29 11459.66
1991/03/28 12314.16 11661.45
1991/04/30 12656.50 11747.90
1991/05/31 13300.91 12192.20
1991/06/28 12988.78 11675.69
1991/07/31 13710.35 12152.28
1991/08/30 14233.33 12382.96
1991/09/30 14327.58 12298.91
1991/10/31 14771.77 12498.30
1991/11/29 14327.58 11865.65
1991/12/31 15184.33 12845.31
1992/01/31 15614.16 12933.97
1992/02/28 16117.50 13271.75
1992/03/31 16055.36 13082.80
1992/04/30 16403.25 13592.89
1992/05/29 16582.46 13681.15
1992/06/30 16477.97 13571.03
1992/07/31 16986.62 14094.15
1992/08/31 16636.92 13675.13
1992/09/30 16849.40 13869.90
1992/10/30 16987.86 13907.01
1992/11/30 17648.20 14395.64
1992/12/31 18077.81 14759.30
1993/01/29 18572.21 15217.23
1993/02/26 18901.70 15713.08
1993/03/31 19617.30 16186.87
1993/04/30 19672.49 15964.62
1993/05/28 19970.56 16300.20
1993/06/30 20160.07 16642.60
1993/07/30 20359.79 16837.57
1993/08/31 21025.50 17449.95
1993/09/30 20947.94 17513.14
1993/10/29 21338.14 17539.01
1993/11/30 21014.83 17169.13
1993/12/31 21492.00 17512.14
1994/01/31 22520.39 18171.06
1994/02/28 22087.76 17603.60
1994/03/31 21183.75 16935.85
1994/04/29 21759.45 17244.96
1994/05/31 22017.94 17421.87
1994/06/30 21850.84 17001.24
1994/07/29 22441.40 17507.52
1994/08/31 23209.14 18029.85
1994/09/30 22675.50 17473.82
1994/10/31 23067.28 17657.16
1994/11/30 22046.29 16943.88
1994/12/30 22171.41 17171.54
1995/02/28 22947.50 18328.32
1995/03/31 23703.12 18698.80
1995/04/28 24256.99 19286.12
1995/05/31 24823.45 20058.57
1995/06/30 25164.41 20370.68
1995/07/31 26151.25 21083.16
1995/08/31 26290.42 21413.93
1995/09/29 26883.63 22142.26
1995/10/31 26082.85 21856.22
1995/11/30 27366.65 22939.98
1995/12/29 28022.58 23529.51
1996/01/31 28797.08 24207.08
1996/02/29 29164.92 24408.47
1996/03/29 29957.28 24832.31
1996/04/30 30432.37 24982.15
1996/05/31 30722.71 25325.15
1996/06/28 30484.72 25315.12
1996/07/31 29449.54 24317.01
1996/08/30 30126.38 25050.15
1996/09/30 31162.75 26012.56
1996/10/31 31736.63 26944.28
1996/11/29 33591.71 28846.23
1996/12/31 33264.95 28610.54
1997/01/31 34404.70 29898.50
1997/02/28 34728.48 30321.94
1997/03/31 33324.35 29259.58
1997/04/30 34894.38 30407.89
1997/05/30 36888.75 32178.11
1997/06/30 38633.53 33583.58
1997/07/31 41176.89 35999.53
1997/08/29 38804.04 34894.71
1997/09/30 40953.57 37024.78
1997/10/31 39655.95 35992.77
1997/11/28 41081.91 37464.19
1997/12/31 42304.04 38575.18
1998/01/30 42492.74 38014.34
1998/02/27 45118.70 40547.99
1998/03/31 47573.98 42946.92
1998/04/30 47685.65 43227.05
1998/05/29 47494.21 42501.08
1998/06/30 49059.28 42971.81
1998/07/31 48787.27 41980.78
1998/08/31 41346.77 35705.76
1998/09/30 43155.32 37752.22
1998/10/30 46878.65 40525.98
1998/11/30 49318.07 42350.43
1998/12/31 52025.59 43783.05
1999/01/29 52661.94 44026.89
1999/02/26 51946.51 43223.36
1999/03/31 53409.79 44026.86
1999/04/30 55700.78 48132.43
1999/05/28 53672.11 47743.75
1999/06/30 56145.75 49154.73
1999/08/31 53356.01 45966.92
1999/09/30 51857.23 44410.50
1999/10/29 53652.09 46716.73
1999/11/30 53388.14 46391.90
1999/12/31 54299.52 46695.01
2000/01/31 52333.24 45192.27
2000/02/29 49888.51 42246.54
2000/03/31 53954.89 47026.29
2000/04/28 52937.62 46534.60
2000/05/31 53416.33 46942.28
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity(registered trademark) Equity-Income II Fund on
August 31, 1990, shortly after the fund started. As the chart shows,
by May 31, 2000, the value of the investment would have grown to
$53,416 - a 434.16% increase on the initial investment. For
comparison, look at how the Russell 3000 Value Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 would have grown to $46,942 - a 369.42% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. The stock
market, for example, has a
history of long-term growth
and short-term volatility. In turn,
the share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
* THE LIPPER EQUITY INCOME FUNDS AVERAGE REFLECTS THE PERFORMANCE
(EXCLUDING SALES CHARGES) OF MUTUAL FUNDS WITH SIMILAR PORTFOLIO
CHARACTERISTICS AND CAPITALIZATION. AS OF MAY 31, 2000, THE SIX MONTH,
ONE YEAR, AND FIVE YEAR CUMULATIVE AND THE ONE YEAR AND FIVE YEAR
AVERAGE ANNUAL TOTAL RETURNS FOR THE EQUITY INCOME FUNDS AVERAGE ARE
1.33%, -1.91%, 96.17%, AND -1.91% AND 14.34%, RESPECTIVELY.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
U.S. equity investors faced a steadily
declining market during the latter
part of the six-month period that
ended May 31, 2000, after
experiencing continued growth the
prior three months. Two chief
catalysts - a tightening of monetary
policy by the Federal Reserve Board
and the bursting of a speculative
bubble in technology stocks -
sparked a sustained pullback among
the major U.S. equity indexes that
began in March. The tech-heavy
NASDAQ Composite Index reached
a high of 5048 on March 10 before
quickly retreating below the 4000
level. The NASDAQ dropped to
3401 on the final day of the period,
gaining a modest 2.05% return for
the six-month period. The Standard
& Poor's 500SM Index - an index
of 500 widely held stocks - fared
slightly better in returning 2.90%.
Another index of well-established
stocks - the blue chips' Dow Jones
Industrial Average - surged higher
during the NASDAQ's sharp
plummet in April, but the brief rally
wasn't enough to significantly offset
earlier losses, and the Dow returned
-2.55% for the period. The Russell
2000(Registered trademark) Index - a barometer of
small-cap stocks - outperformed the
major indexes of larger companies
with a 5.50% return. As the period
drew to a close, weaker trading
volume suggested investors were
mixed about the direction of U.S.
stocks, and whether the three
interest-rate hikes levied by the
Fed during the period had begun
to cool off the overheated economy.
(photograph of Steve DuFour)
NOTE TO SHAREHOLDERS:
Steve DuFour became Portfolio Manager of Fidelity Equity-Income II
Fund on February 1, 2000.
Q. HOW DID THE FUND PERFORM, STEVE?
A. For the six months that ended May 31, 2000, the fund returned
0.05%. That compared to a 1.19% return for the Russell 3000 Value
Index and a 2.05% return for the equity income funds average as
tracked by Lipper Inc. for the same period. For the 12 months that
ended May 31, 2000, the fund returned -0.48%, compared to a -1.68%
return for the Russell 3000 Value Index and a -0.62% return for the
peer group during the same period.
Q. WHAT FACTORS CAUSED THE FUND TO UNDERPERFORM THE INDEX AND THE PEER
GROUP DURING THE SIX-MONTH PERIOD?
A. The fund underperformed the index and its peers primarily as a
result of its overweighting in the health sector, which was one of the
weaker performing segments of the market during the period. Upon
taking over management of the fund in February, I began reducing the
fund's overweighting in health, looking to bring the weighting more in
line with that of the fund's new benchmark - the Russell 3000 Value
Index. However, reducing the fund's weighting in pharmaceutical stocks
wasn't enough to offset earlier losses in the sector.
Q. SINCE TAKING OVER THE FUND, WHAT OTHER STRATEGIES DID YOU EMPLOY?
A. I made some adjustments to the sector weightings in the fund that
were a result of two factors: the fund's benchmark change to the
Russell 3000 Value Index from the Standard & Poor's 500 Index, and my
own strategy based on fundamental research. I increased the fund's
weighting in the financial sector because many of the names there
offered good value. The fund opportunistically purchased stocks - such
as Mellon Financial and American International Group - that were
attractively valued and poised to benefit from a potential change in
the Federal Reserve Board's monetary policy. Elsewhere, since oil
prices had risen to historically high levels, I positioned the fund to
benefit from a declining oil price by owning large integrated energy
companies, such as Exxon Mobil, as well as some selected energy
services names that could benefit from higher capital expenditures by
the oil companies - such as Weatherford International. Both Exxon
Mobil and Weatherford ended the period among the fund's top-10
contributors.
Q. DID YOU MAKE ANY OTHER ADJUSTMENTS?
A. Due to a shortage in natural gas, I increased the fund's holdings
in the natural gas utilities sector, which generally benefited the
fund. Several of these companies offered very good values, above
market-dividend yields and improving fundamentals, including Dynegy,
Enron and El Paso Energy. In the utilities sector, I increased the
fund's weighting in some of the emerging telecommunications companies,
such as U.S. West, which are competitors to the entrenched regional
Bell operating companies (RBOCs) and long-distance companies.
Additionally, I reduced some of the stocks in the retail sector - such
as Wal-Mart - that typically suffer during a rising interest-rate
environment and a slowdown in consumer spending. This move benefited
the fund as the retail sector delivered lackluster results.
Q. WHAT STOCKS PERFORMED WELL?
A. The merger between Internet software provider America Online and
media conglomerate Time Warner helped the performance of Time Warner,
which was the fund's top performer. Energy services company Dynegy,
which I added to the fund during the period, also performed well as
the prices of oil, natural gas and electricity surged.
Q. WHICH STOCKS DISAPPOINTED?
A. AT&T Corp. hurt performance due to added competition and readjusted
growth rates resulting from slowing business conditions. Several of
the fund's pharmaceutical stocks - such as Bristol-Myers Squibb -
detracted from performance based on concerns about both slowing growth
and new Medicare regulations.
Q. WHAT'S YOUR OUTLOOK, STEVE?
A. I am cautiously optimistic about the next six to 12 months. Toward
the end of the period, as a technology correction sparked investors to
reassess their portfolios, it appeared value stocks might come into
favor as investors began to focus more on companies with earnings and
more realistic valuations. The market started to reward more companies
that had consistent earnings growth rather than companies that had no
current earnings, but some potential. If that environment persists,
the large-cap value stocks this fund tends to invest in could be good
relative performers.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: reasonable income; the
fund also considers the
potential for capital
appreciation
FUND NUMBER: 319
TRADING SYMBOL: FEQTX
START DATE: August 21, 1990
SIZE: as of May 31, 2000,
more than $13.8 billion
MANAGER: Steve DuFour, since
February 2000; manager,
Fidelity Balanced Fund, July
1997-January 2000; Fidelity
Convertible Securities Fund,
January 1997-July 1997;
several Fidelity Select
Portfolios, 1993-1997;
joined Fidelity in 1993
STEVE DUFOUR
ON THE ECONOMY:
"The past six months were a very
interesting time in the history
of the stock market. The Federal
Reserve Board, led by its
chairman, Alan Greenspan,
decided some months ago that the
economy was growing too fast and
had the likelihood of creating
inflation. As a result, the Fed set
out to consistently raise interest
rates to slow consumer expenditures.
"At the end of the period, we started
to see the first signs that the Fed's
actions were taking hold, curbing
some of the spending in the U.S.
economy. There were reports of
lower order rates for new cars, a fall
off in new housing construction, a
drop off in the buying of electronic
goods at selected retailers and a
slight increase in the
unemployment rate - all factors
suggesting a slowdown may be in its
infant stage.
"These are early signs, but I will
watch diligently for more evidence
of an economic slowdown, because
that will signal to investors and
economists that future
interest-rate hikes may not be
necessary. If this is the case, I view
it as very positive for the sectors
that the fund typically invests in -
such as financials - which have
been hit very hard during this past
period of rising interest rates."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF MAY 31,
2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Exxon Mobil Corp. 7.3 5.0
Fannie Mae 4.6 3.8
Citigroup, Inc. 4.3 3.1
SBC Communications, Inc. 2.6 2.9
Eli Lilly & Co. 2.6 2.0
Freddie Mac 2.3 1.6
Mellon Financial Corp. 2.1 0.1
American International Group, 1.8 1.3
Inc.
BellSouth Corp. 1.8 0.5
Minnesota Mining & 1.7 0.5
Manufacturing Co.
31.1 20.8
TOP FIVE MARKET SECTORS AS OF
MAY 31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Finance 28.7 21.3
Energy 14.2 12.3
Utilities 13.4 8.0
Health 6.4 12.9
Basic Industries 4.9 3.1
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF MAY 31, 2000 * AS OF NOVEMBER 30, 1999 **
Stocks and Equity Futures 86.5% Stocks 91.8%
Convertible Securities 3.6% Convertible Securities 1.4%
Short-Term Investments and Short-Term Investments and
Net Other Assets 9.9% Net Other Assets 6.8%
* FOREIGN INVESTMENTS 0.1% ** FOREIGN INVESTMENTS 5.7%
Row: 1, Col: 1, Value: 86.5 Row: 1, Col: 1, Value: 91.8
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 3.6 Row: 1, Col: 4, Value: 1.4
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 9.9 Row: 1, Col: 8, Value: 6.8
</TABLE>
INVESTMENTS MAY 31, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 85.5%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 2.2%
BFGoodrich Co. 100,000 $ 3,550
Boeing Co. 5,039,200 196,844
Honeywell International, Inc. 1,864,800 101,981
302,375
BASIC INDUSTRIES - 4.0%
CHEMICALS & PLASTICS - 3.6%
Avery Dennison Corp. 1,379,400 84,488
Dow Chemical Co. 1,107,100 118,529
NOVA Chemicals Corp. 485,400 9,925
Pharmacia Corp. 1,100,400 57,152
PPG Industries, Inc. 3,164,400 156,836
Rohm & Haas Co. 828,800 28,283
Union Carbide Corp. 689,400 37,702
492,915
METALS & MINING - 0.4%
Alcoa, Inc. 989,200 57,806
TOTAL BASIC INDUSTRIES 550,721
CONSTRUCTION & REAL ESTATE -
1.0%
BUILDING MATERIALS - 0.1%
Masco Corp. 750,000 14,766
REAL ESTATE INVESTMENT TRUSTS
- 0.9%
Crescent Real Estate Equities 223,100 4,560
Co.
Duke-Weeks Realty Corp. 60,500 1,305
Equity Office Properties Trust 4,355,500 115,693
121,558
TOTAL CONSTRUCTION & REAL 136,324
ESTATE
DURABLES - 3.8%
AUTOS, TIRES, & ACCESSORIES -
1.8%
Danaher Corp. 122,800 5,917
Eaton Corp. 856,500 62,150
Ford Motor Co. 1,100,000 53,419
General Motors Corp. 288,867 20,401
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES -
CONTINUED
Johnson Controls, Inc. 492,300 $ 28,030
Navistar International Corp. 2,214,100 71,128
(a)
241,045
CONSUMER DURABLES - 1.7%
Minnesota Mining & 2,795,400 239,706
Manufacturing Co.
CONSUMER ELECTRONICS - 0.1%
General Motors Corp. Class H 171,606 16,892
(a)
TEXTILES & APPAREL - 0.2%
NIKE, Inc. Class B 771,100 33,061
TOTAL DURABLES 530,704
ENERGY - 14.0%
ENERGY SERVICES - 3.5%
Diamond Offshore Drilling, 3,797,400 155,219
Inc.
Noble Drilling Corp. (a) 2,251,110 97,642
Smith International, Inc. (a) 389,500 30,795
Tidewater, Inc. 220,000 8,553
Weatherford International, 4,297,200 185,048
Inc.
477,257
OIL & GAS - 10.5%
Burlington Resources, Inc. 2,198,700 100,591
Chevron Corp. 1,544,100 142,733
Exxon Mobil Corp. 12,159,391 1,013,023
Grant Prideco, Inc. (a) 4,894,000 113,786
Kerr-McGee Corp. 521,100 31,103
Petro-Canada 150,000 2,867
The Coastal Corp. 815,000 50,021
1,454,124
TOTAL ENERGY 1,931,381
FINANCE - 28.2%
BANKS - 10.2%
Bank of America Corp. 2,434,800 135,284
Bank of New York Co., Inc. 4,447,456 208,752
Bank One Corp. 3,071,700 101,558
Chase Manhattan Corp. 3,060,700 228,596
Comerica, Inc. 164,300 8,318
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Commerce Bancorp, Inc. 56,700 $ 2,601
Firstar Corp. 1,525,900 39,006
FleetBoston Financial Corp. 2,713,000 102,585
J.P. Morgan & Co., Inc. 140,000 18,025
Mellon Financial Corp. 7,718,300 297,637
Northern Trust Corp. 459,700 30,254
PNC Financial Services Group, 3,502,600 176,443
Inc.
State Street Corp. 200,000 22,300
Wells Fargo & Co. 350,000 15,838
Wilmington Trust Corp. 459,600 23,325
1,410,522
CREDIT & OTHER FINANCE - 5.0%
American Express Co. 1,160,736 62,462
Associates First Capital 1,600,000 43,900
Corp. Class A
Citigroup, Inc. 9,472,481 589,070
695,432
FEDERAL SPONSORED CREDIT - 6.9%
Fannie Mae 10,590,700 636,766
Freddie Mac 7,158,487 318,553
955,319
INSURANCE - 3.7%
American General Corp. 1,691,500 108,362
American International Group, 2,195,400 247,120
Inc.
CIGNA Corp. 107,300 9,530
Marsh & McLennan Companies, 279,400 30,751
Inc.
MetLife, Inc. 3,854,300 79,013
The Chubb Corp. 483,400 33,838
508,614
SECURITIES INDUSTRY - 2.4%
AXA Financial, Inc. 3,266,500 127,189
Lehman Brothers Holdings, 848,900 65,524
Inc.
Merrill Lynch & Co., Inc. 397,300 39,184
Morgan Stanley Dean Witter & 1,368,600 98,454
Co.
330,351
TOTAL FINANCE 3,900,238
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - 6.4%
DRUGS & PHARMACEUTICALS - 4.8%
American Home Products Corp. 1,000,000 $ 53,875
Bristol-Myers Squibb Co. 1,335,528 73,538
Eli Lilly & Co. 4,622,700 351,903
Merck & Co., Inc. 585,400 43,685
Schering-Plough Corp. 1,803,400 87,239
Warner-Lambert Co. 435,100 53,137
663,377
MEDICAL EQUIPMENT & SUPPLIES
- 1.6%
Abbott Laboratories 594,900 24,205
Baxter International, Inc. 1,431,900 95,221
Johnson & Johnson 1,104,300 98,835
218,261
TOTAL HEALTH 881,638
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.1%
ELECTRICAL EQUIPMENT - 1.6%
Emerson Electric Co. 1,144,700 67,537
General Electric Co. 2,959,300 155,733
223,270
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.5%
Deere & Co. 545,300 22,664
Ingersoll-Rand Co. 687,000 31,301
Parker-Hannifin Corp. 200,000 8,338
62,303
TOTAL INDUSTRIAL MACHINERY & 285,573
EQUIPMENT
MEDIA & LEISURE - 4.0%
BROADCASTING - 1.2%
AT&T Corp. - Liberty Media 2,353,400 104,285
Group Class A (a)
Comcast Corp. Class A 1,011,200 38,299
(special) (a)
Time Warner, Inc. 317,492 25,062
167,646
ENTERTAINMENT - 1.3%
MGM Grand, Inc. 470,700 15,298
Walt Disney Co. 3,754,100 158,376
173,674
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 1.5%
Gannett Co., Inc. 289,400 $ 18,739
McGraw-Hill Companies, Inc. 2,683,000 138,007
The New York Times Co. Class A 871,200 33,432
Tribune Co. 606,300 23,343
213,521
TOTAL MEDIA & LEISURE 554,841
NONDURABLES - 2.7%
BEVERAGES - 1.3%
Anheuser-Busch Companies, 1,791,200 138,818
Inc.
Coca-Cola Enterprises, Inc. 357,200 6,117
The Coca-Cola Co. 550,000 29,356
174,291
FOODS - 0.7%
H.J. Heinz Co. 337,300 13,218
Quaker Oats Co. 1,237,600 91,041
104,259
HOUSEHOLD PRODUCTS - 0.4%
Clorox Co. 409,100 16,211
Procter & Gamble Co. 616,500 40,997
57,208
TOBACCO - 0.3%
Philip Morris Companies, Inc. 1,600,000 41,800
TOTAL NONDURABLES 377,558
RETAIL & WHOLESALE - 0.5%
APPAREL STORES - 0.2%
The Limited, Inc. 1,332,200 32,139
GENERAL MERCHANDISE STORES -
0.3%
Wal-Mart Stores, Inc. 600,000 34,575
TOTAL RETAIL & WHOLESALE 66,714
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
SERVICES - 0.4%
H&R Block, Inc. 351,410 $ 10,850
True North Communications 1,113,200 48,633
59,483
TECHNOLOGY - 3.8%
COMMUNICATIONS EQUIPMENT - 0.0%
Oni Systems Corp. 7,400 185
COMPUTER SERVICES & SOFTWARE
- 1.8%
Ceridian Corp. (a) 261,500 6,309
Microsoft Corp. (a) 600,000 37,538
Unisys Corp. (a) 7,522,200 204,040
247,887
COMPUTERS & OFFICE EQUIPMENT
- 1.5%
Apple Computer, Inc. (a) 72,100 6,056
Dell Computer Corp. (a) 582,000 25,099
International Business 1,257,500 134,945
Machines Corp.
Xerox Corp. 1,273,000 34,530
200,630
ELECTRONICS - 0.4%
Micron Technology, Inc. (a) 334,400 23,387
Motorola, Inc. 397,200 37,238
60,625
PHOTOGRAPHIC EQUIPMENT - 0.1%
Eastman Kodak Co. 210,600 12,583
TOTAL TECHNOLOGY 521,910
TRANSPORTATION - 0.2%
RAILROADS - 0.2%
Norfolk Southern Corp. 1,836,100 32,706
UTILITIES - 12.2%
CELLULAR - 0.3%
ALLTEL Corp. 470,400 30,782
AT&T Corp. - Wireless Group 470,000 13,424
44,206
ELECTRIC UTILITY - 0.2%
Montana Power Co. 421,200 15,927
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
NRG Energy, Inc. 351,000 $ 5,835
Southern Co. 450,000 11,672
33,434
GAS - 3.4%
Dynegy, Inc. Class A 2,990,528 230,644
El Paso Energy Corp. 1,501,500 77,327
Enron Corp. 1,922,600 140,109
KeySpan Corp. 902,000 27,511
475,591
TELEPHONE SERVICES - 8.3%
AT&T Corp. 5,782,950 200,596
BellSouth Corp. 5,219,600 243,690
SBC Communications, Inc. 8,210,004 358,675
Sprint Corp. - FON Group 1,250,000 75,625
Time Warner Telecom, Inc. 1,112,500 62,300
Class A
U.S. WEST, Inc. 1,287,400 92,693
WorldCom, Inc. (a) 2,825,391 106,305
1,139,884
TOTAL UTILITIES 1,693,115
TOTAL COMMON STOCKS 11,825,281
(Cost $9,952,193)
CONVERTIBLE PREFERRED STOCKS
- 2.8%
BASIC INDUSTRIES - 0.9%
CHEMICALS & PLASTICS - 0.9%
Monsanto Co. $1.625 ACES 2,523,000 115,585
FINANCE - 0.5%
CREDIT & OTHER FINANCE - 0.5%
Union Pacific Capital Trust 1,680,600 71,426
$3.125
MEDIA & LEISURE - 0.3%
PUBLISHING - 0.3%
Tribune Co. (America Online, 377,700 43,639
Inc.) $3.14 PHONES
CONVERTIBLE PREFERRED STOCKS
- CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - 1.1%
ELECTRIC UTILITY - 0.1%
Alliant Energy Resources, 212,100 $ 14,052
Inc. $4.91 (c)
TELEPHONE SERVICES - 1.0%
Qwest Trends Trust $2.04 (c) 2,081,400 139,974
TOTAL UTILITIES 154,026
TOTAL CONVERTIBLE PREFERRED 384,676
STOCKS
(Cost $380,113)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONVERTIBLE BONDS - 0.8%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT (000S)
ENERGY - 0.2%
OIL & GAS - 0.2%
Kerr-McGee Corp. 5.25% 2/15/10 Baa2 $ 21,398 25,036
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.5%
Clear Channel Communications, Baa3 27,100 35,569
Inc. 2.625% 4/1/03
Liberty Media Corp. 3.75% Baa3 25,420 26,087
2/15/30 (c)
61,656
UTILITIES - 0.1%
CELLULAR - 0.0%
Nextel Communications, Inc. B1 6,780 5,933
5.25% 1/15/10 (c)
TELEPHONE SERVICES - 0.1%
Level 3 Communications, Inc. Caa1 14,380 11,899
6% 3/15/10
TOTAL UTILITIES 17,832
TOTAL CONVERTIBLE BONDS 104,524
(Cost $98,810)
U.S. TREASURY OBLIGATIONS -
0.1%
U.S. Treasury Bills, yield at - 19,000 18,801
date of purchase 6.03%
8/10/00 (d) (Cost $18,777)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 10.9%
SHARES VALUE (NOTE 1) (000S)
Central Cash Collateral Fund, 300,900 $ 301
6.54% (b)
Taxable Central Cash Fund, 1,510,970,498 1,510,970
6.37% (b)
TOTAL CASH EQUIVALENTS 1,511,271
(Cost $1,511,271)
TOTAL INVESTMENT PORTFOLIO - 13,844,553
100.1%
(Cost $11,961,164)
NET OTHER ASSETS - (0.1)% (14,483)
NET ASSETS - 100% $ 13,830,070
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT UNREALIZED GAIN/LOSS (000S)
VALUE (000S)
PURCHASED
406 S&P 500 Stock Index June 2000 $ 144,353 $ 411
Contracts
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS - 1.0%
</TABLE>
SECURITY TYPE ABBREVIATIONS
ACES - Automatic Common Exchange
Securities
PHONES - Participating Hybrid Option
Note Exchangeable Security
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $186,046,000 or 1.3% of net assets.
(d) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $8,411,000.
INCOME TAX INFORMATION
At May 31, 2000, the aggregate cost of investment securities for
income tax purposes was $12,017,532,000. Net unrealized appreciation
aggregated $1,827,021,000, of which $2,213,298,000 related to
appreciated investment securities and $386,277,000 related to
depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT)
MAY 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 13,844,553
value (cost $11,961,164) -
See accompanying schedule
Receivable for investments 33,363
sold
Receivable for fund shares 3,407
sold
Dividends receivable 23,127
Interest receivable 9,237
Other receivables 1,177
TOTAL ASSETS 13,914,864
LIABILITIES
Payable for investments $ 57,193
purchased
Payable for fund shares 19,510
redeemed
Accrued management fee 5,467
Payable for daily variation 508
on futures contracts
Other payables and accrued 1,815
expenses
Collateral on securities 301
loaned, at value
TOTAL LIABILITIES 84,794
NET ASSETS $ 13,830,070
Net Assets consist of:
Paid in capital $ 9,382,806
Undistributed net investment 43,742
income
Accumulated undistributed net 2,519,774
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,883,748
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 516,387 $ 13,830,070
shares outstanding
NET ASSET VALUE, offering $26.78
price and redemption price
per share ($13,830,070
(divided by) 516,387 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED MAY 31, 2000
(UNAUDITED)
INVESTMENT INCOME $ 105,867
Dividends
Interest 46,777
Security lending 310
TOTAL INCOME 152,954
EXPENSES
Management fee $ 36,302
Transfer agent fees 13,443
Accounting and security 538
lending fees
Non-interested trustees' 48
compensation
Custodian fees and expenses 97
Registration fees 109
Audit 54
Legal 49
Miscellaneous 16
Total expenses before 50,656
reductions
Expense reductions (3,445) 47,211
NET INVESTMENT INCOME 105,743
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 2,584,407
Foreign currency transactions (109)
Futures contracts (8,459) 2,575,839
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (2,761,106)
Assets and liabilities in 8
foreign currencies
Futures contracts 411 (2,760,687)
NET GAIN (LOSS) (184,848)
NET INCREASE (DECREASE) IN $ (79,105)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 2000 YEAR ENDED NOVEMBER 30, 1999
(UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 105,743 $ 230,896
income
Net realized gain (loss) 2,575,839 2,267,903
Change in net unrealized (2,760,687) (961,891)
appreciation (depreciation)
NET INCREASE (DECREASE) IN (79,105) 1,536,908
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (108,152) (219,010)
From net investment income
From net realized gain (1,967,790) (1,468,602)
TOTAL DISTRIBUTIONS (2,075,942) (1,687,612)
Share transactions Net 704,238 2,373,789
proceeds from sales of shares
Reinvestment of distributions 1,962,238 1,600,445
Cost of shares redeemed (4,865,732) (4,245,510)
NET INCREASE (DECREASE) IN (2,199,256) (271,276)
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (4,354,303) (421,980)
IN NET ASSETS
NET ASSETS
Beginning of period 18,184,373 18,606,353
End of period (including $ 13,830,070 $ 18,184,373
undistributed net investment
income of $43,742 and
$46,151, respectively)
OTHER INFORMATION
Shares
Sold 26,410 77,468
Issued in reinvestment of 73,625 54,952
distributions
Redeemed (183,033) (138,453)
Net increase (decrease) (82,998) (6,033)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED NOVEMBER 30,
SIX MONTHS ENDED MAY 31, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
SELECTED PER-SHARE DATA
Net asset value, beginning $ 30.34 $ 30.73 $ 28.81 $ 25.17 $ 21.53 $ 18.57
of period
Income from Investment
Operations
Net investment income .18 D .37 D .35 D .42 D .48 .42
Net realized and unrealized (.20) 2.01 4.84 4.87 4.23 3.80
gain (loss)
Total from investment (.02) 2.38 5.19 5.29 4.71 4.22
operations
Less Distributions
From net investment income (.19) (.35) (.33) (.49) (.43) (.40)
From net realized gain (3.35) (2.42) (2.94) (1.16) (.64) (.86)
Total distributions (3.54) (2.77) (3.27) (1.65) (1.07) (1.26)
Net asset value, end of $ 26.78 $ 30.34 $ 30.73 $ 28.81 $ 25.17 $ 21.53
period
TOTAL RETURN B, C .05% 8.25% 20.05% 22.30% 22.75% 24.13%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 13,830 $ 18,184 $ 18,606 $ 16,650 $ 15,596 $ 11,553
(in millions)
Ratio of expenses to average .67% A .66% .68% .70% .73% .76%
net assets
Ratio of expenses to average .62% A, E .64% E .66% E .68% E .72% E .75% E
net assets after expense
reductions
Ratio of net investment 1.40% A 1.19% 1.20% 1.58% 2.13% 2.37%
income to average net assets
Portfolio turnover rate 156% A 71% 62% 77% 46% 45%
</TABLE>
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.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Equity-Income II Fund (the fund) is a fund of Fidelity
Financial Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Foreign securities are valued based
on quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. 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. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity money market funds. Deferred amounts
remain in the fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, foreign currency transactions,
non-taxable dividends and losses deferred due to wash sales. The fund
also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the fund may invest in the Taxable Central Cash Fund and the Central
Cash Collateral Fund (the Cash Funds) managed by Fidelity Investments
Money Management, Inc., an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as either interest income or security lending income in the
accompanying financial statements.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock market. Buying futures tends to increase the
fund's exposure to the underlying instrument, while selling futures
tends to decrease the fund's exposure to the underlying instrument or
hedge other fund investments. Futures contracts involve, to varying
degrees, risk of loss in excess of the futures variation margin
reflected in the Statement of Assets and Liabilities. The underlying
face amount at value of any open futures contracts at period end is
shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in
the value of the underlying instruments or if the counterparties do
not perform under the contracts' terms. Gains (losses) are realized
upon the expiration or closing of the futures contracts. Futures
contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
2. OPERATING POLICIES - CONTINUED
RESTRICTED SECURITIES - CONTINUED
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $10,815,064,000 and $15,270,068,000, respectively.
The market value of futures contracts opened and closed during the
period amounted to $650,809,000 and $498,408,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .2167% to .5200% for the
period. The annual individual fund fee rate is .20%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .48% of average net
assets.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of .18% of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's
accounting records and administers the security lending program. The
security lending fee is based on the number and duration of lending
transactions. The accounting fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $678,000 for the
period.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of
5. SECURITY LENDING - CONTINUED
the market value of the loaned securities during the period of the
loan. The market value of the loaned securities is determined at the
close of business of the fund and any additional required collateral
is delivered to the fund on the next business day. If the borrower
defaults on its obligation to return the securities loaned because of
insolvency or other reasons, the fund could experience delays and
costs in recovering the securities loaned or in gaining access to the
collateral. At period end, the value of the securities loaned amounted
to $300,000. The fund received cash collateral of $301,000 which was
invested in cash equivalents.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $3,116,000 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $5,000, and $324,000, respectively, under these arrangements.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
8 Montgomery Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
Three Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 Old N. Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
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501 Route 17, South
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NEW YORK
1055 Franklin Avenue
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999 Walt Whitman Road
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NORTH CAROLINA
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1735 Market Street
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RHODE ISLAND
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TEXAS
10000 Research Boulevard
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UTAH
215 South State Street
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VIRGINIA
1861 International Drive
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WASHINGTON
411 108th Avenue, N.E.
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511 Pine Street
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WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Stephen DuFour, Vice President
Richard A. Spillane, Jr., Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
* INDEPENDENT TRUSTEES
EII-SANN-0700 106216
1.704739.102
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
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SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S GROWTH AND INCOME FUNDS
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Real Estate Investment Portfolio
Utilities Fund
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FIDELITY(REGISTERED TRADEMARK)
RETIREMENT GROWTH
FUND
SEMIANNUAL REPORT
MAY 31, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 17 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 21 Footnotes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
The technology sell-off that began in mid-March continued to hamper
equity markets, driving the tech-heavy NASDAQ index down more than 16%
year to date through the end of May. Broader equity indexes, including
the S&P 500(registered trademark), also were down, but not as much as
more concentrated performance measures. In bond markets, Treasuries
got a boost late in the period as economic reports showed the first
signs of a slowing economy.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY RETIREMENT GROWTH 15.40% 30.40% 174.47% 414.13%
S&P 500 (registered trademark) 2.90% 10.48% 190.44% 398.93%
Capital Appreciation Funds 8.57% 27.58% 171.27% 319.60%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare the fund's returns to the performance
of the Standard & Poor's 500SM Index - a market
capitalization-weighted index of common stocks. To measure how the
fund's performance stacked up against its peers, you can compare it to
the capital appreciation funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Inc. The
past six months average represents a peer group of 302 mutual funds.
These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges. Lipper has created new
comparison categories that group funds according to portfolio
characteristics and capitalization, as well as by capitalization only.
These averages are listed on page 5 of this report.*
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY RETIREMENT GROWTH 30.40% 22.38% 17.79%
S&P 500 10.48% 23.77% 17.43%
Capital Appreciation Funds 27.58% 20.03% 13.73%
Average
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Retirement Growth S&P 500
00073 SP001
1990/05/31 10000.00 10000.00
1990/06/30 10225.37 9932.00
1990/07/31 10186.74 9900.22
1990/08/31 9143.59 9005.24
1990/09/30 8171.28 8566.68
1990/10/31 7907.28 8529.85
1990/11/30 8454.60 9080.87
1990/12/31 8732.02 9334.23
1991/01/31 9134.53 9741.20
1991/02/28 9887.63 10437.70
1991/03/31 10147.32 10690.29
1991/04/30 10212.24 10715.95
1991/05/31 10549.84 11178.88
1991/06/30 9874.65 10666.88
1991/07/31 10517.37 11163.96
1991/08/31 10965.34 11428.55
1991/09/30 11101.67 11237.69
1991/10/31 11497.70 11388.28
1991/11/30 11173.09 10929.33
1991/12/31 12712.51 12179.64
1992/01/31 12740.40 11953.10
1992/02/29 12921.71 12108.49
1992/03/31 12524.22 11872.38
1992/04/30 12663.69 12221.42
1992/05/31 12900.79 12281.31
1992/06/30 12426.60 12098.32
1992/07/31 12851.97 12593.14
1992/08/31 12503.30 12334.98
1992/09/30 12649.74 12480.53
1992/10/31 13047.23 12524.21
1992/11/30 13786.41 12951.29
1992/12/31 14059.55 13110.59
1993/01/31 14410.19 13220.72
1993/02/28 13956.93 13400.52
1993/03/31 14350.32 13683.27
1993/04/30 14239.14 13352.14
1993/05/31 14991.72 13709.97
1993/06/30 15188.42 13749.73
1993/07/31 15291.05 13694.73
1993/08/31 16146.25 14213.77
1993/09/30 16206.11 14104.32
1993/10/31 16685.03 14396.28
1993/11/30 16471.23 14259.51
1993/12/31 17170.85 14432.05
1994/01/31 17656.04 14922.74
1994/02/28 17474.91 14518.34
1994/03/31 16674.09 13885.34
1994/04/30 16826.63 14063.07
1994/05/31 16941.03 14293.70
1994/06/30 16569.22 13943.51
1994/07/31 16988.70 14400.86
1994/08/31 17808.58 14991.29
1994/09/30 17608.37 14624.00
1994/10/31 17684.64 14953.04
1994/11/30 17169.83 14408.45
1994/12/31 17181.34 14622.13
1995/01/31 17256.41 15001.28
1995/02/28 17652.00 15585.88
1995/03/31 18026.21 16045.82
1995/04/30 18496.64 16518.37
1995/05/31 18731.86 17178.61
1995/06/30 19116.76 17577.67
1995/07/31 20046.94 18160.55
1995/08/31 20196.63 18206.13
1995/09/30 20634.99 18974.43
1995/10/31 20185.93 18906.69
1995/11/30 20848.82 19736.69
1995/12/31 21352.98 20116.82
1996/01/31 21670.70 20801.60
1996/02/29 21894.97 20994.43
1996/03/31 21965.79 21196.61
1996/04/30 22662.18 21509.04
1996/05/31 22862.83 22063.76
1996/06/30 22367.09 22147.83
1996/07/31 21104.15 21169.33
1996/08/31 21470.05 21615.80
1996/09/30 22449.72 22832.33
1996/10/31 22272.67 23462.05
1996/11/30 23653.65 25235.54
1996/12/31 23132.73 24735.63
1997/01/31 24243.21 26281.11
1997/02/28 24149.55 26487.15
1997/03/31 22691.21 25398.80
1997/04/30 23440.45 26915.11
1997/05/31 24858.65 28553.70
1997/06/30 26156.44 29832.90
1997/07/31 28524.57 32206.71
1997/08/31 27534.50 30402.49
1997/09/30 28979.46 32067.63
1997/10/31 26905.68 30996.57
1997/11/30 27387.33 32431.40
1997/12/31 27422.15 32988.25
1998/01/31 28349.79 33353.10
1998/02/28 31474.45 35758.53
1998/03/31 32516.00 37589.72
1998/04/30 33020.50 37967.87
1998/05/31 31978.95 37315.21
1998/06/30 33817.94 38830.95
1998/07/31 33736.57 38417.40
1998/08/31 28008.03 32863.01
1998/09/30 30595.64 34968.22
1998/10/31 32450.90 37812.53
1998/11/30 34826.95 40104.35
1998/12/31 37264.14 42415.16
1999/01/31 39858.60 44188.96
1999/02/28 37801.14 42815.57
1999/03/31 39933.41 44528.62
1999/04/30 40307.50 46253.21
1999/05/31 39428.40 45161.18
1999/06/30 42421.07 47667.62
1999/07/31 41598.08 46179.44
1999/08/31 41803.83 45950.85
1999/09/30 40382.31 44691.34
1999/10/31 41504.56 47519.41
1999/11/30 44553.34 48485.47
1999/12/31 54788.69 51341.27
2000/01/31 53437.64 48761.88
2000/02/29 67207.37 47838.82
2000/03/31 64393.75 52518.89
2000/04/30 56123.38 50938.60
2000/05/31 51412.68 49893.34
IMATRL PRASUN SHR__CHT 20000531 20000620 112134 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Retirement Growth Fund on May 31, 1990. As the
chart shows, by May 31, 2000, the value of the investment would have
grown to $51,413 - a 414.13% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $49,893 - a 398.93% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
* THE LIPPER MULTI-CAP GROWTH FUNDS AVERAGE REFLECTS THE PERFORMANCE
(EXCLUDING SALES CHARGES) OF MUTUAL FUNDS WITH SIMILAR PORTFOLIO
CHARACTERISTICS AND CAPITALIZATION. THE LIPPER MULTI-CAP SUPERGROUP
AVERAGE REFLECTS THE PERFORMANCE (EXCLUDING SALES CHARGES) OF MUTUAL
FUNDS WITH SIMILAR CAPITALIZATION. AS OF MAY 31, 2000, THE SIX MONTH,
ONE YEAR, FIVE YEAR, AND 10 YEAR CUMULATIVE AND AVERAGE ANNUAL TOTAL
RETURNS FOR THE MULTI-CAP GROWTH FUNDS AVERAGE ARE 13.01%, 40.45%,
214.24%, 426.94%, AND 40.45%, 25.26%, AND 17.71%, RESPECTIVELY; AND
THE SIX MONTH, ONE YEAR, FIVE YEAR, AND 10 YEAR CUMULATIVE AND AVERAGE
ANNUAL TOTAL RETURNS FOR THE MULTI-CAP SUPERGROUP AVERAGE ARE 7.79%,
17.37%, 152.79%, 322.52% AND 17.37%, 19.72%, AND 15.05%, RESPECTIVELY.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
U.S. equity investors faced a steadily
declining market during the latter
part of the six-month period that
ended May 31, 2000, after
experiencing continued growth the
prior three months. Two chief
catalysts - a tightening of monetary
policy by the Federal Reserve Board
and the bursting of a speculative
bubble in technology stocks -
sparked a sustained pullback among
the major U.S. equity indexes that
began in March. The tech-heavy
NASDAQ Composite Index reached
a high of 5048 on March 10 before
quickly retreating below the 4000
level. The NASDAQ dropped to
3401 on the final day of the period,
gaining a modest 2.05% return for
the six-month period. The Standard
& Poor's 500SM Index - an index
of 500 widely held stocks - fared
slightly better in returning 2.90%.
Another index of well-established
stocks - the blue chips' Dow Jones
Industrial Average - surged higher
during the NASDAQ's sharp
plummet in April, but the brief rally
wasn't enough to significantly offset
earlier losses, and the Dow returned
-2.55% for the period. The Russell
2000(Registered trademark) Index - a barometer of
small-cap stocks - outperformed the
major indexes of larger companies
with a 5.50% return. As the period
drew to a close, weaker trading
volume suggested investors were
mixed about the direction of U.S.
stocks, and whether the three
interest-rate hikes levied by the
Fed during the period had begun
to cool off the overheated economy.
(photograph of Fergus Shiel)
An interview with Fergus Shiel, Portfolio Manager of Fidelity
Retirement Growth Fund
Q. HOW DID THE FUND PERFORM, FERGUS?
A. Quite well. For the six months that ended May 31, 2000, the fund
returned 15.40%, compared to 2.90% for the Standard & Poor's 500 Index
and 8.57% for the capital appreciation funds average tracked by Lipper
Inc. For the 12 months that ended May 31, 2000, the fund returned
30.40%, while the S&P 500 index and the Lipper average returned 10.48%
and 27.58%, respectively.
Q. WHAT FACTORS HELPED THE FUND OUTPERFORM BOTH THE S&P 500 AND THE
PEER GROUP DURING THE SIX-MONTH PERIOD?
A. Performance was enhanced by strong stock selection and an
overweighting in the technology sector, despite a technology
correction in the second half of the six-month period. Although I
underweighted the energy sector relative to the index, the fund got a
boost from specific stock positions. In this sector, I focused on
energy services stocks, such as new holding Halliburton, which
typically experience strong earnings growth in a climate of rising oil
prices. Elsewhere, specific nondurable stocks - such as tobacco
company RJ Reynolds, which was as cheap as it had been since the
mid-1980s - also boosted returns. Finally, the fund's focus on certain
biotechnology stocks with strong earnings and solid product
development - such as Immunex and Medimmune - benefited the fund.
Q. THE FUND'S TECHNOLOGY WEIGHTING ROSE TO 61.1% OF NET ASSETS AT THE
END OF THE PERIOD, FROM 35.8% SIX MONTHS AGO. WHAT WAS YOUR STRATEGY
THERE?
A. I thought the technology sector afforded investors the best
opportunity for growth in the marketplace. Other than energy prices,
it was hard to find big pockets of inflation in the economy, despite
government figures that may have been interpreted otherwise.
Certainly, very few companies had the luxury of increasing their
prices. As a result, the only consistent way for companies to grow
revenues was to increase unit sales. The broadest sector of the market
experiencing high unit-sales growth was technology, hence the fund's
emphasis in that area.
Q. THE TECHNOLOGY SECTOR PEAKED ON MARCH 10, THEN WENT THROUGH A
SEVERE PERIOD OF VOLATILITY AND A CORRECTION IN APRIL. DID THIS
ENVIRONMENT ALTER YOUR STRATEGY?
A. It was a pretty horrible 10 weeks or so, but I saw this as an
opportunity to upgrade the fund's technology positions. I bought more
of some industry leaders in the wireless and network build-out
subsectors - such as Micron Technology, which I added to the fund
earlier in the period, and Nokia. At the same time, I eliminated or
reduced some companies that had performed well, but were early in
their corporate life cycles and weren't earning significant profits -
such as Akamai Technologies and interactive TV technology provider
Liberate Technologies.
Q. WHICH STOCKS PERFORMED WELL?
A. Micron Technology, the fund's largest position and its top
performer, got a boost from the market's demand for dynamic random
access memory chips, or DRAM, which are used in personal computers.
Another top contributor, Ericsson, was recognized by the market as the
leader in providing wireless infrastructure products.
Q. WHAT STOCKS DISAPPOINTED?
A. Motorola was a disappointment. It continued to produce lower
margins than its major competitors, and first-quarter business trends
were not as promising as expected in either its cellular handset or
mobile infrastructure divisions. Another detractor was Globalstar, a
company building a global satellite telephony system marketed toward
remote areas. Unfortunately, the service launch was not as smooth as
expected. I sold the fund's entire positions in both stocks by the end
of the period.
Q. WHAT'S YOUR OUTLOOK?
A. Going forward, I would be surprised if the market focused as
powerfully on technology stocks as it did in late 1999 and early 2000.
Rather, I think there could be sharp rotational shifts between sectors
vying for market leadership over the next few months. Ultimately,
however, I think the market will return to growth. In this
environment, I will focus on the market leaders in various industries,
not the second-tier companies with slowing fundamentals. Prices of
leading companies that have good fundamentals and strong earnings
growth may still go down due to market volatility, but they'll have
the best opportunity to come back when the market rebounds.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: to provide capital
appreciation
FUND NUMBER: 073
TRADING SYMBOL: FDFFX
START DATE: March 25, 1983
SIZE: as of May 31, 2000,
more than $7.4 billion
MANAGER: J. Fergus Shiel, since
1996; manager, Fidelity
Advisor Dynamic Capital
Appreciation Fund, since
1998; Fidelity Trend Fund,
1995-1996; Fidelity Dividend
Growth Fund, 1994-1995;
several Fidelity Select
Portfolios, 1991-1993;
joined Fidelity in 1989
FERGUS SHIEL ON THE
TECHNOLOGY SECTOR:
"Company-by-company
fundamental evaluations are very
important in the technology sector,
as opposed to making a conscious
decision to buy technology stocks in
general. I do not manage a fund by
considering what the technology
sector weighting should or
shouldn't be. Rather, I try to own
companies that have a significant
advantage in the marketplace in
which they compete, with strong or
accelerating unit growth, and those
that are on the front end of
defensible product cycles.
"The most important factor in
owning technology stocks is the
product cycles. All things being equal,
if another company has a product
that's marginally better than yours, it
will dramatically outsell your
company's product. So being No. 2 in
technology is just a terrible place to
be. Investors often can get lured into
buying these second-tier technology
companies based on the decline in
the stock price, while hoping for a
turnaround. While these
turnarounds can occur from time to
time, they are very rare.
"In this sector, it is best to focus on
the market leaders. For example,
Texas Instruments has the potential
to be as integral to the wireless
communications market as Intel
was to the personal computer, given
its strategic position supplying the
wireless industry. Leading
companies with strong fundamentals
and robust product cycles are where
I will continue to focus my energy in
the months ahead."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF MAY 31,
2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Micron Technology, Inc. 5.8 0.0
Texas Instruments, Inc. 4.9 3.4
Brocade Communications 4.5 0.9
Systems, Inc.
Nokia AB sponsored ADR 4.3 2.6
Immunex Corp. 4.2 3.5
General Electric Co. 4.0 0.0
Philip Morris Companies, Inc. 4.0 0.5
RJ Reynolds Tobacco Holdings, 3.8 3.2
Inc.
Cisco Systems, Inc. 3.5 3.1
Network Appliance, Inc. 3.4 0.0
42.4 17.2
TOP FIVE MARKET SECTORS AS OF
MAY 31, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Technology 61.1 35.8
Nondurables 8.1 4.6
Health 5.9 15.7
Industrial Machinery & 4.9 3.3
Equipment
Media & Leisure 4.2 4.0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF MAY 31, 2000 * AS OF NOVEMBER 30, 1999 **
Stocks 97.6% Stocks 96.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.4% Net Other Assets 4.0%
* FOREIGN INVESTMENTS 10.1% ** FOREIGN INVESTMENTS 10.1%
Row: 1, Col: 1, Value: 97.59999999999999 Row: 1, Col: 1, Value: 96.0
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.4 Row: 1, Col: 8, Value: 4.0
</TABLE>
INVESTMENTS MAY 31, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 97.6%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 0.3%
Boeing Co. 500,000 $ 19,531
Northrop Grumman Corp. 50,000 3,831
23,362
BASIC INDUSTRIES - 1.4%
CHEMICALS & PLASTICS - 1.1%
Dow Chemical Co. 273,000 29,228
E.I. du Pont de Nemours and 600,000 29,400
Co.
Sealed Air Corp. (a) 91,600 5,130
Union Carbide Corp. 307,400 16,811
80,569
IRON & STEEL - 0.3%
Bethlehem Steel Corp. (a) 5,600,000 21,700
TOTAL BASIC INDUSTRIES 102,269
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- 0.3%
Pinnacle Holdings, Inc. (a) 483,800 23,706
DURABLES - 1.0%
CONSUMER DURABLES - 0.5%
Minnesota Mining & 400,000 34,300
Manufacturing Co.
CONSUMER ELECTRONICS - 0.5%
Gemstar International Group 867,700 36,823
Ltd. (a)
TOTAL DURABLES 71,123
ENERGY - 3.6%
ENERGY SERVICES - 3.4%
ENSCO International, Inc. 2,150,000 75,116
Global Marine, Inc. 4,300,400 121,755
Halliburton Co. 1,150,000 58,650
255,521
OIL & GAS - 0.2%
Cabot Oil & Gas Corp. Class A 383,000 9,551
TOTAL ENERGY 265,072
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 0.5%
BANKS - 0.1%
J.P. Morgan & Co., Inc. 90,600 $ 11,665
SECURITIES INDUSTRY - 0.4%
Charles Schwab Corp. 969,600 27,876
Diversinet Corp. (a) 188,500 1,700
29,576
TOTAL FINANCE 41,241
HEALTH - 5.9%
DRUGS & PHARMACEUTICALS - 5.9%
Bristol-Myers Squibb Co. 250,000 13,766
Genentech, Inc. 615,500 66,089
Immunex Corp. (a) 12,093,000 312,906
IVAX Corp. (a) 50,000 1,881
Medimmune, Inc. (a) 312,000 48,477
United Therapeutics Corp. 10,000 640
443,759
INDUSTRIAL MACHINERY &
EQUIPMENT - 4.9%
ELECTRICAL EQUIPMENT - 4.9%
Alcatel SA sponsored ADR 1,194,700 65,186
General Electric Co. 5,700,000 299,963
365,149
MEDIA & LEISURE - 4.2%
BROADCASTING - 3.1%
American Tower Corp. Class A 1,006,400 37,363
(a)
EchoStar Communications Corp. 4,681,900 186,983
Class A (a)
Spectrasite Holdings, Inc. (a) 644,600 10,918
235,264
ENTERTAINMENT - 0.2%
Mandalay Resort Group (a) 231,800 4,911
MGM Grand, Inc. 176,300 5,730
Park Place Entertainment 277,700 3,506
Corp. (a)
14,147
LODGING & GAMING - 0.2%
Jurys Doyle Hotel Group PLC 1,812,200 9,967
Mirage Resorts, Inc. (a) 200,000 4,188
14,155
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.7%
Gannett Co., Inc. 200,000 $ 12,950
Independent Newspapers PLC 4,884,346 38,812
51,762
TOTAL MEDIA & LEISURE 315,328
NONDURABLES - 8.1%
AGRICULTURE - 0.3%
IAWS Group PLC 3,278,275 19,204
TOBACCO - 7.8%
Philip Morris Companies, Inc. 11,372,200 297,099
RJ Reynolds Tobacco Holdings, 10,266,100 284,884
Inc. (c)
581,983
TOTAL NONDURABLES 601,187
RETAIL & WHOLESALE - 4.1%
DRUG STORES - 0.6%
Walgreen Co. 1,700,000 48,238
GENERAL MERCHANDISE STORES -
1.2%
Arnotts PLC (c) 1,667,488 10,471
Kohls Corp. (a) 867,600 44,898
Target Corp. 500,000 31,344
86,713
GROCERY STORES - 1.4%
Safeway, Inc. New (a) 2,186,800 100,866
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.9%
Bed Bath & Beyond, Inc. (a) 1,200,000 44,175
Home Depot, Inc. 514,600 25,119
69,294
TOTAL RETAIL & WHOLESALE 305,111
SERVICES - 0.8%
ADVERTISING - 0.4%
Omnicom Group, Inc. 306,800 25,752
SERVICES - 0.4%
Ecolab, Inc. 800,000 30,600
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
SERVICES - CONTINUED
SERVICES - CONTINUED
Per-Se Technologies, Inc. (a) 38,994 $ 253
Per-Se Technologies, Inc. 52,343 0
warrants 7/8/03 (a)
30,853
TOTAL SERVICES 56,605
TECHNOLOGY - 61.1%
COMMUNICATIONS EQUIPMENT -
13.5%
Cisco Systems, Inc. (a) 4,613,600 262,687
Corning, Inc. 290,000 56,097
Nokia AB sponsored ADR 6,160,000 320,320
Nortel Networks Corp. 1,000,000 53,291
Oni Systems Corp. 4,100 103
Sycamore Networks, Inc. 1,275,000 106,622
Tekelec (a) 982,900 32,436
Telefonaktiebolaget LM 8,490,000 174,045
Ericsson sponsored ADR
1,005,601
COMPUTER SERVICES & SOFTWARE
- 15.6%
Akamai Technologies, Inc. 20,000 1,335
Art Technology Group, Inc. 145,500 8,539
BEA Systems, Inc. (a) 3,415,700 123,392
Ceridian Corp. (a) 305,700 7,375
Certicom Corp. (a) 150,000 4,756
Exodus Communications, Inc. 189,600 13,379
(a)
Kana Communications, Inc. 177,500 7,954
Keynote Systems, Inc. 550,000 19,147
Mercury Interactive Corp. (a) 1,268,000 107,463
Microsoft Corp. (a) 55 3
Network Solutions, Inc. Class 842,600 124,547
A (a)
OnDisplay, Inc. 14,700 676
OpenTV Corp. 229,400 10,380
Phone.com, Inc. 410,000 28,674
Polycom, Inc. (a) 610,000 51,278
Portal Software, Inc. 168,800 6,794
Redback Networks, Inc. 2,619,300 219,694
Software.com, Inc. 141,000 11,879
Tumbleweed Communications 258,900 8,981
Corp.
VeriSign, Inc. (a) 839,800 113,688
VERITAS Software Corp. (a) 1,395,000 162,518
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- CONTINUED
Vignette Corp. (a) 4,470,000 $ 123,204
Wink Communications, Inc. 174,400 3,771
1,159,427
COMPUTERS & OFFICE EQUIPMENT
- 11.3%
Brocade Communications 2,830,700 333,846
Systems, Inc.
Extended Systems, Inc. (a) 349,800 11,259
Juniper Networks, Inc. 1,376,600 241,163
Network Appliance, Inc. (a) 3,908,500 252,343
Pitney Bowes, Inc. 150,000 6,525
845,136
ELECTRONIC INSTRUMENTS - 0.6%
Agilent Technologies, Inc. 631,596 46,501
Biomira, Inc. (a) 65,000 521
47,022
ELECTRONICS - 20.1%
Advanced Micro Devices, Inc. 2,120,000 172,648
(a)
Applied Micro Circuits Corp. 830,000 82,378
(a)
Conductus, Inc. (a) 58,900 493
Cree, Inc. (a) 180,000 21,867
E Tek Dynamics, Inc. (a) 877,500 161,295
International Rectifier Corp. 900,000 37,125
(a)
JDS Uniphase Corp. (a) 171,500 15,092
Micron Technology, Inc. (a) 6,162,400 430,980
PMC-Sierra, Inc. (a) 735,600 112,731
RF Micro Devices, Inc. (a) 265,000 27,825
Sanmina Corp. (a) 370,000 23,541
SDL, Inc. (a) 50,000 11,328
Semtech Corp. (a) 50,000 2,788
Texas Instruments, Inc. 5,010,000 361,973
Tyco International Ltd. 850,000 40,003
1,502,067
TOTAL TECHNOLOGY 4,559,253
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.2%
Ryanair Holdings PLC 383,000 15,512
sponsored ADR (a)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TRANSPORTATION - CONTINUED
SHIPPING - 0.3%
Irish Continental Group PLC 2,283,600 $ 19,477
(c)
TOTAL TRANSPORTATION 34,989
UTILITIES - 0.9%
CELLULAR - 0.8%
Crown Castle International 629,500 16,485
Corp. (a)
SBA Communications Corp. 590,400 21,992
Class A
VoiceStream Wireless Corp. (a) 184,900 21,171
59,648
ELECTRIC UTILITY - 0.0%
AES Corp. (a) 10,600 925
TELEPHONE SERVICES - 0.1%
Telefonos de Mexico SA de CV 200,000 9,738
Series L sponsored ADR
TOTAL UTILITIES 70,311
TOTAL COMMON STOCKS 7,278,465
(Cost $5,752,142)
CASH EQUIVALENTS - 4.6%
Central Cash Collateral Fund, 124,854,900 124,855
6.54% (b)
Taxable Central Cash Fund, 222,940,529 222,941
6.37% (b)
TOTAL CASH EQUIVALENTS 347,796
(Cost $347,796)
TOTAL INVESTMENT PORTFOLIO - 7,626,261
102.2%
(Cost $6,099,938)
NET OTHER ASSETS - (2.2)% (166,160)
NET ASSETS - 100% $ 7,460,101
</TABLE>
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Affiliated company
Distribution of investments by country of issue, as a percentage of
total net assets, is as follows:
United States of America 89.9%
Finland 4.3
Sweden 2.3
Ireland 1.6
Others (individually less 1.9
than 1%)
100.0%
INCOME TAX INFORMATION
At May 31, 2000, the aggregate cost of investment securities for
income tax purposes was $6,172,522,000. Net unrealized appreciation
aggregated $1,453,739,000, of which $1,988,763,000 related to
appreciated investment securities and $535,024,000 related to
depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT)
MAY 31, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 7,626,261
value (cost $6,099,938) -
See accompanying schedule
Receivable for investments 24,582
sold
Receivable for fund shares 7,554
sold
Dividends receivable 2,163
Interest receivable 1,055
Other receivables 1,101
TOTAL ASSETS 7,662,716
LIABILITIES
Payable for investments $ 58,417
purchased
Payable for fund shares 13,385
redeemed
Accrued management fee 4,487
Other payables and accrued 1,471
expenses
Collateral on securities 124,855
loaned, at value
TOTAL LIABILITIES 202,615
NET ASSETS $ 7,460,101
Net Assets consist of:
Paid in capital $ 5,537,261
Distributions in excess of (6,478)
net investment income
Accumulated undistributed net 403,026
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,526,292
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 309,227 $ 7,460,101
shares outstanding
NET ASSET VALUE, offering $24.12
price and redemption price
per share ($7,460,101
(divided by) 309,227 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED MAY 31, 2000
(UNAUDITED)
INVESTMENT INCOME $ 22,016
Dividends (including $14,209
received from affiliated
issuers)
Interest 4,708
Security lending 1,397
TOTAL INCOME 28,121
EXPENSES
Management fee Basic fee $ 22,488
Performance adjustment 4,948
Transfer agent fees 6,002
Accounting and security 413
lending fees
Non-interested trustees' 38
compensation
Custodian fees and expenses 125
Registration fees 600
Audit 31
Legal 23
Interest 12
Miscellaneous 1
Total expenses before 34,681
reductions
Expense reductions (946) 33,735
NET INVESTMENT INCOME (LOSS) (5,614)
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 423,835
(including realized loss of
$680 on sales of investments
in affiliated issuers)
Foreign currency transactions (115) 423,720
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 344,677
Assets and liabilities in (5) 344,672
foreign currencies
NET GAIN (LOSS) 768,392
NET INCREASE (DECREASE) IN $ 762,778
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED MAY 31, 2000 YEAR ENDED NOVEMBER 30, 1999
(UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ (5,614) $ 13,439
income (loss)
Net realized gain (loss) 423,720 936,934
Change in net unrealized 344,672 342,388
appreciation (depreciation)
NET INCREASE (DECREASE) IN 762,778 1,292,761
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (12,436) (30,323)
In excess of investment
income
From net realized gain (797,698) (608,308)
TOTAL DISTRIBUTIONS (810,134) (638,631)
Share transactions Net 2,083,229 1,103,365
proceeds from sales of shares
Reinvestment of distributions 805,571 637,147
Cost of shares redeemed (1,293,197) (1,127,071)
NET INCREASE (DECREASE) IN 1,595,603 613,441
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 1,548,247 1,267,571
IN NET ASSETS
NET ASSETS
Beginning of period 5,911,854 4,644,283
End of period (including $ 7,460,101 $ 5,911,854
under (over) distribution
of net investment income of
$(6,478) and $12,717,
respectively)
OTHER INFORMATION
Shares
Sold 75,205 51,144
Issued in reinvestment of 34,512 32,238
distributions
Redeemed (48,699) (52,173)
Net increase (decrease) 61,018 31,209
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED MAY 31, 2000 YEARS ENDED NOVEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 23.82 $ 21.40 $ 20.47 $ 20.04 $ 19.50 $ 18.01
of period
Income from Investment
Operations
Net investment income (loss) (.02) D .05 D .13 D, E .13 D .26 .34
Net realized and unrealized 3.56 5.25 4.34 2.61 2.14 3.09
gain (loss)
Total from investment 3.54 5.30 4.47 2.74 2.40 3.43
operations
Less Distributions
From net investment income (.05) (.14) (.13) (.26) (.34) (.20)
From net realized gain (3.19) (2.74) (3.41) (2.05) (1.52) (1.74)
Total distributions (3.24) (2.88) (3.54) (2.31) (1.86) (1.94)
Net asset value, end of $ 24.12 $ 23.82 $ 21.40 $ 20.47 $ 20.04 $ 19.50
period
TOTAL RETURN B, C 15.40% 27.93% 27.16% 15.78% 13.45% 21.43%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,460 $ 5,912 $ 4,644 $ 4,014 $ 4,205 $ 3,970
(in millions)
Ratio of expenses to average .89% A .63% .62% .64% .74% .99%
net assets
Ratio of expenses to average .87% A, F .58% F .57% F .59% F .70% F .99%
net assets after expense
reductions
Ratio of net invest- ment (.14)% A .25% .68% .66% 1.26% 1.92%
income (loss) to average net
assets
Portfolio turnover rate 238% A 310% 266% 205% 230% 108%
</TABLE>
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.
D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH
AMOUNTED TO $0.03 PER SHARE.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Retirement Growth Fund (the fund) is a fund of Fidelity
Financial Trust (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Foreign securities are valued based
on quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. 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. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in a cross-section of other Fidelity funds.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from
generally accepted accounting principles. These differences, which may
result in distribution reclassifications, are primarily due to
differing treatments for litigation proceeds, foreign currency
transactions and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Distributions in excess of net investment income and accumulated
undistributed net realized gain (loss) on investments and foreign
currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury, Federal Agency,
or other obligations found to be satisfactory by FMR are transferred
to an account of the fund, or to the Joint Trading Account, at a bank
custodian. The securities are marked-to-market daily and maintained at
a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). FMR, the fund's investment
adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the fund may invest in the Taxable Central Cash Fund and the Central
Cash Collateral Fund (the Cash Funds) managed by Fidelity Investments
Money Management, Inc., an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as either interest income or security lending income in the
accompanying financial statements.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $9,803,313,000 and $8,967,317,000, 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 .2167% to
.5200% for the period. The annual individual fund fee rate is .30%. In
the event that these rates were lower than the contractual rates in
effect during the period, FMR voluntarily implemented the above rates,
as they
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
resulted in the same or a lower management fee. The basic fee is
subject to a performance adjustment (up to a maximum of
(plus/minus).20% of the fund's average net assets over the performance
period) based on the fund's investment performance as compared to the
appropriate index over a specified period of time. For the period, the
management fee was equivalent to an annualized rate of .71% of average
net assets after the performance adjustment.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annualized rate of .15% of average net assets.
ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the fund's
accounting records and administers the security lending program. The
security lending fee is based on the number and duration of lending
transactions. The accounting fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $160,000 for the
period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a borrower.
The average daily loan balance during the period for which loans were
outstanding amounted to $18,354,000. The weighted average interest
rate was 5.65%.
6. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end, the value of the securities
loaned amounted to $116,773,000. The fund received cash collateral of
$124,855,000 which was invested in cash equivalents.
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 $802,000 under this arrangement.
In addition, through arrangements with the fund's custodian and
transfer agent, credits realized as a result of uninvested cash
balances were used to reduce a portion of the fund's expenses. During
the period, the fund's custodian and transfer agent fees were reduced
by $20,000 and $124,000, respectively, under these arrangements.
8. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of
at least 5% of the voting securities. Transactions during the period
with companies which are or were affiliates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS WITH
AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS PURCHASE COST SALES COST DIVIDEND INCOME VALUE
AFFILIATE
Arnotts PLC $ - $ - $ 256 $ 10,471
Bethlehem Steel Corp. 172 2,182 - -
Irish Continental Group PLC 2,298 - 176 19,477
RJ Reynolds Tobacco Holdings, 29,900 - 13,777 284,884
Inc.
TOTALS $ 32,370 $ 2,182 $ 14,209 $ 314,832
</TABLE>
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FAST(registered trademark))
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
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10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
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7676 Hazard Center Drive
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8 Montgomery Street
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950 Northgate Drive
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1400 Civic Drive
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6300 Canoga Avenue
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COLORADO
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CONNECTICUT
48 West Putnam Avenue
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DELAWARE
222 Delaware Avenue
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FLORIDA
4400 N. Federal Highway
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90 Alhambra Plaza
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4090 N. Ocean Boulevard
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1907 West State Road 434
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8880 Tamiami Trail, North
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2401 PGA Boulevard
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8065 Beneva Road
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1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
Three Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
One W. Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
801 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 Old N. Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
16850 SW 72nd Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
RHODE ISLAND
47 Providence Place
Providence, RI
TENNESSEE
6150 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
1861 International Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Abigail P. Johnson, Vice President
J. Fergus Shiel, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
FRE-SANN-0700 106154
1.479485.102
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Aggressive Growth Fund
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Capital Appreciation Fund
Contrafund(registered trademark)
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Growth Company Fund
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OTC Portfolio
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Stock Selector
Tax Managed Stock Fund
TechnoQuant GrowthSM Fund
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Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST(registered trademark)) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com