FIDELITY
(REGISTERED TRADEMARK)
BLUE CHIP GROWTH
FUND
ANNUAL REPORT
JULY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 26 Notes to the financial statements.
REPORT OF INDEPENDENT 31 The auditors' opinion.
ACCOUNTANTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Blue Chip Growth 32.64% 168.56% 321.59%
Blue Chip Growth (incl. 3% sales 28.66% 160.51% 308.94%
charge)
S&P 500(registered trademark) 26.11% 83.44% 188.56%
Average Growth Fund 24.75% 83.14% 178.61%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on December 31, 1987. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. You can compare the fund's returns to the performance of the
Standard & Poor's Composite Index of 500 Stocks - a common proxy for the
U.S. stock market. To measure how the fund's performance stacked up against
its peers, you can compare it to the average growth fund, which reflects
the performance of 529 growth funds with similar objectives tracked by
Lipper Analytical Services over the past 12 months. Both benchmarks include
reinvested dividends and capital gains, if any, and exclude the effects of
sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Blue Chip Growth 32.64% 21.85% 20.88%
Blue Chip Growth (incl. 3% sales charge) 28.66% 21.11% 20.39%
S&P 500(registered trademark) 26.11% 12.90% 14.99%
Average Growth Fund 24.75% 12.52% 14.01%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Blue Chip Growth (3Standard & Poor's 500 Stock Index
12/31/87 9700.00 10000.00
01/31/88 9767.90 10421.00
02/29/88 10185.00 10906.62
03/31/88 9816.40 10569.60
04/30/88 9797.00 10686.93
05/31/88 9797.00 10779.90
06/30/88 10359.60 11274.70
07/31/88 10155.90 11231.86
08/31/88 9729.10 10849.97
09/30/88 10165.60 11312.18
10/31/88 10146.20 11626.66
11/30/88 9961.90 11460.40
12/31/88 10272.95 11660.96
01/31/89 11031.75 12514.54
02/28/89 10700.99 12202.93
03/31/89 10953.92 12487.26
04/30/89 11702.99 13135.34
05/31/89 12461.79 13667.32
06/30/89 12024.02 13589.42
07/31/89 13191.40 14816.55
08/31/89 13512.43 15106.95
09/30/89 13846.77 15045.01
10/31/89 13640.69 14695.97
11/30/89 13876.21 14995.77
12/31/89 13995.40 15355.66
01/31/90 12823.32 14325.30
02/28/90 13170.98 14510.09
03/31/90 13826.54 14894.61
04/30/90 13697.42 14522.25
05/31/90 15246.94 15938.17
06/30/90 15594.59 15829.79
07/31/90 15227.08 15779.13
08/31/90 13915.94 14352.70
09/30/90 13258.58 13653.72
10/31/90 13178.88 13595.01
11/30/90 14015.64 14473.25
12/31/90 14485.44 14877.05
01/31/91 15619.78 15525.69
02/28/91 16824.39 16635.78
03/31/91 17667.62 17038.36
04/30/91 17476.89 17079.26
05/31/91 18400.43 17817.08
06/30/91 17476.89 17001.06
07/31/91 19012.77 17793.31
08/31/91 19845.96 18215.01
09/30/91 19534.98 17910.82
10/31/91 19926.88 18150.82
11/30/91 19504.83 17419.34
12/31/91 22424.76 19412.12
01/31/92 21719.26 19051.05
02/29/92 21820.04 19298.72
03/31/92 21225.41 18922.39
04/30/92 21507.61 19478.71
05/31/92 21951.06 19574.15
06/30/92 21316.12 19282.50
07/31/92 22192.95 20071.15
08/31/92 21961.14 19659.70
09/30/92 22252.76 19891.68
10/31/92 22561.69 19961.30
11/30/92 23745.89 20641.98
12/31/92 23808.73 20895.88
01/31/93 23860.87 21071.40
02/28/93 23704.44 21357.97
03/31/93 24851.60 21808.63
04/30/93 25247.89 21280.86
05/31/93 26572.33 21851.19
06/30/93 26822.62 21914.55
07/31/93 26822.62 21826.90
08/31/93 28491.21 22654.14
09/30/93 29084.11 22479.70
10/31/93 29409.21 22945.03
11/30/93 28515.20 22727.05
12/31/93 29642.54 23002.05
01/31/94 30819.90 23784.12
02/28/94 30844.43 23139.57
03/31/94 29875.56 22130.68
04/30/94 30758.58 22413.96
05/31/94 31151.04 22781.54
06/30/94 30071.79 22223.40
07/31/94 30832.17 22952.32
08/31/94 32500.10 23893.37
09/30/94 32403.56 23307.98
10/31/94 33899.49 23832.41
11/30/94 32131.58 22964.43
12/31/94 32562.32 23305.00
01/31/95 31746.69 23909.30
02/28/95 32800.73 24841.04
03/31/95 34181.02 25574.10
04/30/95 35448.38 26327.26
05/31/95 36238.91 27379.56
06/30/95 38246.61 28015.58
07/31/95 40894.26 28944.58
$10,000 OVER LIFE OF FUND: Let's
say you invested $10,000 in Fidelity Blue Chip Growth Fund on December 31,
1987, when the fund started, and paid a 3% sales charge. As the chart
shows, by July 31, 1995, the value of your investment would have grown to
$40,894 - a 308.94% increase on your initial investment. For comparison,
look at how the S&P 500 did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $28,856 - a
188.56% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Strong corporate earnings and a
favorable interest rate
environment helped the U.S.
stock market post strong returns
for the 12 months ended July 31,
1995. The Standard & Poor's
Composite Index of 500 Stocks
finished the 12-month period with a
total return of 26.11% - well
above its historical annual
average of roughly 12%. With
inflation posing little threat,
interest rates fell during the first
half of 1995. The Federal
Reserve Board cut the federal
funds rate - the rate banks
charge each other for overnight
loans - by 0.25% on July 6.
Large-capitalization stocks led
the somewhat narrow market
rally. Technology companies -
whose goods and services
benefited from both corporate
and consumer demand - posted
the strongest earnings growth
and stock price gains. In
February, the Dow Jones
Industrial Average closed
above 4000 for the first time.
Returns from foreign markets
were varied, as investors brought
capital back to the U.S. The
Morgan Stanley Emerging
Markets Free Index was down
3.76% for the 12 months ended
July 31. The Morgan Stanley
EAFE (Europe, Australia, Far
East) Index returned 6.95% for the
year ended July 31. European
markets have fared well through
the first half of 1995 - after a
difficult year in 1994 - while the
Japanese market recently has
shown some signs of recovery
after struggling through much of
the year.
An interview with Michael Gordon, Portfolio Manager of Fidelity Blue Chip
Growth Fund
Q. HOW HAS THE FUND PERFORMED, MIKE?
A. Very well. For the 12 months ended July 31, 1995, the fund returned
32.64%. That beat the average growth fund, which returned 24.75%, for the
same time period, according to Lipper Analytical Services.
Q. WHAT FACTORS HELPED THE FUND TO OUTPERFORM MANY OF ITS PEERS?
A. The fund has benefited tremendously from its emphasis on technology
stocks. Technology has been a very strong performer and the fund's holdings
in Compaq, Texas Instruments, Silicon Graphics and IBM helped the fund to
outperform. The fund also was positioned in more aggressive stocks, such as
Oxford Health Plans, which did well during the period. In addition, the
fund's holdings in selected foreign stocks, such as Indonesian tobacco
company H.M. Sampoerna, have contributed positively to the fund's overall
results.
Q. THE FUND'S HOLDINGS IN FINANCIAL STOCKS HAS INCREASED FROM 13.5% OF THE
FUND SIX MONTHS AGO TO 20.6% AS OF JULY 31, 1995. WHAT'S YOUR STRATEGY?
A. There are really two themes in the fund's financial holdings. The first
is that many brokerage stocks, such as Merrill Lynch and Morgan Stanley,
were historically inexpensive relative to potential earnings growth when I
started buying them early in the period. The economy was slowing and
interest rates had begun to come down, which I feel is very favorable for
brokerage stocks. The second is that the fund's increased holdings in
growth stocks happened to be in the financial market sector. Stocks such as
the Money Store, Greentree Acceptance and MGIC Investment Corp. had been
out of favor, yet began generating tremendous earnings per share growth and
selling at attractive valuations. Together, these had a positive impact on
results during the past six months.
Q. HAVE ANY NEW INVESTMENT TRENDS EMERGED IN THE FUND DURING THE PAST SIX
MONTHS?
A. Yes. I've dramatically increased the fund's exposure to cyclical stocks
- those stocks that rise and fall with the economy. Despite the recent
economic slowdown, I think there are still sectors in the cyclical economy
that are doing very well, especially industrial machinery. The fund's
increased machinery component is based on a couple of things. One is that I
believe we are entering a cyclically strong period. Caterpillar, for
example, has generated end market sales growth of 10% to 12%, and has
meaningfully reduced costs over the past several years. I think that
Caterpillar should realize solid earnings per share gains over the next
several quarters despite some Wall Street estimates to the contrary. It's
my belief that we'll see strong financial and operating performance in
other cyclical stocks as the economy improves in the second half of 1995
and 1996. Companies that the fund owns that I expect to do well include
Timken, Parker-Hannifin and Deere & Co. I'm impressed with the terrific
earnings per share gains they've achieved in a difficult economy. If the
economy gets better in 1996, so should their results.
Q. DOES YOUR THINKING ON CYCLICAL STOCKS APPLY TO THE FUND'S INCREASED
HOLDINGS IN GENERAL MOTORS AND CHRYSLER AS WELL?
A. Yes. The auto holdings also reflect my belief that the 1996 economy will
be stronger than 1995's and the auto stocks are selling at particularly
attractive valuations. In the case of General Motors, if you factor in the
price of the various subsidiaries, I believe you are paying next to nothing
for the North American auto division. Also, the company is in the midst of
a significant cost reduction and restructuring program that should improve
results markedly.
Q. WHAT INVESTMENTS DIDN'T PERFORM AS WELL AS YOU WOULD HAVE LIKED?
A. Basically, in the past six months the fund didn't experience any major
distress. In this market, the trick has been to own stocks that are up more
than the market. The cyclicals that the fund owned didn't do as well as the
market, which was disappointing. But I've continued adding cyclical stocks
to the fund with the belief that they'll outperform going forward. I also
held on to some of the fund's HMO stocks, such as United Health Care, for
longer than I should have.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. On a risk/reward basis, cyclical stocks are my favorite investment
theme. I expect that the fund will continue to emphasize cyclicals during
the next six months as we move toward a potentially stronger economy in
1996.
FUND FACTS
GOAL: to increase the value
of the fund's shares, by
investing mainly in common
stocks of well-known and
established companies.
START DATE: December 31,
1987
SIZE: as of July 31, 1995,
more than $6.4 billion
MANAGER: Michael Gordon,
since January 1993;
previously managed Fidelity
Select Chemicals (August
1992 - January 1993) and
Fidelity Select Biotechnology
Portfolios (May 1990 -
August 1992); joined Fidelity
in 1987
(checkmark)
MICHAEL GORDON ON
TECHNOLOGY STOCKS:
"Technology continues to be
the fund's largest sector
weighting - at about 33% of
the fund's investments. I've
increased the fund's holding
in Oracle during the past year.
The company has continued
to report very strong results,
has continued to gain
significant market share and
continues to face very robust
end market demand. I expect
the company's earnings per
share to remain at the healthy
clip of the past several
quarters.
"To date, 1995 has been an
outstanding year for
technology stocks - they've
really led the market. Despite
this, I believe that technology
will continue to be a fertile
place for the fund to invest in
the next six months."
DISTRIBUTIONS
A total of 32% of the dividends
distributed during the fiscal
year qualifies for the
dividends-received
deductions for corporate
shareholders.
The fund will notify
shareholders in January 1996
of the applicable percentage
for use in preparing 1995
income tax returns.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
General Motors Corp. 3.7 1.1
Compaq Computer Corp. 3.1 2.6
Caterpillar, Inc. 3.0 1.2
Chrysler Corp. 2.4 0.8
Deere & Co. 2.0 0.3
Texas Instruments, Inc. 1.9 0.0
Merrill Lynch & Co., Inc. 1.9 1.5
Morgan Stanley Group, Inc. 1.8 1.9
International Business Machines 1.7 2.3
Corp.
Silicon Graphics, Inc. 1.7 1.1
TOP FIVE MARKET SECTORS AS OF JULY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Technology 32.9 33.0
Finance 20.6 13.5
Industrial Machinery & Equipment 11.5 4.1
Durables 10.7 3.9
Basic Industries 6.9 3.0
ASSET ALLOCATION
AS OF JULY 31, 1995 * AS OF JANUARY 31, 1995 **
Row: 1, Col: 1, Value: 3.3
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 48.7
Row: 1, Col: 4, Value: 48.0
Row: 1, Col: 1, Value: 9.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 45.0
Row: 1, Col: 4, Value: 46.0
Stocks 96.7%
Short-term
investments 3.3%
FOREIGN
INVESTMENTS 10.5%
Stocks 91.0%
Short-term
investments 9.0%
FOREIGN
INVESTMENTS 11.5%
*
**
INVESTMENTS JULY 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.7%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.3%
Precision Castparts Corp. 393,400 $ 14,015
Rockwell International Corp. 7,300 333
Rohr Industries, Inc. (a) 363,700 5,365
19,713
BASIC INDUSTRIES - 6.9%
CHEMICALS & PLASTICS - 0.9%
Hanna (M.A.) Co. 854,800 23,614
PT Tri Polyta Indonesia sponsored ADR 1,586,900 36,499
Union Carbide Corp. 5,000 174
60,287
IRON & STEEL - 1.2%
AK Steel Holding Corp. (a) 708,200 21,512
Inland Steel Industries, Inc. 1,037,900 29,840
LTV Corp. (a) 833,400 12,709
Material Sciences Corp. (a) 345,500 7,558
Nucor Corp. 96,400 5,181
76,800
METALS & MINING - 4.5%
Alcan Aluminium Ltd. 1,626,700 55,155
Alumax, Inc. (a) 374,700 12,880
Aluminum Co. of America 1,490,200 84,755
Belden, Inc. 51,900 1,525
Castech Aluminum Group (a) 209,400 3,717
Falconbridge Ltd. 213,600 4,267
Inco Ltd. 2,576,600 87,599
Kaiser Aluminum Corp. (a) 2,387,600 38,799
Magma Copper Co. Class B (a) 129,900 2,403
Reynolds Metals Co. 600 38
291,138
PAPER & FOREST PRODUCTS - 0.3%
Albany International Corp. Class A 456,500 11,584
Champion International Corp. 26,400 1,488
Fajar Surya Wisesa 4,312,000 4,534
Federal Paper Board Co., Inc. 21,600 807
International Paper Co. 5,000 423
18,836
TOTAL BASIC INDUSTRIES 447,061
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONGLOMERATES - 0.5%
Crane Co. 831,000 $ 30,747
CONSTRUCTION & REAL ESTATE - 3.2%
BUILDING MATERIALS - 2.7%
Armstrong World Industries, Inc. 900,900 49,775
Carlisle Companies, Inc. 117,300 4,853
Centex Construction Products (a) 291,900 4,196
Cimentas AS (a) 540,000 329
Congoleum Corp. Class A (a) 6,900 86
Lafarge Corp. 66,938 1,330
Manville Corp. (a) 479,600 6,654
Masco Corp. 1,113,600 28,954
Medusa Corp. 195,300 5,249
Owens-Corning Fiberglas Corp. (a) 1,160,000 45,530
Ply-Gem Industries, Inc. (b) 1,456,200 22,571
Southdown, Inc. (a) 215,000 4,139
173,666
CONSTRUCTION - 0.5%
Oakwood Homes Corp. 2,800 84
Pulte Corp. 28,900 777
Schuler Homes, Inc. (a) 363,100 4,176
Webb (Del E.) Corp. (b) 1,487,600 30,124
35,161
TOTAL CONSTRUCTION & REAL ESTATE 208,827
DURABLES - 10.7%
AUTOS, TIRES, & ACCESSORIES - 9.3%
Chrysler Corp. 3,218,400 156,897
Cummins Engine Co., Inc. 83,800 3,520
Dana Corp. 1,327,900 39,173
Eaton Corp. 505,100 28,222
Echlin, Inc. 609,600 23,774
Ford Motor Co. 1,915,200 55,301
General Motors Corp. 4,950,006 241,313
Lear Seating Corp. (a) 171,800 4,639
TRW, Inc. 141,300 10,545
Titan Wheel International, Inc. (b) 1,382,800 42,867
606,251
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 1.1%
Black & Decker Corp. 1,597,900 $ 50,534
Whirlpool Corp. 338,900 19,571
70,105
HOME FURNISHINGS - 0.1%
Heilig-Meyers Co. 30,600 773
Leggett & Platt, Inc. 80,800 3,747
4,520
TEXTILES & APPAREL - 0.2%
Mohawk Industries, Inc. (a) 79,500 1,411
Shaw Industries, Inc. 519,000 8,758
10,169
TOTAL DURABLES 691,045
ENERGY - 0.7%
ENERGY SERVICES - 0.5%
Global Industries Ltd. (a)(b) 644,200 12,884
Hornbeck Offshore Services, Inc. (a) 55,100 789
Marine Drilling Cos., Inc. (a) 1,427,129 5,352
Noble Drilling Corp. (a) 12,275 80
Tidewater, Inc. 579,600 14,635
Weatherford International, Inc. (a) 28,100 358
34,098
OIL & GAS - 0.2%
Barrington Petroleum Ltd. (a) 489,000 1,506
Blue Range Resource Corp. Class A (a)(b) 1,375,100 10,963
Newfield Exploration Co. (a) 7,000 179
Rio Alto Exploration Ltd. (a) 1,053,700 2,742
15,390
TOTAL ENERGY 49,488
FINANCE - 20.6%
BANKS - 0.0%
Citicorp 305 19
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 5.2%
American Express Co. 1,451,963 $ 55,901
Bankard, Inc. 2,685,000 1,006
Countrywide Credit Industries, Inc. 2,155,500 47,960
Equitable Companies, Inc. 3,491,400 78,120
Green Tree Acceptance, Inc. 749,600 40,572
Greenpoint Financial Corp. 85,900 2,072
Jayhawk Acceptance Corp. 9,500 95
Mercury Finance Co. 1,707,000 33,713
Money Store, Inc. (b) 802,500 41,329
North American Mortgage Co. (b) 1,499,400 32,425
Olympic Financial Ltd. (a) 104,400 1,957
335,150
FEDERAL SPONSORED CREDIT - 0.8%
Federal Home Loan Mortgage Corporation 281,800 18,458
Federal National Mortgage Association 348,500 32,628
51,086
INSURANCE - 4.5%
Allstate Corp. 2,862,600 89,456
CMAC Investments (b) 942,200 46,286
Conseco, Inc. 250,300 12,327
Equitable Iowa Companies 636,600 20,690
MGIC Investment Corp. 1,289,000 65,417
Old Republic International Corp. 562,500 14,836
PMI Group, Inc. 317,300 14,754
SunAmerica, Inc. 476,400 27,274
Travelers, Inc. (The) 21,566 1,022
292,062
SAVINGS & LOANS - 0.2%
Monterey Bay Bancorp, Inc. (a) 134,000 1,340
Standard Financial, Inc. (a) 132,500 1,772
Washington Mutual, Inc. 521,000 12,439
15,551
SECURITIES INDUSTRY - 9.9%
Alex Brown, Inc. 676,400 32,721
Alliance Capital Management LP 99,900 1,898
Bear Stearns Companies, Inc. 2,592,938 57,369
Edwards (A.G.), Inc. 1,388,300 34,013
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - CONTINUED
Inter-Regional Financial Group, Inc. 148,800 $ 4,576
Legg Mason, Inc. 542,800 15,673
Lehman Brothers Holdings, Inc. 1,174,740 25,991
Merrill Lynch & Co., Inc. 2,183,700 121,195
Morgan Stanley Group, Inc. 1,374,600 114,951
PaineWebber Group, Inc. 3,672,850 75,293
Piper Jaffray, Inc. 172,300 2,908
Price (T. Rowe) Associates, Inc. 347,300 15,281
Quick & Reilly Group, Inc. (The) 830,623 31,979
Raymond James Financial, Inc. 606,400 13,189
Salomon, Inc. 327,400 12,073
Schwab (Charles) Corp. 1,733,500 79,958
639,068
TOTAL FINANCE 1,332,936
HEALTH - 1.7%
DRUGS & PHARMACEUTICALS - 1.0%
Biogen, Inc. (a) 1,298,900 59,749
COR Therapeutics, Inc. (a) 600 6
Phoenix International Life Sciences, Inc. (a)(d) 315,200 2,311
62,066
MEDICAL EQUIPMENT & SUPPLIES - 0.2%
Coherent, Inc. (a) 441,000 16,648
MEDICAL FACILITIES MANAGEMENT - 0.5%
Columbia/HCA Healthcare Corp. 620,300 30,395
Oxford Health Plans, Inc. (a) 13,000 671
31,066
TOTAL HEALTH 109,780
INDUSTRIAL MACHINERY & EQUIPMENT - 11.5%
ELECTRICAL EQUIPMENT - 0.8%
California Microwave Corp. (a) 153,400 3,988
General Electric Co. 1,000 59
Murata Mfg. Co. Ltd. 571,000 24,941
Oak Industries, Inc. (a) 371,000 10,110
Omron Corp. 523,000 11,896
50,994
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 10.7%
Aida Engineering Ltd. Ord. 752,000 $ 5,489
Amadasonoike Co. Ltd. 629,000 4,064
Applied Power, Inc. Class A 192,300 5,625
Cascade Corp. 508,200 8,258
Case Corp. 1,039,700 36,649
Caterpillar, Inc. 2,766,200 194,671
Cincinnati Milacron, Inc. 1,147,700 35,866
Deere & Co. 1,435,950 129,056
Dover Corp. 242,700 19,234
Greenbrier Companies, Inc. 37,100 496
Greenfield Industries, Inc. 308,200 9,015
Harnischfeger Industries, Inc. 647,900 24,296
IDEX Corp. 90,700 3,980
Indresco, Inc. (a) 328,600 5,176
Ingersoll-Rand Co. 817,900 34,147
Kennametal, Inc. 716,638 26,426
PRI Automation, Inc. 47,200 1,935
Parker-Hannifin Corp. 1,105,500 45,049
Regal-Beloit Corp. 161,100 3,303
Timken Co. 660,300 30,126
TRINOVA Corp. 747,600 28,689
Tsugami Corp. 325,000 1,490
Varity Corp. (a) 799,300 37,467
690,507
POLLUTION CONTROL - 0.0%
TETRA Technologies, Inc. (a) 282,000 3,384
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 744,885
MEDIA & LEISURE - 1.2%
LEISURE DURABLES & TOYS - 0.2%
Fleetwood Enterprises, Inc. 752,400 15,518
LODGING & GAMING - 0.2%
Doubletree Corp. (a) 530,300 12,064
La Quinta Motor Inns, Inc. 83,400 2,346
Marcus Corp. 5,000 156
14,566
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.8%
Landry's Seafood Restaurants, Inc. (a) 227,200 $ 4,246
Lone Star Steakhouse Saloon (a) 1,006,500 39,379
Outback Steakhouse, Inc. (a) 153,100 5,339
48,964
TOTAL MEDIA & LEISURE 79,048
NONDURABLES - 1.3%
TOBACCO - 1.3%
Philip Morris Companies, Inc. 4,400 315
Sampoerna Hanjaya Mandala (For. Reg.) 9,655,000 82,402
82,717
RETAIL & WHOLESALE - 1.7%
APPAREL STORES - 0.0%
Baby Superstore, Inc. (a) 3,750 179
RETAIL & WHOLESALE, MISCELLANEOUS - 1.7%
Best Buy Co., Inc. (a) 2,380 62
CDW Computer Centers, Inc. (a) 5,200 285
Lowe's Companies, Inc. 1,292,700 47,668
Micro Warehouse, Inc. (a) 873,600 42,588
Petsmart, Inc. (a) 642,058 18,459
109,062
TOTAL RETAIL & WHOLESALE 109,241
SERVICES - 1.2%
PRINTING - 0.0%
Paxar Corp. (a) 135,200 2,636
SERVICES - 1.2%
Interim Services, Inc. (a) 167,300 4,099
Manpower, Inc. 1,412,400 39,724
Medaphis Corp. (a) 1,135,200 28,664
Robert Half International, Inc. (a) 155,800 4,304
76,791
TOTAL SERVICES 79,427
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 32.9%
COMMUNICATIONS EQUIPMENT - 0.9%
DSC Communications Corp. (a) 400 $ 22
Ericsson (L.M.) Telephone Co. Class B ADR 41,600 775
General Instrument Corp. (a) 14,500 535
Network Equipment Technologies (a) 660,200 19,971
Nokia Corp. AB:
sponsored ADR 252,300 16,588
Series A 297,600 19,894
57,785
COMPUTER SERVICES & SOFTWARE - 9.8%
Accent Software International (b) 100,000 1,350
Adobe Systems, Inc. 5,400 333
Altai, Inc. (a) 71,100 658
America Online, Inc. (a) 700 39
American Business Information, Inc. (a) 672,600 20,767
Ascend Communications, Inc. (a) 5,600 406
Cambridge Technology Partners Mass., Inc. 55,000 1,863
Cerner Corp. (a) 630,000 38,824
Computer Sciences Corp. (a) 1,684,760 99,401
Continuum Co., Inc. (a)(b) 1,049,200 38,165
Electronic Arts, Inc. (a) 1,961,100 70,845
Epic Design Technology (a) 263,100 9,800
Firefox Communications, Inc. (a) 168,000 3,654
GMIS, Inc. (a)(b) 775,700 11,636
HBO & Co. 58,900 3,254
Informix Corp. (a) 433,500 12,842
Keane, Inc. (a) 10,400 246
Medicus Systems Corp. (b) 346,600 3,076
Microsoft Corp. (a) 4,300 389
Oracle Systems Corp. (a) 2,547,400 106,672
Peoplesoft, Inc. (a) 950,500 67,961
Policy Management Systems Corp. (a) 36,800 1,973
Shared Medical Systems Corp. (b) 1,797,800 74,833
Spectrum Holobyte, Inc. (a) 1,110,800 19,647
Stratacom, Inc. (a) 1,200 65
Sybase, Inc. (a) 800 26
Trinzic Corp. (a)(b) 1,492,100 11,937
Wonderware Corp. (a)(b) 848,900 32,046
632,708
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 11.2%
ADAPTEC, Inc. (a) 741,000 $ 31,678
Amdahl Corp. (a) 1,096,800 10,899
Apple Computer, Inc. 4,900 221
Bay Networks, Inc. (a) 48,200 2,163
Comdisco, Inc. 543,000 17,444
Compaq Computer Corp. (a) 3,965,400 201,244
Conner Peripherals, Inc. (a) 71,800 969
Digital Equipment Corp. (a) 1,648,400 63,257
Filenet Corp. (a) 220,200 9,661
International Business Machines Corp. 1,040,600 113,295
Komag, Inc. 57,300 3,932
National Computer System, Inc. 296,800 6,270
Quantum Corp. (a) 774,000 19,931
SCI Systems, Inc. (a) 148,100 3,962
Seagate Technology (a) 1,025,400 45,502
Silicon Graphics, Inc. (a) 2,582,080 108,447
Sun Microsystems, Inc. (a) 1,340,710 64,522
Symbol Technologies, Inc. (a) 366,000 13,954
Telxon Corp. 20,000 475
Western Digital Corp. (a) 289,600 5,611
Xerox Corp. 600 71
723,508
ELECTRONIC INSTRUMENTS - 1.2%
Applied Materials, Inc. (a) 203,600 21,073
KLA Instruments Corp. (a) 1,700 147
Measurex Corp. 302,000 9,135
Silicon Valley Group, Inc. 394,700 18,403
Tektronix, Inc. 374,400 18,018
Varian Associates, Inc. 196,600 10,838
77,614
ELECTRONICS - 9.8%
Advanced Micro Devices, Inc. 8,800 287
AMP, Inc. 767,600 33,103
Analog Devices, Inc. (a) 450 16
Arrow Electronics, Inc. (a) 760,900 42,991
Atmel Corp. (a) 105,700 7,201
Augat, Inc. 366,300 8,745
Avnet, Inc. 488,100 25,381
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Bell Industries, Inc. 800 $ 19
Brooktree Corp. 50,000 1,051
Cypress Semiconductor Corp. (a) 5,500 290
Intel Corp. 1,268,500 82,452
Kyocera Corp. 908,000 78,295
Micron Technology, Inc. 1,200 75
Motorola, Inc. 113,800 8,720
National Semiconductor Corp. (a) 5,800 157
NMB Semiconductor Co. Ltd. Ord. (a) 1,339 35,608
Rohm Co. Ltd. 1,515,000 85,891
Samsung Electronics Co. Ltd. 373,324 74,734
Samsung Electronics Co. Ltd. GDR (d) 60,900 8,526
Texas Instruments, Inc. 778,200 121,594
VLSI Technology, Inc. (a) 711,100 21,066
Wyle Laboratories 5,200 209
636,411
TOTAL TECHNOLOGY 2,128,026
TRANSPORTATION - 1.8%
AIR TRANSPORTATION - 0.7%
Delta Air Lines, Inc. 356,100 28,221
KLM Royal Dutch Airlines (a) 216,900 8,079
KLM Royal Dutch Airlines Ord. 316,000 11,879
UAL Corp. 10,000 1,485
49,664
RAILROADS - 1.0%
Burlington Northern, Inc. 130,600 9,044
CSX Corp. 285,400 23,938
Conrail, Inc. 321,300 19,840
Railtex, Inc. (a) 299,200 8,677
Trinity Industries, Inc. 37,400 1,253
62,752
TRUCKING & FREIGHT - 0.1%
TNT Freightways Corp. 272,100 5,986
TOTAL TRANSPORTATION 118,402
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 0.5%
CELLULAR - 0.5%
Cellular Communications, Inc. Class P (a) 15,000 $ 811
Vodafone Group PLC 5,000,000 19,106
Vodafone Group PLC sponsored ADR 331,600 13,057
32,974
TOTAL COMMON STOCKS
(Cost $5,221,505) 6,264,317
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. (Cost $6)(c) 2,315 6
REPURCHASE AGREEMENTS - 3.3%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 5.82%,
dated 7/31/95 due 8/1/95 $ 214,044 214,009
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $5,435,520) $ 6,478,332
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO BUY
4,545,650 JPY 8/2/95 $ 51,439 $ (1,366)
(Payable amount $52,805)
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.8%
CONTRACTS TO SELL
4,545,650 JPY 8/2/95 $ 51,439 3,394
(Receivable amount $54,833)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.8%
$ 2,028
CURRENCY ABBREVIATION
JPY - Japanese yen
LEGEND
1. Non-income producing
2. Affiliated company (see Note 7 of Notes to Financial Statements).
3. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Gulf Canada
Resources Ltd. 10/15/93 $ 6
4. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $10,837,000 or 0.2% of net
assets.
OTHER INFORMATION
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 89.5%
Japan 3.4
Canada 2.5
Indonesia 1.9
Korea 1.3
Others (individually less than 1%) 1.4
TOTAL 100.0%
INCOME TAX INFORMATION
At July 31,1995, the aggregate cost of investment securities for income tax
purposes was $5,454,363,000. Net unrealized appreciation aggregated
$1,023,969,000 of which $1,077,947,000 related to appreciated investment
securities and $53,978,000 related to depreciated investment securities.
The fund hereby designates $10,106,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JULY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 6,478,332
agreements of $214,009) (cost $5,435,520) -
See accompanying schedule
Cash 1,125
Receivable for investments sold 137,586
Unrealized appreciation on foreign currency contracts 3,394
Receivable for fund shares sold 31,853
Dividends receivable 4,781
Other receivables 59
TOTAL ASSETS 6,657,130
LIABILITIES
Payable for investments purchased $ 217,634
Unrealized depreciation on foreign currency contracts 1,366
Payable for fund shares redeemed 10,861
Accrued management fee 3,471
Other payables and accrued expenses 2,392
TOTAL LIABILITIES 235,724
NET ASSETS $ 6,421,406
Net Assets consist of:
Paid in capital $ 5,064,217
Undistributed net investment income 3,300
Accumulated undistributed net realized gain (loss) on 309,049
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 1,044,840
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 197,040 shares outstanding $ 6,421,406
NET ASSET VALUE, offering price and redemption price per $32.59
share ($6,421,406 (divided by) 197,040 shares)
Maximum offering price per share (100/97.00 of 32.59) . $33.60
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1995
INVESTMENT INCOME $ 33,583
Dividends (including $542 received from affiliated
issuers)
Interest 15,320
TOTAL INCOME 48,903
EXPENSES
Management fee $ 23,793
Basic fee
Performance adjustment 2,593
Transfer agent fees 11,554
Accounting fees and expenses 757
Non-interested trustees' compensation 22
Custodian fees and expenses 278
Registration fees 1,303
Audit 107
Legal 16
Interest 12
Miscellaneous 25
Total expenses before reductions 40,460
Expense reductions (1,121) 39,339
NET INVESTMENT INCOME 9,564
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain (loss) of 365,195
$47,204 on sales of investments in affiliated issuers)
Foreign currency transactions (16,550) 348,645
Change in net unrealized appreciation (depreciation) on:
Investment securities 924,161
Assets and liabilities in foreign currencies 12,313 936,474
NET GAIN (LOSS) 1,285,119
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,294,683
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 9,564 $ 2,809
Net investment income
Net realized gain (loss) 348,645 104,229
Change in net unrealized appreciation (depreciation) 936,474 30,724
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,294,683 137,762
FROM OPERATIONS
Distributions to shareholders - (332)
From net investment income
From net realized gain (64,196) (147,694)
TOTAL DISTRIBUTIONS (64,196) (148,026)
Share transactions 4,429,317 2,243,190
Net proceeds from sales of shares
Reinvestment of distributions 62,248 141,684
Cost of shares redeemed (1,529,164) (933,920)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,962,401 1,450,954
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,192,888 1,440,690
NET ASSETS
Beginning of period 2,228,518 787,828
End of period (including undistributed net investment $ 6,421,406 $ 2,228,518
income of $3,300 and $10,286, respectively)
OTHER INFORMATION
Shares
Sold 162,136 89,635
Issued in reinvestment of distributions 2,477 5,832
Redeemed (56,233) (37,436)
Net increase (decrease) 108,380 58,031
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JULY 31,
1995 1994 C 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, beginning $ 25.14 $ 25.72 $ 22.02 $ 18.94 $ 15.33
of period
Income from Investment
Operations
Net investment income .07 D .12 .10 .09 .12
Net realized and unrealized 7.96 3.43 4.36 3.07 3.64
gain (loss)
Total from investment 8.03 3.55 4.46 3.16 3.76
operations
Less Distributions - (.01) (.14) (.08) (.15)
From net investment income
From net realized gain (.58) (4.12) (.62) - -
Total distributions (.58) (4.13) (.76) (.08) (.15)
Net asset value, end of period $ 32.59 $ 25.14 $ 25.72 $ 22.02 $ 18.94
TOTAL RETURN A, B 32.64% 14.95% 20.86% 16.73% 24.86%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 6,421 $ 2,229 $ 788 $ 476 $ 219
(in millions)
Ratio of expenses to average 1.02% 1.22% 1.25% 1.27% 1.26%
net assets
Ratio of expenses to average 1.05% 1.27% 1.25% 1.27% 1.26%
net assets before expense
reductions
Ratio of net investment income .25% .21% .46% .55% .80%
to average net assets
Portfolio turnover rate 182% 271% 319% 71% 99%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C EFFECTIVE AUGUST 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME,
CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Blue Chip Growth Fund (the fund) is a fund of Fidelity Securities
Fund (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments
are translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions and losses deferred due to wash sales. The fund also
utilized earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income (loss) and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. These contracts
involve market risk in excess of the unrealized gain or loss reflected in
the fund's Statement of Assets and Liabilities. The U.S. dollar value of
the currencies the fund has committed to buy or sell is shown in the
schedule of investments under the caption "Forward Foreign Currency
Contracts." This amount represents the aggregate exposure to each currency
the fund has acquired or hedged through currency contracts at period end.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date
2. OPERATING POLICIES - CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
of offset; otherwise, gain (loss) is recognized on settlement date.
Contracts that have been offset with different counterparties are reflected
as both a contract to buy and a contract to sell in the schedule of
investments under the caption "Forward Foreign Currency Contracts."
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency Securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
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 $6,000 or 0% of
net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $9,508,203,000 and $6,735,300,000, respectively, of which U.S.
government and government agency obligations aggregated $171,997,000 and
$177,297,000, 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 .2700% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
The annual individual fund fee rate is .30%. The basic fee is subject to a
performance adjustment (up to a maximum of (plus/minus) .20%) based on the
fund's investment performance as compared to the appropriate index over a
specified period of time. For the period, the management fee was
equivalent to an annual rate of .69% of average net assets after the
performance adjustment.
SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR,
is the general distributor of the fund. FDC is paid a 3% sales charge on
sales of shares of the fund. Prior to October 12, 1990, FDC was paid a 2%
sales charge and a 1% deferred sales charge. Shares purchased before
October 12, 1990 are subject to the deferred sales charge upon redemption.
For the period, FDC received sales charges and deferred sales charges of
$10,174,000 and $17,000, respectively, on sales of shares of the fund.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period August 1, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which 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.
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 $4,498,000 for the period.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balance during the period for which
loans were outstanding amounted to $23,000,000. The weighted average
interest rate was 6.4%.
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
$1,121,000 under this arrangement.
7. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Accent Software International $ - $ - $ - $ 1,350
Bell Microproducts, Inc. 1,836 2,166 - -
Blue Range Resource Corp.
Class A (a) 748 - - 10,963
Broderbund Software, Inc. - 20,391 - -
C COR Electronics, Inc. (a) 888 7,830 - -
CMAC Investments 15,911 - - 46,286
Continuum Co., Inc. (a) 1,456 - - 38,165
Dual Drilling Co. (a) 740 7,833 - -
GMIS, Inc. (a) 8,250 613 - 11,636
Global Industries Ltd. (a) 6,327 3,180 - 12,884
Hollywood Entertainment Corp. 4,981 6,933 - -
Jordan Petroleum Ltd. Class A 1,103 2,392 - -
Landry's Seafood Restaurants, Inc. (a) 9,410 11,446 - -
Marine Drilling Cos., Inc. (a) 1,823 4,017 - -
Medicus Systems Corp. 4,293 5,155 18 3,076
Money Store, Inc. 4,859 - - 41,329
North American Mortage Co. 17,198 - 90 32,425
Oxford Health Plans, Inc. (a) 10,117 40,203 - -
Peoplesoft, Inc. (a) 3,937 20,273 - -
Petsmart, Inc. (a) 16,583 35,432 - -
Platinum Technology, Inc. 12,489 13,788 - -
Ply-Gem Industries, Inc. 12,018 - - 22,571
Shared Medical Systems Corp. 21,817 1,154 382 74,833
Titan Wheel International, Inc. 16,543 - 52 42,867
Trinzic Corp. (a) 4,971 3,403 - 11,937
Webb (Del E.) Corp. 15,400 - - 30,124
Wonderware Corp. (a) 6,067 2,762 - 32,046
TOTALS $ 199,765 $ 188,971 $ 542 $ 412,492
(a) NON-INCOME PRODUCING.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity Blue Chip Growth Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Securities Fund: Fidelity Blue Chip Growth Fund, including the
schedule of portfolio investments, as of July 31, 1995, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended .
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1995 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Securities Fund: Fidelity Blue Chip Growth Fund as of July
31, 1995, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 1, 1995
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Michael Gordon, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Export Fund
Fidelity Fifty
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Growth Fund
Stock Selector
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(REGISTERED TRADEMARK)
DIVIDEND GROWTH
FUND
ANNUAL REPORT
JULY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 25 Notes to the financial statements.
REPORT OF INDEPENDENT 29 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 30
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells investments that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1995 PAST 1 LIFE OF
YEAR FUND
Dividend Growth 39.14% 64.56%
S&P 500(registered trademark) 26.11% 38.12%
Average Growth Fund 24.75% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, or since the fund started on
April 27, 1993. For example, if you invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare the fund's returns to the performance of the Standard &
Poor's Composite Index of 500 Stocks - a common proxy for the U.S. stock
market. To measure how the fund's performance stacked up against its peers,
you can compare it to the average growth fund, which reflects the
performance of 529 growth funds with similar objectives tracked by Lipper
Analytical Services over the past 12 months. Both benchmarks include
reinvested dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1995 PAST 1 LIFE OF
YEAR FUND
Dividend Growth 39.14% 24.62%
S&P 500(registered trademark) 26.11% 15.34%
Average Growth Fund 24.75% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Fidelity Dividend Standard & Poor's
04/27/93 10000.00 10000.00
04/30/93 10150.00 10155.08
05/31/93 10480.00 10427.23
06/30/93 10700.00 10457.47
07/31/93 10800.00 10415.64
08/31/93 11550.00 10810.40
09/30/93 11820.00 10727.16
10/31/93 12080.00 10949.21
11/30/93 11680.00 10845.19
12/31/93 12171.52 10976.42
01/31/94 12493.15 11349.62
02/28/94 12302.18 11042.04
03/31/94 11715.49 10560.61
04/30/94 11786.37 10695.78
05/31/94 11604.11 10871.20
06/30/94 11310.46 10604.85
07/31/94 11826.87 10952.69
08/31/94 12616.68 11401.75
09/30/94 12485.05 11122.41
10/31/94 13041.96 11372.66
11/30/94 12474.92 10958.47
12/31/94 12691.18 11120.98
01/31/95 12732.22 11409.35
02/28/95 13142.60 11853.97
03/31/95 13768.44 12203.78
04/30/95 14404.54 12563.19
05/31/95 14907.26 13065.34
06/30/95 15728.03 13368.84
07/31/95 16456.47 13812.15
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Dividend Growth Fund on April 27, 1993, when the fund started. As the chart
shows, by July 31, 1995, the value of your investment would have grown to
$16,456 - a 64.56% increase on your initial investment. For comparison,
look at how the S&P 500 did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $13,812 - a
38.12% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Strong corporate earnings and a
favorable interest rate
environment helped the U.S.
stock market post strong returns
for the 12 months ended July 31,
1995. The Standard & Poor's
Composite Index of 500 Stocks
finished the 12-month period with a
total return of 26.11% - well
above its historical annual
average of roughly 12%. With
inflation posing little threat,
interest rates fell during the first
half of 1995. The Federal
Reserve Board cut the federal
funds rate - the rate banks
charge each other for overnight
loans - by 0.25% on July 6.
Large-capitalization stocks led
the somewhat narrow market
rally. Technology companies -
whose goods and services
benefited from both corporate
and consumer demand - posted
the strongest earnings growth
and stock price gains. In
February, the Dow Jones
Industrial Average closed
above 4000 for the first time.
Returns from foreign markets
were varied, as investors brought
capital back to the U.S. The
Morgan Stanley Emerging
Markets Free Index was down
3.76% for the 12 months ended
July 31. The Morgan Stanley
EAFE (Europe, Australia, Far
East) Index returned 6.95% for the
year ended July 31. European
markets have fared well through
the first half of 1995 - after a
difficult year in 1994 - while the
Japanese market recently has
shown some signs of recovery
after struggling through much of
the year.
An interview with Steve Wymer, Portfolio Manager of Fidelity Dividend
Growth Fund
Q. STEVE, HOW HAS THE FUND PERFORMED?
A. The fund has performed very well. For the 12 months ended July 31, 1995,
the fund returned 39.14%. That beat the average growth fund, which returned
24.75% for the same time period, according to Lipper Analytical Services.
Q. WHAT FACTORS HELPED THE FUND TO OUTPERFORM MANY OF ITS PEERS?
A. The major reason is that for most of the year, the fund was primarily
invested in large-cap stocks - such as Philip Morris; Nokia, a Finnish
manufacturer of cellular phones; and Ericsson, a Swedish telecommunications
company - which were rewarded in the market during the past six months.
Q. YOU BEGAN MANAGING THE FUND IN MAY. WHAT CHANGES IN STRATEGY - IF ANY -
HAVE YOU MADE SINCE TAKING OVER?
A. I've brought some new stocks to the fund since I began managing it. I'm
changing the fund's focus from large cap stocks to being more mid-cap
focused. I prefer operating in the mid-cap environment because I believe
there are a lot of less-discovered names in the market that are suitable
for the fund.
Q. CAN YOU GIVE SOME EXAMPLES OF MID-CAP NAMES YOU'VE ADDED TO THE FUND?
A. Sure. A good example is BW/IP, a pump and seal manufacturer that serves
the energy and chemical refining industries. Industrial companies such as
BW/IP generally perform well later in an economic cycle. Though the
company's orders haven't increased, it has recently been quoting on more
business than it was last year. Generally, quotes lead to orders, orders
lead to sales, and sales lead to higher earnings and stock prices. I hope
to see orders come through later in the year, which should be followed by
an increase in sales and earnings. Another mid-cap stock I like is Wang
Labs. Wang has transformed itself from a proprietary systems provider to an
open-systems provider of equipment and services. It recently made an
advantageous acquisition of a division of Groupe Bull, the French
technology company. The companies have overlapping service structures
worldwide, which will eliminate some costs and could drive earnings higher.
To many people, Wang is a fragile company that's just coming out of
bankruptcy. But I see a company with a lot of cash on the balance sheet
that's in a position to grow, and may eventually begin to pay a dividend.
Q. INDUSTRIAL EQUIPMENT AND MACHINERY HAS INCREASED FROM 3.1% OF THE FUND
SIX MONTHS AGO TO ABOUT 10.2% AT THE END OF JULY. WHAT'S YOUR THINKING?
A. As I mentioned earlier, industrial equipment and machinery is a sector
that generally does better in the later part of the economic cycle. Here's
why: Manufacturing and process companies such as chemical companies don't
start spending money on plants and equipment until they're near full
capacity and/or their cash flow has increased. I've begun to focus on the
capital equipment phase of the economy by adding companies like BW/IP,
Duriron, Caterpillar and Ingersoll-Rand to the fund.
Q. THERE ARE SEVERAL NEW ADDITIONS TO THE FUND'S TOP 10 HOLDINGS . . .
A. Yes. I've added Apple Computer to the fund based on the potential of the
Power Macintosh. My thinking here is that because of the recently improved
price performance chips in the Power Mac, Apple may be able to accelerate
its growth rate. I've also added to the fund's holding in PepsiCo. Though
Pepsi's beverage and snack divisions have been doing well, the company's
restaurants - Pizza Hut, KFC and Taco Bell - have dragged down results.
Recently, there's been a change in management and strategy that I think
will be positive for the company. The plan is to go from company-owned
stores to franchises. This would allow Pepsi to take its own capital out of
the restaurant business and use it for something else, such as making
acquisitions or buying back stock.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
A. It's hard to be disappointed with stocks that are up 20% in six months -
even if the market is up more. Looking back, any regrets I have about the
past six months are those investments that I've sold too early rather than
investments that didn't do well. For example, I cut Micron Technology and
Texas Instruments back too much and too early, and both have been very
strong performers.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. Since the market's up, I'm more cautious than I have been in a while. I
plan to keep my ideas fresh and constantly look for new opportunities as
the market continues to shift.
FUND FACTS
GOAL: to increase the value
of the fund's shares by
investing mainly in equity
securities of companies that
have the potential to
increase their current
dividend or begin paying a
dividend
START DATE: April 27, 1993
SIZE: as of July 31, 1995
more than $464 million
MANAGER: Steve Wymer,
since May 1995; assistant,
OTC Portfolio, December,
1994 - June, 1995; manager,
Fidelity Select Chemicals,
1993-1994; assistant,
Magellan Fund, 1992-1994;
manager, Fidelity Select
Automotive, 1990-1993;
assistant, Fidelity Growth &
Income Portfolio, 1990-1992;
joined Fidelity in 1989
(checkmark)
STEVE WYMER ON AIRLINE
STOCKS:
"The airlines have been doing
well lately. Demand has
grown with the economy, yet
the industry has been slow to
add planes. Because they've
had a disastrous decade and
have lost so much money
over the years, they're
hesitant to add capacity -
hardly believing that their
luck has turned around. If
demand keeps growing, and
few new planes are added to
supply, returns could be very
strong going forward.
"I particularly like Delta
Airlines. The company
endured the toughest price
competition on some of its
routes last year from
Continental Lite and US Air,
which put pressure on rates
and depressed results. Now
that some of those
competitive threats have
been lifted, Delta is in a
position where it could
prosper. In addition, the
company has benefited from
massive cost-cutting. Though
Delta is the fund's primary
airline play, the fund also
owns SkyWest, Atlantic
Southeast, Comair, Mesa
Airlines, ValuJet and
Southwest Airlines."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 2.7 4.0
Ericsson (L.M.) Telephone Co. 2.3 2.3
Class B ADR
BW/IP Holdings, Inc. Class A 2.0 0.0
Apple Computer, Inc. 1.9 0.0
Federal National Mortgage 1.8 0.0
Association
RJR Nabisco Holdings Corp. 1.6 2.5
PepsiCo, Inc. 1.5 0.7
WorldCom, Inc. 1.4 0.0
American Express Co. 1.4 0.8
Intel Corp. 1.4 0.0
TOP FIVE MARKET SECTORS AS OF JULY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET SECTORS
6 MONTHS AGO
Technology 21.9 19.2
Industrial Machinery & Equipment 10.2 3.1
Nondurables 9.2 10.7
Finance 7.7 6.7
Retail & Wholesale 6.1 7.1
ASSET ALLOCATION
AS OF JULY 31, 1995* AS OF JANUARY 31, 1995**
Row: 1, Col: 1, Value: 8.0
Row: 1, Col: 2, Value: 42.0
Row: 1, Col: 3, Value: 50.0
Stocks 90.4%
Short-term
Investments 9.6%
FOREIGN
INVESTMENTS 9.3%
Stocks 92.0%
Short-term
Investments 8.0%
FOREIGN
INVESTMENTS 9.8%
Row: 1, Col: 1, Value: 9.6
Row: 1, Col: 2, Value: 40.4
Row: 1, Col: 3, Value: 50.0
*
**
INVESTMENTS JULY 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 91.7%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 3.9%
AEROSPACE & DEFENSE - 3.1%
Aviall, Inc. 100,000 $ 825,000
Boeing Co. 55,000 3,685,000
McDonnell Douglas Corp. 35,000 2,891,875
Northrop Grumman Corp. 45,000 2,565,000
Precision Castparts Corp. 26,200 933,375
Rockwell International Corp. 65,000 2,965,625
Thiokol Corp. 30,700 1,020,775
14,886,650
DEFENSE ELECTRONICS - 0.8%
Loral Corp. 50,000 2,800,000
Trimble Navigation Ltd. (a) 24,900 846,600
3,646,600
TOTAL AEROSPACE & DEFENSE 18,533,250
BASIC INDUSTRIES - 3.8%
CHEMICALS & PLASTICS - 2.3%
Ethyl Corp. 90,000 978,750
First Mississippi Corp. 60,500 2,064,563
Grace (W.R.) & Co. 25,000 1,560,020
Nalco Chemical Co. 100,000 3,562,500
Raychem Corp. 50,000 1,900,000
Union Carbide Corp. 20,000 695,000
10,760,833
IRON & STEEL - 0.7%
Chaparral Steel Co. 100,000 1,125,000
Quanex Corp. 80,000 1,970,000
3,095,000
METALS & MINING - 0.8%
Aluminum Co. of America 50,000 2,843,750
RMI Titanium Co. (a) 136,600 1,092,800
3,936,550
TOTAL BASIC INDUSTRIES 17,792,383
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONGLOMERATES - 0.7%
Figgie International Holdings, Inc. Class A (a) 100,000 $ 1,012,500
ITT Corp. 20,000 2,400,000
3,412,500
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.6%
Cooper Cameron Corp. 25,776 576,738
Sherwin-Williams Co. 60,000 2,190,000
2,766,738
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Haagen Alexander Properties, Inc. 60,000 735,000
Innkeepers USA Trust 38,400 340,800
1,075,800
TOTAL CONSTRUCTION & REAL ESTATE 3,842,538
DURABLES - 1.0%
AUTOS, TIRES, & ACCESSORIES - 0.5%
Gentex Corp. (a) 55,000 1,189,375
TRW, Inc. 15,200 1,134,300
2,323,675
HOME FURNISHINGS - 0.5%
Ethan Allen Interiors, Inc. (a) 24,900 463,763
Haverty Furniture Companies, Inc. 48,100 565,175
Heilig-Meyers Co. 54,800 1,383,700
2,412,638
TOTAL DURABLES 4,736,313
ENERGY - 3.7%
ENERGY SERVICES - 0.5%
Enterra Corp. (a) 100,000 2,100,000
OIL & GAS - 3.2%
Atlantic Richfield Co. 25,400 2,927,350
British Petroleum PLC ADR 20,168 1,830,246
Burlington Resources, Inc. 5,000 194,375
Canada Occidental Petroleum Ltd. 154,700 5,075,200
Chesapeake Energy Corp. (a) 31,500 720,563
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Global Natural Resources, Inc. (a) 150,000 $ 1,593,750
Mobil Corp. 30,000 2,932,500
15,273,984
TOTAL ENERGY 17,373,984
FINANCE - 7.7%
BANKS - 0.5%
Banc One Corp. 38,900 1,235,075
Bank of New York Co., Inc. 30,000 1,203,750
2,438,825
CREDIT & OTHER FINANCE - 2.1%
American Express Co. 170,892 6,579,342
Beneficial Corp. 16,300 772,213
Equitable Companies, Inc. 102,300 2,288,963
Jayhawk Acceptance Corp. 500 5,000
Triad Guaranty, Inc. 15,000 337,500
9,983,018
FEDERAL SPONSORED CREDIT - 2.4%
Federal National Mortgage Association 90,000 8,426,250
Student Loan Marketing Association 50,000 2,693,750
11,120,000
INSURANCE - 0.4%
Renaissance RE Holdings 1,000 22,875
Torchmark Corp. 50,000 1,925,000
1,947,875
SECURITIES INDUSTRY - 2.3%
Legg Mason, Inc. 5,200 150,150
Lehman Brothers Holdings, Inc. 2,000 44,250
Merrill Lynch & Co., Inc. 105,300 5,844,150
Morgan Stanley Group, Inc. 42,300 3,537,338
Schwab (Charles) Corp. 25,500 1,176,188
10,752,076
TOTAL FINANCE 36,241,794
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 5.2%
DRUGS & PHARMACEUTICALS - 1.5%
Cephalon, Inc. (a) 50,000 $ 1,168,750
Elan Corp. PLC ADR (a) 30,000 1,260,000
Nature's Sunshine Products, Inc. 13,600 255,000
North American Biologicals, Inc. (a) 120,300 1,383,450
Pharmacia AB Class A Free shares 25,500 614,523
Sepracor, Inc. (a) 145,000 2,156,875
6,838,598
MEDICAL EQUIPMENT & SUPPLIES - 3.2%
AMSCO International, Inc. (a) 200,000 3,725,000
Baxter International, Inc. 161,400 6,012,150
Becton, Dickinson & Co. 24,200 1,424,775
Medtronic, Inc. 15,000 1,230,000
St. Jude Medical, Inc. 20,000 1,095,000
Thermedics, Inc. (a) 31,100 622,000
Zoll Medical Corp. (a) 101,100 1,074,188
15,183,113
MEDICAL FACILITIES MANAGEMENT - 0.5%
United HealthCare Corp. 50,000 2,262,500
TOTAL HEALTH 24,284,211
HOLDING COMPANIES - 0.2%
U.S. Industries, Inc. (a) 58,900 846,688
INDUSTRIAL MACHINERY & EQUIPMENT - 10.2%
ELECTRICAL EQUIPMENT - 1.9%
Asea AB Class B Free shares 25,000 2,194,346
California Amplifier, Inc. (a) 167,500 2,093,750
General Signal Corp. 50,000 1,843,750
Honeywell, Inc. 50,000 2,143,750
Pacific Scientific Co. 25,000 484,900
VWR Corp. 14,100 137,475
8,897,971
INDUSTRIAL MACHINERY & EQUIPMENT - 6.3%
BW/IP Holdings, Inc. Class A 494,100 9,387,888
Case Corp. 20,500 722,625
Caterpillar, Inc. 60,000 4,222,500
Cooper Industries, Inc. 48,544 1,814,332
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
Deere & Co. 25,000 $ 2,246,875
Duriron Co., Inc. 93,700 2,389,350
Exide Corp. 20,000 1,020,000
Hardinge Brothers, Inc. 25,500 599,250
Ingersoll-Rand Co. 104,500 4,362,875
McDermott (J. Ray) SA 90,600 2,027,175
Varity Corp. (a) 26,100 1,223,438
30,016,308
POLLUTION CONTROL - 2.0%
Browning-Ferris Industries, Inc. 68,000 2,626,500
Safety Kleen Corp. 54,200 846,875
USA Waste Services, Inc. (a) 50,000 950,000
WMX Technologies, Inc. 120,000 3,750,000
Zurn Industries, Inc. 50,000 1,099,315
9,272,690
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 48,186,969
MEDIA & LEISURE - 5.0%
BROADCASTING - 0.2%
CAI Wireless Systems, Inc. (a) 50,700 652,763
Valuevision International, Inc. (a) 10,700 62,863
715,626
LEISURE DURABLES & TOYS - 0.2%
Russ Berrie & Co., Inc. 53,600 777,200
LODGING & GAMING - 0.9%
Grand Casinos, Inc. (a) 20,000 780,000
Harrah's Entertainment, Inc. 25,000 667,000
President Casinos, Inc. (a) 105,000 426,563
Showboat, Inc. 120,000 2,595,000
4,468,563
PUBLISHING - 1.2%
Houghton Mifflin Co. 50,000 2,443,750
News Corp. Ltd. (vtg.) sponsored ADR (Pfd. Reg.) 80,000 1,680,000
Times Mirror Co. Class A 50,000 1,437,500
5,561,250
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 2.5%
Apple South, Inc. 120,000 $ 2,565,000
Applebee's International, Inc. 100,000 2,825,000
Darden Restaurants, Inc. (a) 100,000 1,087,500
Longhorn Steaks, Inc. (a) 45,000 748,125
McDonald's Corp. 40,000 1,545,000
Outback Steakhouse, Inc. (a) 40,000 1,395,000
Sbarro, Inc. 40,000 980,000
Starbucks Corp. (a) 20,000 747,500
11,893,125
TOTAL MEDIA & LEISURE 23,415,764
NONDURABLES - 9.2%
BEVERAGES - 1.5%
PepsiCo, Inc. 150,000 7,031,250
FOODS - 0.2%
Interstate Bakeries Corp. 50,000 950,000
HOUSEHOLD PRODUCTS - 2.6%
Clorox Co. 30,000 1,968,750
Colgate-Palmolive Co. 25,000 1,750,000
Helen of Troy Corp. (a) 6,000 126,000
International Flavors & Fragrances, Inc. 40,000 2,090,000
Procter & Gamble Co. 35,000 2,410,625
Rubbermaid, Inc. 60,000 1,785,000
Tambrands, Inc. 50,000 2,356,250
12,486,625
TOBACCO - 4.9%
Dimon, Inc. 112,350 1,895,906
Philip Morris Companies, Inc. 175,000 12,534,375
RJR Nabisco Holdings Corp. 279,440 7,719,530
Universal Corp. 43,600 937,400
23,087,211
TOTAL NONDURABLES 43,555,086
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
PRECIOUS METALS - 1.3%
Ashanti Goldfields Ltd. GDR 100,000 $ 2,188,000
Barrick Gold Corp. 20,000 498,515
Firstmiss Gold, Inc. (a) 14,300 305,663
Newmont Mining Corp. 70,000 2,992,500
5,984,678
RETAIL & WHOLESALE - 6.1%
APPAREL STORES - 0.5%
Cato Corp. Class A 45,100 355,163
Claire's Stores, Inc. 100,000 2,000,000
2,355,163
GENERAL MERCHANDISE STORES - 2.7%
Dollar General Corp. 90,800 3,064,500
K mart Corp. 75,000 1,181,250
Proffitts, Inc. (a) 116,400 3,986,700
Wal-Mart Stores, Inc. 130,000 3,461,250
Woolworth Corp. 53,100 829,688
12,523,388
GROCERY STORES - 0.6%
Smith's Food & Drug Center, Inc. 35,900 695,563
Supervalu, Inc. 70,000 2,152,500
2,848,063
RETAIL & WHOLESALE, MISCELLANEOUS - 2.3%
Best Products, Inc. (a) 170,000 1,317,500
Circuit City Stores, Inc. 50,000 1,856,250
Global Directmail Corp. (a) 28,500 712,500
Hancock Fabrics, Inc. 72,500 734,063
Hechinger Co. Class A 100,000 662,500
Officemax, Inc. (a) 106,350 2,392,875
Petsmart, Inc. (a) 51,636 1,484,535
Staples, Inc. (a) 76,050 1,711,125
10,871,348
TOTAL RETAIL & WHOLESALE 28,597,962
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 2.5%
PRINTING - 0.9%
Bowne & Co., Inc. 80,000 $ 1,470,000
Wallace Computer Services, Inc. 50,000 2,918,750
4,388,750
SERVICES - 1.6%
Barefoot, Inc. 50,000 712,500
Block (H & R), Inc. 31,600 1,185,000
Borg Warner Security Corp. (a) 431,900 3,779,125
Comdata Holdings Corp. (a) 36,100 631,750
Manpower, Inc. 36,100 1,015,313
7,323,688
TOTAL SERVICES 11,712,438
TECHNOLOGY - 21.6%
COMMUNICATIONS EQUIPMENT - 4.7%
DSC Communications Corp. (a) 45,700 2,456,375
Dialogic Corp. (a) 20,000 495,000
Ericsson (L.M.) Telephone Co. Class B ADR 570,000 10,616,250
Nokia Corp. AB sponsored ADR 85,000 5,588,750
Northern Telecom Ltd. 73,000 2,762,820
21,919,195
COMPUTER SERVICES & SOFTWARE - 8.0%
American Business Information, Inc. (a) 53,800 1,661,075
Ascend Communications, Inc. (a) 35,000 2,537,500
Ceridian Corp. (a) 135,000 5,585,625
CompUSA, Inc. (a) 134,400 4,653,600
Computer Sciences Corp. (a) 62,600 3,693,400
General Motors Corp. Class E 30,000 1,320,000
Information Resources, Inc. (a) 100,000 1,300,000
Intersolv, Inc. (a) 43,800 1,089,525
Landmark Graphics Corp. (a) 42,000 1,155,000
Marcam Corp. (a) 25,600 265,600
Novell, Inc. (a) 110,000 1,993,750
Policy Management Systems Corp. (a) 60,000 3,217,500
SHL Systemhouse, Inc. (a) 120,000 956,710
SunGard Data Systems, Inc. (a) 100,000 2,900,000
Symantec Corp. (a) 100,000 2,725,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
Systems & Computer Technology Corp. (a) 75,900 $ 2,030,325
Wonderware Corp. (a) 17,000 641,750
37,726,360
COMPUTERS & OFFICE EQUIPMENT - 6.7%
Apple Computer, Inc. 195,000 8,775,000
Compaq Computer Corp. (a) 75,000 3,806,250
Digital Equipment Corp. (a) 62,900 2,413,788
Filenet Corp. (a) 49,500 2,171,813
International Business Machines Corp. 55,000 5,988,125
Itron, Inc. (a) 25,000 575,000
Pitney Bowes, Inc. 60,000 2,407,500
Wang Laboratories, Inc. (a) 286,700 5,375,625
31,513,101
ELECTRONIC INSTRUMENTS - 0.3%
Perkin-Elmer Corp. 40,000 1,355,000
ELECTRONICS - 1.9%
Electroglas, Inc. (a) 11,000 797,500
Intel Corp. 100,000 6,500,000
Micron Technology, Inc. 15,000 937,500
Texas Instruments, Inc. 5,000 781,250
9,016,250
TOTAL TECHNOLOGY 101,529,906
TRANSPORTATION - 4.9%
AIR TRANSPORTATION - 3.8%
Atlantic Southeast Airlines, Inc. 80,000 2,200,000
Comair Holdings, Inc. 65,500 2,177,875
Delta Air Lines, Inc. 70,000 5,547,500
Mesa Airlines, Inc. (a) 175,000 1,903,125
Qantas Airways Ltd. sponsored ADR (b) 7,100 104,682
SkyWest, Inc. 122,700 2,484,675
Southwest Airlines Co. 50,000 1,437,500
ValuJet Airlines (a) 60,000 1,852,500
17,707,857
RAILROADS - 0.3%
Bombardier, Inc. Class B 136,600 1,677,395
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - 0.8%
American Freightways Corp. (a) 100,000 $ 2,150,000
Hunt (J.B.) Transport Services, Inc. 100,000 1,725,000
3,875,000
TOTAL TRANSPORTATION 23,260,252
UTILITIES - 3.9%
CELLULAR - 0.9%
Arch Communications Group, Inc. (a) 2,500 66,313
Vodafone Group PLC sponsored ADR 110,000 4,331,250
4,397,563
TELEPHONE SERVICES - 3.0%
ALC Communications Corp. (a) 99,100 5,239,913
Tele Danmark AS Class B ADR 35,000 997,500
U.S. Long Distance Corp. (a) 50,000 856,250
WorldCom, Inc. (a) 225,000 6,721,875
13,815,538
TOTAL UTILITIES 18,213,101
TOTAL COMMON STOCKS
(Cost $374,176,022) 431,519,817
NONCONVERTIBLE PREFERRED STOCKS - 0.3%
TECHNOLOGY - 0.3%
COMPUTER SERVICES & SOFTWARE - 0.3%
SAP AG (Cost $1,040,116) 1,000 1,619,594
REPURCHASE AGREEMENTS - 8.0%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.82%, dated
7/31/95 due 8/1/95 $ 37,721,097 37,715,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $412,931,138) $ 470,854,411
LEGEND
1. Non-income producing
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $104,682 or 0.0% of net
assets.
INCOME TAX INFORMATION
At July 31, the aggregate cost of investment securities for income tax
purposes was $413,605,427. Net unrealized appreciation aggregated
$57,248,984, of which $61,195,611 related to appreciated investment
securities and $3,946,627 related to depreciated investment securities.
The fund hereby designates $1,155,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS JULY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 470,854,411
agreements of $37,715,000) (cost $412,931,138 -
See accompanying schedule
Cash 312
Receivable for investments sold 378,519
Receivable for fund shares sold 7,565,306
Dividends receivable 298,532
Interest receivable 514
Other receivables 822
TOTAL ASSETS 479,098,416
LIABILITIES
Payable for investments purchased $ 10,338,160
Payable for fund shares redeemed 3,425,162
Accrued management fee 241,276
Other payables and accrued expenses 240,918
TOTAL LIABILITIES 14,245,516
NET ASSETS $ 464,852,900
Net Assets consist of:
Paid in capital $ 392,873,185
Undistributed net investment income 1,276,016
Accumulated undistributed net realized gain (loss) on 12,780,397
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 57,923,302
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 28,981,811 shares outstanding $ 464,852,900
NET ASSET VALUE, offering price and redemption price per $16.04
share ($464,852,900 (divided by) 28,981,811 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1995
INVESTMENT INCOME $ 2,452,428
Dividends
Interest 977,542
TOTAL INCOME 3,429,970
EXPENSES
Management fee $ 1,077,522
Basic fee
Performance adjustment 154,186
Transfer agent fees 480,418
Accounting fees and expenses 105,291
Non-interested trustees' compensation 710
Custodian fees and expenses 35,839
Registration fees 217,029
Audit 38,512
Legal 1,185
Interest 2,943
Total expenses before reductions 2,113,635
Expense reductions (34,747) 2,078,888
NET INVESTMENT INCOME 1,351,082
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 15,508,286
Foreign currency transactions (392) 15,507,894
Change in net unrealized appreciation (depreciation) on:
Investment securities 55,022,450
Assets and liabilities in foreign currencies 29 55,022,479
NET GAIN (LOSS) 70,530,373
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 71,881,455
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 1,351,082 $ 96,599
Net investment income
Net realized gain (loss) 15,507,894 (296,730)
Change in net unrealized appreciation (depreciation) 55,022,479 2,287,585
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 71,881,455 2,087,454
FROM OPERATIONS
Distributions to shareholders (73,869) (74,046)
From net investment income
From net realized gain (1,106,818) -
In excess of net realized gain - (1,012,776)
TOTAL DISTRIBUTIONS (1,180,687) (1,086,822)
Share transactions 687,747,052 192,121,803
Net proceeds from sales of shares
Reinvestment of distributions 1,158,767 1,069,824
Cost of shares redeemed (367,108,944) (140,293,684)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 321,796,875 52,897,943
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 392,497,643 53,898,575
NET ASSETS
Beginning of period 72,355,257 18,456,682
End of period (including undistributed net investment $ 464,852,900 $ 72,355,257
income of $1,276,016 and $8,641, respectively)
OTHER INFORMATION
Shares
Sold 49,213,225 16,269,312
Issued in reinvestment of distributions 95,766 89,434
Redeemed (26,523,159) (11,871,410)
Net increase (decrease) 22,785,832 4,487,336
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED JULY 31, APRIL 27,1993
(COMMENCEMENT
OF OPERATIONS)
TO JULY 31,
1995 1994 E 1993
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.68 $ 10.80 $ 10.00
Income from Investment Operations
Net investment income .05 .02 (.01)
Net realized and unrealized gain (loss) 4.47 1.01 .81
Total from investment operations 4.52 1.03 .80
Less Distributions (.01) (.01) -
From net investment income
From net realized gain (.15) - -
In excess of net realized gain - (.14) -
Total distributions (.16) (.15) -
Net asset value, end of period $ 16.04 $ 11.68 $ 10.80
TOTAL RETURN B, C 39.14% 9.51% 8.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 464,853 $ 72,355 $ 18,457
Ratio of expenses to average net assets 1.19% 1.40% 2.50% A,
D
Ratio of expenses to average net assets 1.21% 1.43% 4.18% A
before expense reductions
Ratio of net investment income to average .78% .13% (.73)% A
net assets
Portfolio turnover rate 162% 291% 90% A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS
SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E EFFECTIVE AUGUST 1, 1994, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION,
DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL
DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Dividend Growth Fund (the fund) is a fund of Fidelity Securities
Fund (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income is accrued as earned. Investment income
is recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for 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 and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income (loss) and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. Losses may arise
from changes in the value of the foreign currency or if the counterparties
do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission(the 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 that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
2. OPERATING POLICIES -
CONTINUED
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency Securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. The fund's investment adviser, Fidelity Management &
Research Company (FMR), is responsible for determining that the value of
the underlying securities remains in accordance with the market value
requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $564,416,981 and $272,504,470, 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 .2700% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during those periods,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. The
basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .20%) based on the fund's investment performance as compared
to the appropriate index over a specified period of time. For the period,
the management fee was equivalent to an annual rate of .71% of average net
assets after the performance adjustment.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period August 1, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which 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.
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 $265,978 for the period.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $3,527,000 and $2,068,429,
respectively. The weighted average interest rate was 5.42%.
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
$34,747 under this arrangement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity Dividend Growth Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Securities Fund: Fidelity Dividend Growth Fund, including the
schedule of portfolio investments, as of July 31, 1995, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the two years in the period then ended
and for the period April 27, 1993 (commencement of operations) to July 31,
1993. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1995 by correspondence with the custodian
and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Securities Fund: Fidelity Dividend Growth Fund as of July 31,
1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the two years in the period then ended and
for the period April 27, 1993 (commencement of operations) to July 31,
1993, in conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
August 31, 1995
DISTRIBUTIONS
A total of 50% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1996 of the applicable
percentage for use in preparing 1995 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Richard J. Flynn*
Phyllis Burke Davis*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Export Fund
Fidelity Fifty
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Stock Fund
Stock Selector
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
FIDELITY
(REGISTERED TRADEMARK)
GROWTH & INCOME
PORTFOLIO
ANNUAL REPORT
JULY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 27 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 31 Notes to the financial statements.
REPORT OF INDEPENDENT 36 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 37
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Growth & Income 21.95% 113.73% 392.11%
Growth & Income (incl. 3% sales 18.29% 107.31% 377.35%
charge)
S&P 500(registered trademark) 26.11% 83.44% 264.55%
Average Growth & Income Fund 20.48% 77.51% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or since the fund
started on December 30, 1985. For example, if you invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment would
be $1,050. You can compare the fund's returns to the performance of the
Standard & Poor's Composite Index of 500 Stocks - a common proxy for the
U.S. stock market. To measure how the fund's performance stacked up against
its peers, you can compare it to the average growth & income fund, which
reflects the performance of 380 growth & income funds with similar
objectives tracked by Lipper Analytical Services over the past 12 months.
Both benchmarks include reinvested dividends and capital gains, if any, and
exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Growth & Income 21.95% 16.40% 18.07%
Growth & Income (incl. 3% sales charge) 18.29% 15.70% 17.70%
S&P 500(registered trademark) 26.11% 12.90% 14.44%
Average Growth & Income Fund 20.48% 12.04% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Growth & Income (0Standard & Poor
12/30/85 9700.00 10000.00
12/31/85 9700.00 10081.75
01/31/86 10252.90 10138.21
02/28/86 11232.60 10896.55
03/31/86 12580.90 11504.57
04/30/86 12697.30 11374.57
05/31/86 13104.70 11979.70
06/30/86 13444.20 12182.15
07/31/86 12861.58 11501.17
08/31/86 13552.86 12354.56
09/30/86 12686.33 11332.84
10/31/86 13301.34 11986.74
11/30/86 13340.43 12278.02
12/31/86 13086.07 11964.93
01/31/87 14666.61 13576.61
02/28/87 15363.61 14112.88
03/31/87 15825.01 14520.74
04/30/87 15805.99 14391.51
05/31/87 15865.23 14516.72
06/30/87 16447.71 15249.81
07/31/87 17359.64 16022.98
08/31/87 17708.03 16620.63
09/30/87 17568.68 16256.64
10/31/87 13908.04 12754.96
11/30/87 13164.70 11703.95
12/31/87 13841.70 12594.62
01/31/88 14709.56 13124.86
02/29/88 15489.52 13736.47
03/31/88 15156.87 13312.02
04/30/88 15400.98 13459.78
05/31/88 15600.70 13576.88
06/30/88 16321.82 14200.06
07/31/88 16310.62 14146.10
08/31/88 16120.18 13665.13
09/30/88 16703.99 14247.27
10/31/88 17031.96 14643.34
11/30/88 16783.15 14433.94
12/31/88 17022.19 14686.53
01/31/89 18088.22 15761.59
02/28/89 17893.35 15369.13
03/31/89 18446.33 15727.23
04/30/89 19232.76 16543.47
05/31/89 20134.83 17213.48
06/30/89 20273.24 17115.36
07/31/89 21637.23 18660.88
08/31/89 22103.55 19026.63
09/30/89 21984.85 18948.62
10/31/89 21290.21 18509.02
11/30/89 21643.62 18886.60
12/31/89 22061.01 19339.88
01/31/90 20904.64 18042.17
02/28/90 21225.85 18274.92
03/31/90 21598.68 18759.20
04/30/90 21041.54 18290.22
05/31/90 22596.34 20073.52
06/30/90 22491.32 19937.02
07/31/90 22334.59 19873.22
08/31/90 20427.66 18076.68
09/30/90 19249.75 17196.35
10/31/90 19209.65 17122.40
11/30/90 20158.77 18228.51
12/31/90 20561.65 18737.08
01/31/91 22439.49 19554.02
02/28/91 24330.83 20952.13
03/31/91 25671.08 21459.18
04/30/91 26024.60 21510.68
05/31/91 27520.27 22439.94
06/30/91 25651.13 21412.19
07/31/91 27222.72 22410.00
08/31/91 28015.35 22941.12
09/30/91 27768.25 22558.00
10/31/91 28264.88 22860.28
11/30/91 26789.20 21939.01
12/31/91 29164.99 24448.83
01/31/92 29862.45 23994.08
02/29/92 30517.20 24306.00
03/31/92 29890.37 23832.04
04/30/92 30562.55 24532.70
05/31/92 30676.96 24652.91
06/30/92 30074.10 24285.58
07/31/92 30692.56 25278.86
08/31/92 30376.14 24760.64
09/30/92 30687.27 25052.82
10/31/92 30930.31 25140.50
11/30/92 31886.25 25997.80
12/31/92 32529.61 26317.57
01/31/93 33437.33 26538.64
02/28/93 33816.93 26899.56
03/31/93 35058.07 27467.14
04/30/93 35008.28 26802.44
05/31/93 35738.65 27520.74
06/30/93 36288.94 27600.55
07/31/93 36556.02 27490.15
08/31/93 37991.55 28532.03
09/30/93 38198.36 28312.33
10/31/93 38625.82 28898.40
11/30/93 37753.79 28623.86
12/31/93 38882.41 28970.21
01/31/94 40352.32 29955.20
02/28/94 39582.37 29143.41
03/31/94 37841.11 27872.76
04/30/94 38596.88 28229.53
05/31/94 38719.91 28692.49
06/30/94 38047.88 27989.53
07/31/94 39142.53 28907.58
08/31/94 40643.26 30092.80
09/30/94 40171.38 29355.52
10/31/94 40650.05 30016.02
11/30/94 39140.40 28922.84
12/31/94 39763.93 29351.76
01/31/95 40235.29 30112.85
02/28/95 41423.12 31286.35
03/31/95 42726.70 32209.61
04/30/95 43919.86 33158.19
05/31/95 45169.84 34483.52
06/30/95 45985.09 35284.57
07/31/95 47734.73 36454.61
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Growth & Income Portfolio on December 30, 1985, when the fund started, and
paid a 3% sales charge. As the chart shows, by July 31, 1995, the value of
your investment would have grown to $47,735 - a 377.35% increase on your
initial investment. For comparison, look at how the S&P 500 did over the
same period. With dividends reinvested, the same $10,000 investment in the
S&P 500 would have grown to $36,455 - a 264.55% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks or bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Strong corporate earnings and a
favorable interest rate
environment helped the U.S.
stock market post strong returns
for the 12 months ended July 31,
1995. The Standard & Poor's
Composite Index of 500 Stocks
finished the 12-month period with a
total return of 26.11% - well
above its historical annual
average of roughly 12%. With
inflation posing little threat,
interest rates fell during the first
half of 1995. The Federal
Reserve Board cut the federal
funds rate - the rate banks
charge each other for overnight
loans - by 0.25% on July 6.
Large-capitalization stocks led
the somewhat narrow market
rally. Technology companies -
whose goods and services
benefited from both corporate
and consumer demand - posted
the strongest earnings growth
and stock price gains. In
February, the Dow Jones
Industrial Average closed
above 4000 for the first time.
Returns from foreign markets
were varied, as investors brought
capital back to the U.S. The
Morgan Stanley Emerging
Markets Free Index was down
3.76% for the 12 months ended
July 31. The Morgan Stanley
EAFE (Europe, Australia, Far
East) Index returned 6.95% for the
year ended July 31. European
markets have fared well through
the first half of 1995 - after a
difficult year in 1994 - while the
Japanese market recently has
shown some signs of recovery
after struggling through much of
the year.
An interview with Steven Kaye, Portfolio Manager of Fidelity Growth &
Income Portfolio
Q. STEVE, HOW HAS THE FUND PERFORMED?
A. The fund had a total return of 21.95% for the 12 months ended July 31,
1995, compared to 20.48% for the average growth and income fund tracked by
Lipper Analytical Services, and 26.11% for the Standard & Poor's Composite
Index of 500 Stocks.
Q. LET'S TALK ABOUT THE FUND'S PERFORMANCE RELATIVE TO THE AVERAGE FUND AND
THE S&P 500 INDEX.
A. The fund's outperformance of the Lipper average was a result of
individual stock selection, the highlights of which I'll cover later. The
fund's performance relative to the S&P 500 index was affected by three
factors. First, the fund had a smaller weighting in technology issues than
the index, and this sector has been the major driver of the recent stock
market rally. Second, the fund's foreign investments - 8.4% of the fund as
of July 31, 1995 - were a drag on performance, as those markets have
trailed the U.S., especially Japan. Finally, the fund went into the rally
with a high cash position, and though I've worked that down as I've found
investment opportunities, the cash I held in the early stages of 1995 muted
returns.
Q. THE FUND HAD A 7.6% STAKE IN TECHNOLOGY AT THE END OF THE PERIOD, THE
BEST PERFORMING SECTOR THUS FAR IN 1995. WHY HAVEN'T YOU INVESTED AS
HEAVILY IN TECHNOLOGY AS OTHER FUNDS HAVE?
A. While the fund does hold some technology stocks, in general I didn't
like the risk/reward profile for many issues within the sector. I felt many
of the stock valuations were too high, and that, at some point, companies
within the industry would reach a point where supply growth would exceed
demand growth. While semiconductor companies, for example, are enjoying
record levels of profit, they have undertaken massive capital expenditure
programs, spending $75 billion over the past three years, with projections
of an additional $175 billion in spending through 1997. Typically, this
leads to over-capacity problems. I don't believe that profit margins are at
sustainable levels. Technology stock prices tend to move sharply up and
sharply down. I don't find the potential reward inherent in these stocks to
be commensurate with the risks, particularly for growth and income
investors.
Q. WHAT INVESTMENTS HAVE BEEN POSITIVE CONTRIBUTORS TO THE FUND'S
PERFORMANCE?
A. Traditional growth stocks in the consumer nondurable and health care
sectors. In consumer nondurables, Philip Morris, the fund's largest holding
at the end of the period, remains inexpensive. It continues to grow
earnings and generate free cash flow, with international volumes showing
strong double-digit growth. In addition, it is expected to raise its
dividend this year. PepsiCo has benefited from turning around its
restaurant division - including Pizza Hut - and from a hot summer that has
boosted volume growth of its base beverage business. In the health care
sector, I've focused on owning those companies looking to consolidate.
Positive performers here include American Home Products; Boston Scientific,
which acquired SciMed Life, an angioplasty catheter company; and St. Jude
Medical, a heart valve company that bought Siemens' pacemaker business.
Q. WHAT INVESTMENTS OUTSIDE OF THOSE SECTORS HELPED THE FUND?
A. Financial holdings such as American Express and Fannie Mae. American
Express has enjoyed 15% earnings growth from restructuring and is buying
back stock. Fannie Mae has benefited because the spread between what it
earns and what it charges in interest has widened. ITT is also up a lot,
due to restructuring. The fund's largest technology holding, IBM, has seen
its revenues improve, and its stock is still trading at a fairly cheap
multiple of earnings and cash flow.
Q. WHICH INVESTMENTS DIDN'T PERFORM AS WELL AS YOU EXPECTED?
A. A stock I've sold out of, Toys "R" Us, suffered from intense competition
from Wal-Mart, Target and other retailers. The other stocks I'll mention
are still in the fund, because I find their prospects going forward to be
appealing. Revco was a disappointment. It bought Hooks Drug Stores, but
that acquisition hasn't been working as well as expected. I recently
started buying more shares of United HealthCare, an HMO. HMO stocks are
doing poorly at the moment, and I might be getting into United a bit early,
but I believe it will pay off in the long run. I've also been building a
position in Corning, a stock that I find to be cheap. Now that it has
written off its investment in Dow Corning - its breast implant business - I
think it will work well. Finally, Home Depot has seen sales in its existing
stores drop off and is adding square footage, but I'm holding on to the
position because the stock is selling at historically low levels.
Q. ARE THERE OTHER SECTORS YOU'RE TARGETING AT THE MOMENT?
A. It's important to remind shareholders that I'm a "bottom up" investor.
That is, I invest on a stock-by-stock basis. That being said, stocks in
defense and aerospace and retailing have been compelling recently. Defense
and aerospace stocks are cheap and are generating cash flow that companies
are using to reduce market capitalization or to acquire other companies. In
addition, it appears we've reached the bottom of government defense
expenditures, with growth coming in the next few years. Lockheed Martin is
an example of a stock in this area, one that has performed well. I've also
purchased a number of retailers, such as Wal-Mart. Retail stocks have been
battered and are cheap - actually priced as if there is an imminent
recession - to the point where I believe there is limited downside.
However, if there is any sort of economic pick-up, they should do quite
well.
Q. LET'S TAKE A LOOK AT THE FUND'S FOREIGN INVESTMENTS . . .
A. Foreign investments made up 8.4% of the fund at the end of the period.
Many of these holdings are in multinational corporations such as British
Petroleum, SmithKline Beecham and Nestle. These are companies that do
business worldwide, and, as such, may not be that different from U.S.
companies with overseas business. At the same time, the stories behind the
foreign stocks I choose have to be very compelling. That's because
investments in foreign stocks may involve additional risks, including
currency, political or economic risks. When investing abroad, I target
stocks that I hope will provide greater reward potential for the fund than
similar investments in the U.S.
Q. IS THERE A PARTICULAR COUNTRY YOU'D LIKE TO HIGHLIGHT?
A. The fund currently has about 1.5% invested in Japanese stocks. These
include the fund's largest Japanese holding, Sony, as well as investments
in, Matsushita Electric, Mitsubishi Electric, Hitachi, Kyocera - an
electronics company - and Omron, an industrial equipment and machinery
firm. In general, Japanese investments and the Japanese stock market
haven't done well this year for a couple of reasons. First, the domestic
economic environment has been difficult for Japanese companies, not just
this year, but for a number of years. The Kobe earthquake in January didn't
help. Second, earnings from exports have suffered from the strength of the
yen versus the dollar; Japanese products have become more expensive
overseas. At the same time, I find these investments to be attractive,
because many of them trade at stock valuations that are significantly less
than similar U.S. stocks. The Japanese companies I'm invested in have
strong export businesses, and should benefit if the yen weakens.
Q. WHAT'S YOUR OUTLOOK?
A. It's very difficult to tell what will happen with the economy. As a
result, I've tried to position the fund stock by stock, with an eye for
companies that should do well regardless of the economic backdrop, and for
those companies that are economically sensitive but priced as if there's
going to be a recession. The market has seen some strong gains
year-to-date, but it wouldn't be unreasonable to see some sort of
correction in the second half of 1995.
FUND FACTS
GOAL: seeks high total return
through a combination of
current income and capital
appreciation
START DATE: December 30, 1985
SIZE: as of July 31, 1995,
more than $12.1 billion
MANAGER: Steven Kaye,
since 1993; manager,
Fidelity Blue Chip Growth
Fund, 1990 - 1992; Fidelity
Select Energy Services,
Biotechnology, and Health
Care Portfolios, 1986 -
1990; joined Fidelity in 1985
(checkmark)
STEVE KAYE ON PICKING STOCKS:
"I look for stocks that are
cheap relative to their
valuation history. Typically, I
like to look at a number of
different valuation measures,
such as price-to-earnings,
price-to-cash flow and
price-to-sales ratios. I also
focus on a company's
enterprise value - which is
its equity value in the market,
plus the debt on its balance
sheet - divided by earnings
before interest, taxes,
depreciation and amortization.
In looking at enterprise value,
my approach is the same as
people who buy entire
companies, because many
times I'm buying significant
stakes in these companies.
I'm essentially asking myself,
`Do I like this company
enough that I'd want to own it
100% myself?'
"In addition, I need to see
some catalyst showing that
things can turn; I don't want to
buy something just because
it's cheap. I also like to see
companies where
management's interests are
allied with those of
shareholders. I like to see
management own significant
stakes in the company, so
they think like owners as
opposed to managers who
want to hold their jobs. When
management is working for
shareholders, things can still
go wrong, but these kinds of
companies tend to be better
investments."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 4.0 3.2
General Electric Co. 2.8 2.9
Federal National Mortgage 2.1 1.5
Association
American Express Co. 2.0 1.5
International Business Machines Corp. 1.9 1.2
British Petroleum PLC ADR 1.9 1.5
PepsiCo, Inc. 1.5 1.0
RJR Nabisco Holdings Corp. 1.5 1.0
Ameritech Corp. 1.4 1.6
ITT Corp. 1.4 0.8
TOP FIVE MARKET SECTORS AS OF JULY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Health 13.9 12.0
Nondurables 11.0 8.7
Finance 9.7 7.4
Technology 7.6 4.1
Energy 7.5 7.8
ASSET ALLOCATION
AS OF JULY 31, 1995* AS OF JANUARY 31, 1995**
Row: 1, Col: 1, Value: 6.6
Row: 1, Col: 2, Value: 1.5
Row: 1, Col: 3, Value: 1.0
Row: 1, Col: 4, Value: 90.90000000000001
Stocks 91.9%
Bonds 0.5%
Convertibles 1.0%
Other securities
and short-term
investments 6.6%
FOREIGN
INVESTMENTS 8.4%
Row: 1, Col: 1, Value: 16.7
Row: 1, Col: 2, Value: 1.8
Row: 1, Col: 3, Value: 1.1
Row: 1, Col: 4, Value: 80.40000000000001
Stocks 81.4%
Bonds 0.6%
Convertibles 1.3%
Other securities
and short-term
investments 16.7%
FOREIGN
INVESTMENTS 8.9%
*
**
INVESTMENTS JULY 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 91.9%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 5.8%
AEROSPACE & DEFENSE - 3.5%
Aviall, Inc. 383,100 $ 3,161
British Aerospace 800,000 7,767
Flightsafety International, Inc. 578,300 26,530
General Motors Corp. Class H 1,323,900 56,266
Lockheed Martin Corp. 2,473,605 155,526
McDonnell Douglas Corp. 924,900 76,420
Northrop Grumman Corp. 551,800 31,453
Rockwell International Corp. 440,700 20,107
Sundstrand Corp. 632,100 42,272
419,502
DEFENSE ELECTRONICS - 1.6%
Litton Industries, Inc. (a) 1,520,500 58,539
Loral Corp. 1,630,500 91,308
Raytheon Co. 588,200 48,600
198,447
SHIP BUILDING & REPAIR - 0.7%
General Dynamics Corp. 1,672,500 81,534
TOTAL AEROSPACE & DEFENSE 699,483
BASIC INDUSTRIES - 6.2%
CHEMICALS & PLASTICS - 3.9%
AKZO NV Ord. 67,000 8,798
Albemarle Corp. 695,800 10,872
du Pont (E.I.) de Nemours & Co. 863,500 57,855
Ethyl Corp. 2,245,800 24,423
Ferro Corp. (d) 1,585,000 45,569
Grace (W.R.) & Co. 1,322,200 81,811
Great Lakes Chemical Corp. 1,521,200 99,828
Lubrizol Corp. 649,400 22,810
Minnesota Mining & Manufacturing Co. 413,000 23,386
NL Industries, Inc. (a) 501,000 8,329
Nalco Chemical Co. 669,800 23,862
Raychem Corp. 588,400 22,359
Union Carbide Corp. 1,423,700 49,474
479,376
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 1.1%
Alcan Aluminium Ltd. 822,400 $ 27,885
Aluminum Co. of America 1,770,600 100,702
128,587
PACKAGING & CONTAINERS - 0.5%
Corning, Inc. 1,855,000 59,360
PAPER & FOREST PRODUCTS - 0.7%
James River Corp. of Virginia 2,329,700 77,754
Temple-Inland, Inc. 91,200 4,720
82,474
TOTAL BASIC INDUSTRIES 749,797
CONGLOMERATES - 3.8%
Allied-Signal, Inc. 709,000 33,146
Coltec Industries, Inc. (a) 460,800 7,027
GenCorp, Inc. 431,700 5,019
ITT Corp. 1,443,700 173,244
Mark IV Industries, Inc. 313,865 7,337
Tyco International Ltd. 2,289,674 125,932
United Technologies Corp. 1,012,900 85,084
Whitman Corp. 1,039,500 20,270
457,059
CONSTRUCTION & REAL ESTATE - 1.9%
BUILDING MATERIALS - 0.1%
Cooper Cameron Corp. 345,879 7,739
Lafarge Corp. 268,227 5,331
13,070
CONSTRUCTION - 0.0%
Pulte Corp. 115,700 3,109
REAL ESTATE INVESTMENT TRUSTS - 1.8%
Avalon Properties, Inc. 162,950 3,259
Bay Apartment Community 246,000 4,889
Beacon Properties Corp. 636,000 13,436
CBL & Associates Properties, Inc. (d) 896,200 18,484
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Cali Realty Corp. 333,900 $ 6,469
Carr Realty Corp. 185,100 3,424
Crescent Real Estate Equities, Inc. 323,000 10,094
Crown American Realty Trust (SBI) 1,299,700 16,409
Developers Diversified Realty Corp. 345,000 10,479
Duke Realty Investors, Inc. 324,500 9,289
Equity Residential Property Trust (SBI) 1,047,500 30,901
Evans Withycombe Residential, Inc. 171,600 3,303
Highwoods Properties, Inc. 480,500 12,133
Irvine Apartment Communities, Inc. 191,400 3,350
Liberty Property Trust (SBI) 468,500 9,370
Macerich Co. 469,500 9,625
Manufactured Home Communities, Inc. 515,500 8,184
Speiker Properties, Inc. 294,100 6,654
Storage Equities, Inc. 1,473,300 25,230
Urban Shopping Centers, Inc. 621,800 13,446
218,428
TOTAL CONSTRUCTION & REAL ESTATE 234,607
DURABLES - 1.8%
AUTOS, TIRES, & ACCESSORIES - 1.2%
Echlin, Inc. 247,400 9,649
Ford Motor Co. 350,000 10,106
General Motors Corp. 2,225,965 108,516
Snap-on Tools Corp. 236,800 9,886
TRW, Inc. 88,700 6,619
144,776
CONSUMER ELECTRONICS - 0.5%
Matsushita Electric Industrial Co. Ltd. 1,300,000 21,625
Sony Corp. 695,000 37,514
59,139
TEXTILES & APPAREL - 0.1%
NIKE, Inc. Class B 94,300 8,523
Unifi, Inc. 347,700 8,779
17,302
TOTAL DURABLES 221,217
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 7.4%
ENERGY SERVICES - 1.7%
BJ Services Co. (a) 429,724 $ 10,689
BJ Services Co. (warrants) (a) 152,780 764
Baker Hughes, Inc. 300,000 6,638
Halliburton Co. 692,500 28,133
Helmerich & Payne, Inc. 638,200 18,348
Schlumberger Ltd. 1,910,700 128,016
Smith International, Inc. (a) 528,300 8,981
Tidewater, Inc. 28,500 720
202,289
OIL & GAS - 5.7%
Amerada Hess Corp. 962,100 45,940
Amoco Corp. 768,200 51,661
British Petroleum PLC:
ADR 2,476,167 226,374
Ord. 3,906,662 29,514
Burlington Resources, Inc. 454,900 17,684
Canada Occidental Petroleum Ltd. 420,200 13,785
Chevron Corp. 700,400 34,582
Exxon Corp. 550,000 39,875
Kerr-McGee Corp. 489,900 27,863
Mobil Corp. 485,800 47,487
Occidental Petroleum Corp. 1,785,900 40,183
Renaissance Energy Ltd. (a) 328,400 6,831
Royal Dutch Petroleum Co. 352,700 44,793
Total SA sponsored ADR 1,000,000 31,125
Unocal Corp. 1,224,220 34,431
692,128
TOTAL ENERGY 894,417
FINANCE - 9.4%
BANKS - 1.1%
Banc One Corp. 1,857,400 58,972
Bankers Trust New York Corp. 194,300 12,532
Citicorp 387 24
First Chicago Corp. 50,000 3,038
Fleet Financial Group, Inc. 150,000 5,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
NBD Bancorp, Inc. 431,300 $ 14,664
Shawmut National Corp. 1,191,800 36,797
131,371
CREDIT & OTHER FINANCE - 2.2%
American Express Co. 6,349,230 244,446
Beneficial Corp. 471,900 22,356
Jayhawk Acceptance Corp. 17,000 170
266,972
FEDERAL SPONSORED CREDIT - 3.7%
Federal Home Loan Mortgage Corporation 1,530,800 100,267
Federal National Mortgage Association 2,721,000 254,754
Student Loan Marketing Association 1,714,400 92,363
447,384
INSURANCE - 2.0%
Alexander & Alexander Services, Inc. 154,350 3,550
Allstate Corp. 2,273,010 71,030
General Re Corp. 142,300 18,873
Loews Corp. 265,700 31,984
MBIA, Inc. 647,200 43,848
PMI Group, Inc. 312,300 14,522
Travelers, Inc. (The) 1,375,067 65,144
248,951
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 1,395,600 31,227
SECURITIES INDUSTRY - 0.1%
Lehman Brothers Holdings, Inc. 283,020 6,262
Nomura Securities Co. Ltd. 509,000 9,792
16,054
TOTAL FINANCE 1,141,959
HEALTH - 13.5%
DRUGS & PHARMACEUTICALS - 6.4%
Allergan, Inc. 2,682,800 81,155
American Home Products Corp. 1,900,800 150,163
Amgen, Inc. (a) 525,000 44,691
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Astra AB:
Class A Free shares 950,000 $ 32,092
Class B Free shares 148,720 4,929
Bristol-Myers Squibb Co. 1,100,300 76,196
COR Therapeutics, Inc. (a) 517,000 5,235
Genentech, Inc. (redeemable) (a) 1,193,500 56,990
Glaxo PLC sponsored ADR 800,000 19,200
Lilly (Eli) & Co. 270,300 21,151
Merck & Co., Inc. 50,000 2,581
Pfizer, Inc. 2,090,400 105,564
Rhone Poulenc Rorer, Inc. 323,300 14,306
Schering-Plough Corp. 2,173,800 101,082
Scios, Inc. (a) 795,000 3,379
SmithKline Beecham PLC ADR 1,275,000 57,375
776,089
MEDICAL EQUIPMENT & SUPPLIES - 5.2%
Abbott Laboratories 475,000 19,000
AMSCO International, Inc. (a) 1,058,000 19,705
Baxter International, Inc. 3,652,600 136,059
Beckman Instruments, Inc. 616,600 17,188
Becton, Dickinson & Co. 592,100 34,860
Boston Scientific Corp. (a) 1,899,495 69,332
Johnson & Johnson 1,415,300 101,548
McKesson Corp. 718,300 31,695
Medtronic, Inc. 420,600 34,489
Pall Corp. 2,477,500 56,673
St. Jude Medical, Inc. 1,957,100 107,151
627,700
MEDICAL FACILITIES MANAGEMENT - 1.9%
Columbia/HCA Healthcare Corp. 2,054,777 100,683
Employee Benefit Plans, Inc. (a) 252,400 4,291
FHP International Corp. (a) 550,000 14,438
Hillhaven Corp. (a) 192,900 5,570
Lincare Holdings, Inc. (a) 606,100 21,062
Ornda Healthcorp (a) 1,055,000 20,968
Quorum Health Group, Inc. (a) 283,300 6,091
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - CONTINUED
Tenet Healthcare Corp. (a) 1,000,000 $ 15,250
United HealthCare Corp. 953,300 43,137
231,490
TOTAL HEALTH 1,635,279
HOLDING COMPANIES - 0.2%
U.S. Industries, Inc. (a) 1,997,660 28,716
INDUSTRIAL MACHINERY & EQUIPMENT - 5.7%
ELECTRICAL EQUIPMENT - 3.4%
Alcatel Alsthom Cie Generale d'Electricite SA 100,000 10,590
American Superconductor Corp. (a) 304,750 4,114
Duracell International, Inc. 100,000 4,600
General Electric Co. 5,784,000 341,256
Mitsubishi Electric Co. Ord. 1,700,000 12,562
Murata Manufacturing Co. Ltd. 75,000 3,276
Omron Corp. 839,000 19,083
Philips Electronics NV (Bearer) 200,000 9,823
Scientific-Atlanta, Inc. 243,500 5,235
410,539
INDUSTRIAL MACHINERY & EQUIPMENT - 0.4%
Caterpillar, Inc. 159,200 11,204
Cooper Industries, Inc. 651,376 24,345
Harnischfeger Industries, Inc. 92,151 3,456
Keystone International, Inc. 216,400 4,544
Watts Industries, Inc. Class A 302,100 7,024
50,573
POLLUTION CONTROL - 1.9%
Browning-Ferris Industries, Inc. 2,649,400 102,333
Safety Kleen Corp. 152,700 2,386
WMX Technologies, Inc. 3,372,700 105,397
Wheelabrator Technologies, Inc. 1,348,500 22,419
232,535
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 693,647
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 2.4%
BROADCASTING - 0.5%
Home Shopping Network, Inc. (a) 840,200 $ 7,457
Infinity Broadcasting Corp. (a) 38,123 1,411
Viacom, Inc. Class B (non-vtg.) (a) 1,006,845 51,097
59,965
ENTERTAINMENT - 0.3%
Carnival Cruise Lines, Inc. Class A 500,000 11,313
Disney (Walt) Co. 85,500 5,012
Players International, Inc. (a) 1,162,350 25,426
41,751
LEISURE DURABLES & TOYS - 0.1%
Hasbro, Inc. 496,700 15,460
LODGING & GAMING - 0.4%
Aztar Corp. (a)(d) 2,264,100 22,641
Harrah's Entertainment, Inc. 200,000 5,375
Marriott International, Inc. 358,600 12,999
President Riverboat Casinos, Inc. (a) 1,472,900 5,984
46,999
PUBLISHING - 0.3%
McGraw-Hill, Inc. 175,100 13,460
News Corp. Ltd. ADR 537,100 12,689
Times Mirror Co. Class A 270,000 7,763
33,912
RESTAURANTS - 0.8%
Brinker International, Inc. (a) 890,700 15,810
Darden Restaurants, Inc. (a) 3,510,100 38,172
McDonald's Corp. 559,300 21,603
Starbucks Corp. (a) 474,300 17,727
93,312
TOTAL MEDIA & LEISURE 291,399
NONDURABLES - 11.0%
BEVERAGES - 1.5%
PepsiCo, Inc. 3,850,000 180,469
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
FOODS - 2.8%
ConAgra, Inc. 1,271,200 $ 47,988
General Mills, Inc. 811,000 42,375
Hormel (George A) & Co. 201,000 4,950
Kellogg Co. 1,055,800 75,886
Nabisco Holdings Class A 31,900 905
Nestle SA (Reg.) 45,000 45,839
RalCorp Holdings, Inc. (a)(d) 1,800,166 41,404
Ralston Purina Co. 411,307 22,005
SYSCO Corp. 1,879,500 58,499
339,851
HOUSEHOLD PRODUCTS - 0.9%
Procter & Gamble Co. 490,000 33,749
Rubbermaid, Inc. 563,500 16,764
Tambrands, Inc. 1,014,200 47,794
Unilever NV ADR 68,400 9,012
107,319
TOBACCO - 5.8%
Philip Morris Companies, Inc. 6,731,200 482,121
RJR Nabisco Holdings Corp. 6,428,346 177,583
UST, Inc. 1,583,300 43,145
702,849
TOTAL NONDURABLES 1,330,488
PRECIOUS METALS - 0.3%
Newmont Mining Corp. 420,500 17,976
Santa Fe Pacific Gold Corp. 1,912,240 23,903
41,879
RETAIL & WHOLESALE - 5.8%
APPAREL STORES - 0.1%
Gap, Inc. 493,200 17,200
DRUG STORES - 0.9%
Revco (D.S.), Inc. (a) 1,118,293 23,624
Rite Aid Corp. 2,125,300 60,305
Walgreen Co. 367,400 19,013
102,942
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 3.1%
Carson Pirie Scott & Co. (a)(d) 1,551,774 $ 25,992
Dayton Hudson Corp. 956,000 72,298
Dillard Department Stores, Inc. Class A 416,800 12,921
Hornbach Baumarket AG (Bearer) 13,779 8,251
May Department Stores Co. (The) 1,508,000 65,410
Price/Costco, Inc. (a) 1,576,600 28,280
Sears, Roebuck & Co. 797,600 26,022
Wal-Mart Stores, Inc. 5,300,000 141,111
380,285
GROCERY STORES - 0.8%
Food Lion, Inc. Class A 5,227,400 30,058
Kroger Co. (The) (a) 675,600 21,028
Safeway, Inc. (a) 1,102,900 42,186
93,272
RETAIL & WHOLESALE, MISCELLANEOUS - 0.9%
Amway Japan Ltd. 50,000 1,941
Amway Japan Ltd. sponsored ADR 408,200 7,858
Boots Co. PLC (The) 2,300,000 20,128
Borders Group, Inc. (a) 225,500 4,285
Home Depot, Inc. (The) 1,064,400 46,699
Office Depot, Inc. (a) 227,700 6,689
Officemax, Inc. (a) 679,450 15,288
102,888
TOTAL RETAIL & WHOLESALE 696,587
SERVICES - 1.1%
PRINTING - 0.0%
Valassis Communications, Inc. (a) 486,200 6,929
SERVICES - 1.1%
ADT Ltd. (a) 5,222,700 62,672
BET PLC Ord. 3,000,000 6,366
First Financial Management Corp. 90,000 7,875
Jostens, Inc. 156,800 3,567
Western Atlas, Inc. (a) 1,080,700 48,632
129,112
TOTAL SERVICES 136,041
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 7.6%
COMMUNICATIONS EQUIPMENT - 0.5%
Cisco Systems, Inc. (a) 850,000 $ 47,388
Nokia Corp. AB sponsored ADR 200,000 13,150
60,538
COMPUTER SERVICES & SOFTWARE - 1.7%
Automatic Data Processing, Inc. 199,400 12,762
Computer Sciences Corp. (a) 331,600 19,564
General Motors Corp. Class E 2,042,600 89,873
Information Resources, Inc. (a) 775,000 10,075
Microsoft Corp. (a) 555,200 50,246
Novell, Inc. (a) 937,700 16,996
Reuters Holdings PLC ADR Class B 110,000 5,541
205,057
COMPUTERS & OFFICE EQUIPMENT - 3.5%
Canon, Inc. 500,000 9,051
Diebold, Inc. 99,300 4,593
Digital Equipment Corp. (a) 489,500 18,785
International Business Machines Corp. 2,139,900 232,982
Pitney Bowes, Inc. 1,516,300 60,842
Sun Microsystems, Inc. (a) 1,109,700 53,404
Xerox Corp. 304,300 36,250
415,907
ELECTRONICS - 1.4%
AMP, Inc. 1,016,000 43,815
Hitachi Ltd. 2,200,000 23,302
Intel Corp. 1,188,400 77,246
Kyocera Corp. 300,000 25,869
170,232
PHOTOGRAPHIC EQUIPMENT - 0.5%
Polaroid Corp. 1,495,600 64,124
TOTAL TECHNOLOGY 915,858
TRANSPORTATION - 0.8%
AIR TRANSPORTATION - 0.2%
Qantas Airways Ltd. sponsored ADR (e) 186,700 2,856
Southwest Airlines Co. 591,200 16,997
19,853
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - CONTINUED
RAILROADS - 0.6%
Bombardier, Inc. Class B 1,182,200 $ 14,517
CSX Corp. 612,900 51,406
Illinois Central Corp., Series A 228,200 9,014
Santa Fe Pacific Corp. 104,300 2,973
77,910
TOTAL TRANSPORTATION 97,763
UTILITIES - 7.2%
CELLULAR - 0.2%
AirTouch Communications, Inc. (a) 174,100 5,484
Vodafone Group PLC sponsored ADR 479,500 18,880
24,364
ELECTRIC UTILITY - 0.3%
Veba AG Ord. 1,033,000 42,866
TELEPHONE SERVICES - 6.7%
ALC Communications Corp. (a) 1,518,600 80,296
Ameritech Corp. 3,595,200 173,917
Bell Atlantic Corp. 1,787,400 102,329
BellSouth Corp. 984,400 66,693
Frontier Corp. 478,500 12,860
GTE Corp. 800,000 28,400
Koninklijke PPT Nederland 926,100 34,636
NYNEX Corp. 2,252,000 92,895
SBC Communications, Inc. 3,386,200 162,961
WorldCom, Inc. (a) 1,753,500 52,386
807,373
TOTAL UTILITIES 874,603
TOTAL COMMON STOCKS
(Cost $9,058,142) 11,140,799
CONVERTIBLE PREFERRED STOCKS - 0.4%
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - 0.2%
PAPER & FOREST PRODUCTS - 0.2%
International Paper $.6562 (a)(e) 400,000 $ 19,200
ENERGY - 0.1%
OIL & GAS - 0.1%
Atlantic Richfield Co. exchangeable $.5575 296,100 8,069
FINANCE - 0.0%
INSURANCE - 0.0%
Allstate Corp. exchangeable $.575 90,000 3,825
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Westinghouse Electric Corp. $1.30 (e) 755,650 10,295
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
Sprint Corp. $.6573 107,000 3,692
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $44,699) 45,081
CORPORATE BONDS - 1.0%
MOODY'S RATINGS (C) PRINCIPAL
(UNAUDITED) AMOUNT (B) (000S)
CONVERTIBLE BONDS - 0.6%
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Liberty Property exchangeable 8%, 7/1/01 - $ 1,591 1,611
FINANCE - 0.3%
BANKS - 0.3%
Bank of New York Co., Inc. 7 1/2%, 8/15/01 A3 14,872 30,581
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (B) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
HEALTH - 0.2%
DRUGS & PHARMACEUTICALS - 0.2%
Roche Holdings, Inc. liquid yield option notes
0%, 4/20/10 (e) - $ 72,400 $ 28,824
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Food Lion, Inc. 5%, 6/1/03 (e) A3 6,700 6,365
Kroger Co. 6 3/8%, 12/1/99 B2 3,800 6,588
12,953
TOTAL CONVERTIBLE BONDS 73,969
NONCONVERTIBLE BONDS - 0.4%
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Westpoint Stevens, Inc. 8 3/4%, 12/15/01 B1 4,010 3,990
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT - 0.2%
Tenet Healthcare Corp. 10 1/8%, 3/1/05 Ba3 23,000 24,409
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.1%
Citicasters, Inc. 9 3/4%, 2/15/04 B- 6,250 6,250
SCI Television, Inc. secured 11%, 6/30/05 B2 7,250 7,594
13,844
LODGING & GAMING - 0.1%
Aztar Corp. 13 3/4%, 10/1/04 B2 5,000 5,613
Trump Hotels & Casino Resorts Holdings LP/Trump
Hotels & Casino Resorts Funding, Inc.
secured 15 1/2%, 6/15/05 B3 5,760 5,817
11,430
TOTAL MEDIA & LEISURE 25,274
TOTAL NONCONVERTIBLE BONDS 53,673
TOTAL CORPORATE BONDS
(Cost $115,997) 127,642
U.S. TREASURY OBLIGATIONS - 0.1%
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (B) (000S) (000S)
8 1/8%, 8/15/19
(Cost $10,259) Aaa $ 10,000 $ 11,364
REPURCHASE AGREEMENTS - 6.6%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.82%, dated
7/31/95 due 8/1/95 $ 796,477 796,348
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $10,025,445) $ 12,121,234
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO BUY
71,433 DEM 9/14/95 $ 51,620 $ (143)
(Payable amount $51,763)
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.4%
CONTRACTS TO SELL
111,968 DEM 8/31/95 to 9/14/95 $ 80,900 (2,280)
5,014,324 JPY 8/15/95 56,867 2,548
TOTAL CONTRACTS TO SELL
(Receivable amount $138,035) $ 137,767 268
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.1%
$ 125
CURRENCY ABBREVIATIONS
DEM - German deutsche mark
JPY - Japanese yen
LEGEND
1. Non-income producing
2. Principal amount is stated in United States dollars unless otherwise
noted.
3. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
4. Affiliated company (see Note 8 of Notes to Financial Statements).
5. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $67,540,000 or 0.6% of net
assets.
INCOME TAX INFORMATION
At July 31, 1995, the aggregate cost of investment securities for income
tax purposes was $10,032,998,000. Net unrealized appreciation aggregated
$2,088,236,000, of which $2,173,299,000 related to appreciated investment
securities and $85,063,000 related to depreciated investment securities.
The fund hereby designates $29,937,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JULY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 12,121,234
agreements of $796,348) (cost $10,025,445) -
See accompanying schedule
Cash 1
Receivable for investments sold 97,556
Unrealized appreciation on foreign currency contracts 2,548
Receivable for fund shares sold 27,176
Dividends receivable 17,751
Interest receivable 2,984
Other receivables 387
TOTAL ASSETS 12,269,637
LIABILITIES
Payable for investments purchased $ 140,220
Unrealized depreciation on foreign currency contracts 2,423
Payable for fund shares redeemed 12,940
Accrued management fee 5,070
Other payables and accrued expenses 2,920
TOTAL LIABILITIES 163,573
NET ASSETS $ 12,106,064
Net Assets consist of:
Paid in capital $ 9,684,491
Undistributed net investment income 27,390
Accumulated undistributed net realized gain (loss) on 298,452
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 2,095,731
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 482,277 shares outstanding $ 12,106,064
NET ASSET VALUE and redemption price per share $25.10
($12,106,064 (divided by) 482,277 shares)
Maximum offering price per share (100/97.00 of $25.10) $25.88
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1995
INVESTMENT INCOME $ 209,542
Dividends (including $1,712 received from affiliated
issuers)
Interest (including income on securities loaned of $53) 88,262
TOTAL INCOME 297,804
EXPENSES
Management fee $ 51,730
Transfer agent fees 23,842
Accounting and security lending fees 773
Non-interested trustees' compensation 104
Custodian fees and expenses 338
Registration fees 791
Audit 146
Legal 57
Interest 7
Reports to shareholders 351
Miscellaneous 166
Total expenses before reductions 78,305
Expense reductions (1,010) 77,295
NET INVESTMENT INCOME 220,509
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of $1,154 486,109
on
sales of investment in affiliated issuers)
Foreign currency transactions (23,819)
Short sales 302 462,592
Change in net unrealized appreciation (depreciation) on:
Investment securities 1,405,953
Assets and liabilities in foreign currencies 8,352
Short sales (1,423) 1,412,882
NET GAIN (LOSS) 1,875,474
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 2,095,983
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 220,509 $ 163,731
Net investment income
Net realized gain (loss) 462,592 483,457
Change in net unrealized appreciation (depreciation) 1,412,882 (154,747)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,095,983 492,441
FROM OPERATIONS
Distributions to shareholders (175,942) (165,953)
From net investment income
From net realized gain (508,140) (247,094)
TOTAL DISTRIBUTIONS (684,082) (413,047)
Share transactions 3,118,020 3,791,186
Net proceeds from sales of shares
Reinvestment of distributions 667,970 401,972
Cost of shares redeemed (1,849,027) (2,161,673)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,936,963 2,031,485
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,348,864 2,110,879
NET ASSETS
Beginning of period 8,757,200 6,646,321
End of period (including undistributed net investment $ 12,106,064 $ 8,757,200
income of $27,390 and $8,861, respectively)
OTHER INFORMATION
Shares
Sold 136,992 170,517
Issued in reinvestment of distributions 30,753 18,230
Redeemed (80,408) (97,260)
Net increase (decrease) 87,337 91,487
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JULY 31,
1995 1994 C 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, beginning $ 22.17 $ 21.90 $ 21.34 $ 19.92 $ 17.10
of period
Income from Investment
Operations
Net investment income .43 .45 .53 .50 .46
Net realized and unrealized 4.14 1.07 3.02 1.94 3.10
gain (loss)
Total from investment 4.57 1.52 3.55 2.44 3.56
operations
Less Distributions (.40) (.48) (.59) (.38) (.52)
From net investment income
From net realized gain (1.24) (.77) (2.40) (.64) (.22)
Total distributions (1.64) (1.25) (2.99) (1.02) (.74)
Net asset value, end of period $ 25.10 $ 22.17 $ 21.90 $ 21.34 $ 19.92
TOTAL RETURN F, B 21.95% 7.08% 19.10% 12.75% 21.89%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 12,106 $ 8,757 $ 6,646 $ 4,199 $ 2,686
(in millions)
Ratio of expenses to average .77% .82% .83% .86% .87%
net assets
Ratio of expenses to average net .78% .83% .83% .86% .87%
assets before expense
reductions
Ratio of net investment income 2.21% 2.09% 2.67% 2.49% 2.62%
to average net assets
Portfolio turnover rate 67% 92% 87% 221% 215%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS
SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS).
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C EFFECTIVE AUGUST 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION,
DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL
DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT
CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Growth & Income Portfolio (the fund) is a fund of Fidelity
Securities Fund (the trust) and is authorized to issue an unlimited number
of shares. The trust is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts , disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES - CONTINUED
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for litigation
proceeds, paydown gains/losses on certain securities, futures and options
transactions, foreign currency transactions, market discount and
non-taxable dividends. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the fund's investments against currency fluctuations. Also, a
contract to buy or sell can offset a previous contract. These contracts
involve market risk in excess of the unrealized gain or loss reflected in
the fund's Statement of Assets and Liabilities. The U.S. dollar value of
the currencies the fund has committed to buy or sell is shown in the
schedule of investments under the caption "Forward Foreign Currency
Contracts." This amount represents the aggregate exposure to each currency
the fund has acquired or hedged through currency contracts at period end.
Losses may arise from changes in the value of the foreign currency or if
the counterparties do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement
2. OPERATING POLICIES -
CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
date and broker are offset and any realized gain (loss) is recognized on
the date of offset; otherwise, gain (loss) is recognized on settlement
date. Contracts that have been offset with different counterparties are
reflected as both a contract to buy and a contract to sell in the schedule
of investments under the caption "Forward Foreign Currency Contracts."
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 that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency Securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. The fund's investment adviser, FMR, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
SHORT SALES AGAINST THE BOX. The fund may hedge its investments against
changes in value by engaging in short sales against the box. In a short
sale against the box, the fund sells a borrowed security, while at the same
time either owning an identical security or having the right to obtain such
a security. By selling short against the box the equity underlying one of
its convertible holdings, the fund would seek to offset the effect that a
decline in the underlying equity might have on the value of the convertible
security. While the short sale is outstanding, the fund will not dispose of
the security hedged by the short sale.
The fund is required to establish a margin account with the broker lending
the security sold short. While the short sale is outstanding, the broker
retains the proceeds of the short sale and the fund instructs the custodian
to maintain in a separate account securities having a value at least equal
to the amount of the securities sold short.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $7,717,952,000 and $5,867,397,000, respectively. Sales of U.S.
government and government agency obligations aggregated $38,700,000.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2700% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .20%. For
the period, the management fee was equivalent to an annual rate of .52% of
average net assets.
SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an
affiliate of FMR and the general distributor of the fund, received sales
charges of $3,637,000 on sales of shares of the fund.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period August 1, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which 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.
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 $4,345,000 for the period.
5. SECURITY LENDING.
The fund loaned securities to certain brokers who paid the fund negotiated
lenders' fees. These fees are included in interest income. The fund
receives U.S. Treasury obligations and/or cash as collateral against the
loaned securities, in an amount at least equal to 102% of the market value
of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. At period end, there were no
loans outstanding.
6. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks.
6. BANK BORROWINGS - CONTINUED
Under the most restrictive arrangement, the fund must pledge to the bank
securities having a market value in excess of 220% of the total bank
borrowings. The interest rate on the borrowings is the bank's base rate, as
revised from time to time. The maximum loan and the average daily loan
balance during the period for which loans were outstanding amounted to
$12,942,000. The weighted average interest rate was 6.4375%.
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
$1,010,000 under this arrangement.
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:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
DOLLAR AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Amli Residential Properties Trust (SBI) $ - $ 4,797 $ 334 $ -
Aztar Corp. (a) 2,116 3,510 - 22,641
CBL & Associates Properties 259 - 356 18,484
Carson Pirie Scott & Co. (a) 8,529 2,523 - 25,992
Cephalon, Inc. - 2,679 - -
Ferro Corp. 4,797 - 214 45,569
Guidant Corp. - - - -
RalCorp Holdings, Inc. (a) 2,484 - - 41,404
Storage Equities, Inc. - - 555 -
Summit Property Trust (SBI) - 3,173 253 -
TNT Freightways Corp. - 988 - -
TOTALS $ 18,185 $ 17,670 $ 1,712 $ 154,090
(a) NON-INCOME PRODUCING
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity Growth & Income Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Securities Fund: Fidelity Growth and Income Portfolio, including
the schedule of portfolio investments, as of July 31, 1995, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1995 by correspondence with the custodian
and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Securities Fund: Fidelity Growth & Income Portfolio as of July
31, 1995, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 1, 1995
DISTRIBUTIONS
A total of 9.54% of the dividends distributed during the fiscal year was
derived from interest on U.S. Government securities which is generally
exempt from state income tax.
A total of 71% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1996 of these percentages for
use in preparing 1995 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
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OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Steven Kaye, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
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OTC
PORTFOLIO
ANNUAL REPORT
JULY 31, 1995
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 27 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 31 Notes to the financial statements.
REPORT OF INDEPENDENT 35 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 36
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
If you have any questions, please call us at 1-800-544-8888. We stand ready
to provide the information you need to make the investments that are right
for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
OTC 39.98% 126.83% 365.43%
OTC (incl. 3% sales charge) 35.78% 120.03% 351.47%
NASDAQ 38.64% 128.46% 232.31%
Average Mid-Cap Fund 30.64% 112.76% 288.51%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one year, five years, or ten years. For
example, if you invested $1,000 in a fund that had a 5% return over the
past year, the value of your investment would be $1,050. You can compare
the fund's returns to the performance of the NASDAQ Composite Index - a
common proxy for over-the-counter stocks. To measure how the fund's
performance stacked up against its peers, you can compare it to the average
mid-cap fund, which reflects the performance of 89 mid-cap funds with
similar objectives tracked by Lipper Analytical Services over the past 12
months. Unlike most other funds in this category, this fund invests in
large companies as well as small ones. Both benchmarks include reinvested
dividends and capital gains, if any, and exclude the effects of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
OTC 39.98% 17.80% 16.62%
OTC (incl. 3% sales charge) 35.78% 17.08% 16.27%
NASDAQ 38.64% 17.97% 12.76%
Average Mid-Cap Fund 30.64% 15.97% 14.05%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
OTC Portfolios (093NASDAQ
07/31/85 9700.00 10000.00
08/31/85 9772.29 9881.18
09/30/85 9121.68 9304.32
10/31/85 9679.04 9709.58
11/30/85 10290.78 10420.19
12/31/85 10827.75 10784.63
01/31/86 11595.82 11144.41
02/28/86 12438.65 11933.02
03/31/86 13063.99 12436.52
04/30/86 13356.26 12718.64
05/31/86 13682.52 13281.56
06/30/86 13798.07 13459.13
07/31/86 12608.58 12326.00
08/31/86 13233.91 12707.36
09/30/86 11881.29 11638.95
10/31/86 12464.40 11974.18
11/30/86 12273.99 11887.22
12/31/86 12061.61 11577.88
01/31/87 13548.26 13012.71
02/28/87 14998.29 14105.02
03/31/87 14961.67 14273.62
04/30/87 14793.23 13867.37
05/31/87 14925.06 13825.22
06/30/87 15225.31 14095.06
07/31/87 15957.65 14435.59
08/31/87 16704.64 15100.73
09/30/87 16602.11 14746.26
10/31/87 11600.24 10730.53
11/30/87 10897.19 10128.45
12/31/87 12254.19 10968.50
01/31/88 12689.45 11439.48
02/29/88 13534.85 12179.30
03/31/88 13844.56 12434.53
04/30/88 14263.07 12586.88
05/31/88 14137.52 12291.81
06/30/88 15075.00 13099.01
07/31/88 15024.78 12855.72
08/31/88 14664.85 12497.93
09/30/88 15225.66 12868.33
10/31/88 15217.29 12694.08
11/30/88 14723.44 12328.65
12/31/88 15054.81 12658.24
01/31/89 16025.54 13319.39
02/28/89 15982.96 13266.62
03/31/89 16681.21 13499.62
04/30/89 17498.66 14190.65
05/31/89 18282.06 14808.66
06/30/89 18239.48 14447.54
07/31/89 19039.91 15063.23
08/31/89 19891.42 15577.35
09/30/89 20005.00 15696.51
10/31/89 19330.48 15122.64
11/30/89 19507.98 15137.91
12/31/89 19630.34 15095.75
01/31/90 18236.52 13800.99
02/28/90 18743.36 14133.56
03/31/90 19454.89 14455.84
04/30/90 18889.57 13942.38
05/31/90 20127.43 15233.50
06/30/90 20166.42 15343.69
07/31/90 19903.25 14545.45
08/31/90 18187.79 12652.59
09/30/90 17186.83 11434.50
10/31/90 16824.37 10947.59
11/30/90 17992.31 11917.42
12/31/90 18697.66 12407.98
01/31/91 20170.08 13747.55
02/28/91 21733.26 15037.01
03/31/91 22953.55 16007.83
04/30/91 22913.21 16088.15
05/31/91 24032.65 16798.10
06/30/91 22872.87 15796.08
07/31/91 24486.48 16663.02
08/31/91 25777.36 17447.64
09/30/91 25550.84 17487.47
10/31/91 26661.74 18021.84
11/30/91 25401.29 17388.56
12/31/91 27889.33 19460.98
01/31/92 29093.59 20585.15
02/29/92 29149.87 21025.26
03/31/92 28215.72 20039.50
04/30/92 27382.87 19206.74
05/31/92 27776.78 19426.80
06/30/92 27169.03 18706.23
07/31/92 27743.02 19278.10
08/31/92 27056.48 18690.30
09/30/92 27891.57 19359.09
10/31/92 28930.93 20085.96
11/30/92 30972.97 21664.51
12/31/92 32055.93 22468.39
01/31/93 32268.39 23111.95
02/28/93 31006.15 22263.27
03/31/93 32080.93 22905.84
04/30/93 31143.62 21952.94
05/31/93 31980.95 23251.02
06/30/93 32018.44 23364.53
07/31/93 32368.37 23389.43
08/31/93 32968.25 24655.32
09/30/93 33874.31 25317.14
10/31/93 34321.09 25864.12
11/30/93 33413.99 25038.67
12/31/93 34727.31 25782.47
01/31/94 35662.38 26568.09
02/28/94 35288.35 26303.56
03/31/94 33878.54 24675.89
04/30/94 32943.47 24356.60
05/31/94 32770.84 24401.41
06/30/94 31562.43 23431.25
07/31/94 32252.95 23968.93
08/31/94 33864.16 25411.40
09/30/94 33950.47 25367.25
10/31/94 34727.31 25805.37
11/30/94 33590.83 24903.58
12/31/94 33791.27 24958.01
01/31/95 33718.66 25065.55
02/28/95 35490.27 26344.39
03/31/95 36681.02 27123.70
04/30/95 38220.29 28012.21
05/31/95 39309.39 28695.94
06/30/95 42358.89 30981.78
07/31/95 45146.99 33230.77
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity OTC
Portfolio on July 31, 1985 and paid a 3% sales charge. As the chart shows,
by July 31, 1995, the value of your investment would have grown to $45,147
- a 351.47% increase on your initial investment. For comparison, look at
how the NASDAQ did over the same period. The same $10,000 investment would
have grown to $33,231 - a 232.31% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Strong corporate earnings and a
favorable interest rate
environment helped the U.S.
stock market post strong returns
for the 12 months ended July 31,
1995. The Standard & Poor's
Composite Index of 500 Stocks
finished the 12-month period with a
total return of 26.11% - well
above its historical annual
average of roughly 12%. With
inflation posing little threat,
interest rates fell during the first
half of 1995. The Federal
Reserve Board cut the federal
funds rate - the rate banks
charge each other for overnight
loans - by 0.25% on July 6.
Large-capitalization stocks led
the somewhat narrow market
rally. Technology companies -
whose goods and services
benefited from both corporate
and consumer demand - posted
the strongest earnings growth
and stock price gains. In
February, the Dow Jones
Industrial Average closed
above 4000 for the first time.
Returns from foreign markets
were varied, as investors brought
capital back to the U.S. The
Morgan Stanley Emerging
Markets Free Index was down
3.76% for the 12 months ended
July 31. The Morgan Stanley
EAFE (Europe, Australia, Far
East) Index returned 6.95% for the
year ended July 31. European
markets have fared well through
the first half of 1995 - after a
difficult year in 1994 - while the
Japanese market recently has
shown some signs of recovery
after struggling through much of
the year.
An interview with Abigail Johnson, Portfolio Manager of Fidelity
OTC Portfolio
Q. ABBY, HOW DID THE FUND DO?
A. During the 12 months ended July 31, 1995, the fund had a total return of
39.98%. By comparison, the NASDAQ Composite Index, the fund's benchmark,
returned 38.64% during the same period.
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. Quite simply, technology stocks. The fund had a 42.6% stake in
technology at the end of the period, and many of these stocks had very
strong returns. The story remains the same; corporations increasingly are
relying on technology to improve productivity, while consumers are strongly
embracing personal computers and related products. All of this has driven
powerful earnings growth for companies such as Oracle Systems, which
manufactures relational database software; Sun Microsystems, which makes
computer workstations; Altera, a semiconductor manufacturer; Applied
Materials, which makes semiconductor manufacturing equipment; and 3Com,
which makes routers, hubs and switches. However, by far, the top
contributors to the fund's performance were its two largest investments
during the period: Intel and Microsoft.
Q. . . . TWO BELLWETHER STOCKS FOR THE OVER-THE-COUNTER MARKET. BRING US UP
TO DATE ON BOTH OF THESE COMPANIES.
A. Intel has been a terrific stock - its price has more than doubled over
the past 12 months. Much of this was due to stronger-than-expected sales of
the company's flagship Pentium microprocessor, which has been widely
embraced by the PC industry. So far, no other company has come close to
developing a product to compete with the Pentium, and Intel already is
looking ahead to launching its next generation of computer chip later this
year. As for Microsoft, the stock's fortunes have ridden largely on the
anticipated success of its new PC software product - Windows 95. The
company remained on schedule for its August 24 launch of the product, and
investors - myself included - envision wide acceptance and strong sales of
this new easier-to-use software.
Q. ON THE FLIP SIDE, TECHNOLOGY STOCKS GENERALLY AREN'T AS CHEAP AS THEY
WERE 12 MONTHS AGO. WHAT ARE SOME OF THE RISKS OF INVESTING CLOSE TO HALF
OF THE FUND IN THIS SECTOR?
A. First, I would say that the technology sector has become an increasingly
larger portion of the NASDAQ index over the past several years, and,
relative to the index, the fund is only modestly overweighted in
technology. In addition, because of the preponderance of technology stocks
in the OTC market, I believe that many shareholders may be looking for a
significant exposure to this sector when they invest in the fund. That
said, technology stocks tend to place high on the risk/reward scale.
Historically, they have been volatile and have the potential for sudden
downward moves. However, by the same token, often they have large upside
potential. One footnote: I'm not wedded to this sector. If, at some point,
it appears that business prospects of these companies are deteriorating and
their stock valuations - prices relative to earnings - are no longer
attractive, I'll look to cut back the fund's investment.
Q. MOVING BEYOND TECHNOLOGY, WHICH OTHER SECTORS OR STOCKS PROVED
INTERESTING?
A. In the health care sector, some of the fund's biotechnology stocks
rebounded from depressed levels. Investors have separated out those
companies with viable products that have reached the final stages of
testing, such as Biogen and Sepracor, and rewarded them with higher stock
prices.
Q. WHICH INVESTMENTS DIDN'T WORK OUT AS YOU HAD HOPED?
A. By far, my biggest disappointment was U.S. HealthCare, a health
maintenance organization. I thought the company would be able to sustain
the prices of its services, but that wasn't the case. Many HMOs such as
U.S. HealthCare are being forced to cut prices in the race for subscriber
growth, because the biggest companies ultimately will have the most
leverage to negotiate with health care providers. Schuler Homes and Snapple
Beverage also come to mind as disappointments. Schuler is a homebuilder in
Hawaii that suffered from execution problems, while Snapple appeared to hit
a wall in terms of market penetration for its line of fruit drinks and iced
teas.
Q. LET'S TALK ABOUT THE NEXT SIX MONTHS. WHAT'S YOUR OUTLOOK?
A. The market has moved nearly straight up over the past six months. While
I'm certainly not pessimistic in my outlook, I think the chances of stocks
maintaining that momentum through the end of the year are pretty slim.
Therefore, I'm cognizant of preserving some of the gains the fund has made
thus far. I'll be looking for opportunities to trim back some of the
strongest performing stocks that have become expensive, and increase
positions in larger, more established companies that remain attractive.
FUND FACTS
GOAL: to increase the value
of the fund's shares over the
long term by investing mainly
in stocks traded on the
over-the-counter market
START DATE: December 31,
1984
SIZE: as of July 31, 1995,
more than $2.1 billion
MANAGER: Abigail Johnson,
since April 1994; manager,
Fidelity Dividend Growth
Fund, April 1993-April 1994;
Fidelity Select Developing
Communications Portfolio,
1991-1993; Fidelity Select
Telecommunications
Portfolio, 1991-1992; Fidelity
Select Industrial Equipment
Portfolio, 1988-1991; joined
Fidelity
in 1988
(checkmark)
ABIGAIL JOHNSON ON
THE CHANGING FACE OF
TECHNOLOGY STOCKS:
"Historically, technology
stocks have been very
cyclical in nature - tending to
move up and down with the
economy. But these stocks
have blown right through
what would have been the
boundaries of their cycle and
continued to rise with no signs
of slowing. That raises the
question, `Has technology
changed from a cyclical
industry to a growth industry?'
"It appears that maybe it has.
Everywhere you go these
days you see products with
more features. In addition to
personal computers, cars and
other commonplace
consumer goods are big
users of semiconductors and
integrated circuits. It's easy to
see why the demand for
technology products and
services is so huge. While it
appears that the industry has
sidestepped what might have
been a dip in its traditional
cycle, we'll have to wait and
see if this is truly a long-term
change in behavior."
(solid bullet) Eight of the fund's top 10
largest stock investments on
July 31, 1995, were
technology stocks.
(solid bullet) Together, Intel and
Microsoft made up more than
11% of the fund's investments
on July 31.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Intel Corp. 6.1 5.8
Microsoft Corp. 5.2 3.2
Sun Microsystems, Inc. 1.5 1.0
Oracle Systems Corp. 1.5 1.8
Apple Computer, Inc. 1.4 0.9
3Com Corp. 1.0 0.8
MCI Communications Corp. 0.9 1.1
Tele-Communications, Inc. Class 0.9 1.5
A
Symantec Corp. 0.9 0.7
Wang Laboratories, Inc. 0.9 0.5
TOP FIVE MARKET SECTORS AS OF JULY 31, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS IN THESE
MARKET SECTORS
6 MONTHS AGO
Technology 42.6 39.0
Health 8.3 9.6
Finance 8.0 7.8
Media & Leisure 6.1 7.4
Retail & Wholesale 5.3 4.1
ASSET ALLOCATION
AS OF JULY 31, 1995 * AS OF JANUARY 31, 1995 **
Row: 1, Col: 1, Value: 9.6
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 45.2
Row: 1, Col: 4, Value: 44.0
Row: 1, Col: 1, Value: 11.6
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 42.0
Row: 1, Col: 4, Value: 44.6
Stocks 90.2%
Bonds 0.2%
Short-term
investments 9.6%
FOREIGN
INVESTMENTS 4.3%
Stocks 88.1%
Bonds 0.3%
Short-term
investments 11.6%
FOREIGN
INVESTMENTS 4.8%
*
**
INVESTMENTS JULY 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 90.0%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.1%
C A E Industries Ltd. 200,000 $ 1,338
Greenwich Air Services, Inc. (a) 48,100 523
1,861
DEFENSE ELECTRONICS - 0.3%
Trimble Navigation Ltd. (a) 163,300 5,552
TOTAL AEROSPACE & DEFENSE 7,413
BASIC INDUSTRIES - 1.9%
CHEMICALS & PLASTICS - 1.1%
Betz Laboratories, Inc. 85,800 3,872
First Mississippi Corp. 100,000 3,413
Fuller (H.B.) Co. 60,000 2,115
Nalco Chemical Co. 38,000 1,354
OM Group, Inc. 173,100 5,365
PT Tri Polyta Indonesia sponsored ADR (a) 41,000 943
Petrolite Corporation 43,300 1,223
Schulman (A.), Inc. 75,400 2,130
Triple S Plastics, Inc. (a) 60,300 724
Union Carbide Corp. 65,900 2,290
23,429
IRON & STEEL - 0.2%
Huntco, Inc. Class A 70,000 1,129
Schnitzer Steel, Inc. Class A 113,600 3,152
4,281
METALS & MINING - 0.2%
Oregon Metallurgical Corp. (a) 70,000 779
Still Watermining Co. (a) 100,000 2,500
3,279
PAPER & FOREST PRODUCTS - 0.4%
Jefferson Smurfit Corp. (a) 67,100 994
Riverside Forest Products 208,600 2,409
Willamette Industries, Inc. 86,900 5,311
8,714
TOTAL BASIC INDUSTRIES 39,703
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONGLOMERATES - 0.0%
Figgie International Holdings, Inc. Class A (a) 100,000 $ 1,013
CONSTRUCTION & REAL ESTATE - 1.7%
BUILDING MATERIALS - 0.4%
Cooper Cameron Corp. 21,480 481
Hoganas AB Class B Free shares 93,000 1,873
Tecumseh Products Co. Class A 100,500 4,799
Thermo Power Corp. (a) 100,200 1,741
8,894
CONSTRUCTION - 1.0%
Beazer Homes USA, Inc. (a) 130,000 2,113
Granite Construction, Inc. 90,000 2,059
Redman Industries (a) 138,800 3,297
Schuler Homes, Inc. (a) 317,800 3,653
Southern Energy Homes, Inc. (a) 146,500 2,527
Toll Brothers, Inc. (a) 180,000 2,948
U.S. Home Corp. (a) 200,000 4,700
21,297
REAL ESTATE - 0.1%
Price Enterprises, Inc. (a) 200,000 2,900
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Equity Inns, Inc. 200,000 2,150
RFS Hotel Investors, Inc. 105,000 1,509
3,659
TOTAL CONSTRUCTION & REAL ESTATE 36,750
DURABLES - 1.0%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Armor All Products Corp. 82,800 1,397
Jason, Inc. (a) 109,000 1,063
2,460
HOME FURNISHINGS - 0.2%
Bassett Furniture Industries, Inc. 5,000 125
Haverty Furniture Companies, Inc. 179,300 2,107
Ladd Furniture, Inc. 30,033 405
Stanley Furniture (a) 110,000 825
3,462
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.7%
Dixie Yarns, Inc. 105,000 $ 683
Justin Industries, Inc. 381,000 4,024
Mohawk Industries, Inc. (a) 163,100 2,895
Nautica Enterprises, Inc. (a) 68,250 1,851
Westpoint Stevens, Inc. Class A (a) 293,000 6,263
15,716
TOTAL DURABLES 21,638
ENERGY - 0.7%
ENERGY SERVICES - 0.4%
Global Industries Ltd. (a) 117,400 2,347
Newpark Resources, Inc. (a) 115,000 2,070
Noble Drilling Corp. (a) 185,000 1,203
Offshore Logistics, Inc. (a) 154,950 2,034
Pride Petroleum Services, Inc. (a) 166,600 1,291
Tuboscope Vetco Corp. (a) 100,000 600
9,545
OIL & GAS - 0.3%
Chesapeake Energy Corp. (a) 80,000 1,830
Coda Energy, Inc. (a) 296,700 1,891
Crystal Oil Company 10,400 333
Flores & Rucks, Inc. (a) 100,000 1,200
TransTexas Gas Corp. (a) 50,000 744
5,998
TOTAL ENERGY 15,543
FINANCE - 8.0%
BANKS - 4.6%
Bank of New Hampshire Corp. 110,000 3,053
BanPonce Corp. 301,761 10,863
Boatmen's Bancshares, Inc. 187,100 6,806
CCB Financial Corp. 52,800 2,363
Central Fidelity Banks, Inc. 25,000 794
Commerce Bancorp, Inc. 100,000 2,100
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
Dauphin Deposit Corp. 39,900 $ 1,067
Deposit Guaranty Corp. 25,000 975
Fifth Third Bancorp 270,300 15,406
First American Corp. 76,217 2,972
First Commerce Bancshares, Inc. 115,600 1,965
First Commerce Bancshares, Inc. Class B 445,900 6,020
First Commerce Corp. 50,530 1,541
First Security Corp. 25,000 694
Fleet Financial Group, Inc. 100,000 3,563
HUBCO, Inc. 32,470 576
Hancock Holding Co. 50,000 1,600
Liberty Bancorporation, Inc. 69,700 2,440
Meridian Bancorp, Inc. 102,391 3,942
Northern Trust Corp. 167,850 6,693
Peoples Heritage Financial Group, Inc. 150,000 2,794
Regions Financial Corp. 98,200 3,781
Southern National Corp. 112,311 2,695
Trans Financial Bancorp, Inc. 60,000 945
Union Bank of San Francisco 32,000 1,412
Union Planters Corp. 20,549 583
West One Bancorp 30,000 1,103
Whitney Holding Corp. 57,000 1,724
Zions Bancorporation 132,200 7,073
97,543
CREDIT & OTHER FINANCE - 0.2%
Greenpoint Financial Corp. 105,500 2,545
IBS Financial Corp. 100,000 1,463
Jayhawk Acceptance Corp. 3,000 30
4,038
INSURANCE - 1.3%
Allied Group, Inc. 148,500 4,492
Berkley (W.R.) Corp. 105,360 4,043
Commerce Group, Inc. 104,100 1,887
HealthCare COMPARE Corp. (a) 116,700 3,968
Mid Ocean Ltd. 60,000 1,995
NAC Re Corp. 78,400 2,881
SAFECO Corp. 146,300 8,559
27,825
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 1.7%
Astoria Financial Corp. (a) 68,100 $ 2,554
Charter One Financial Corp. 272,900 7,061
Collective Bancorp, Inc. 182,800 4,136
Commercial Federal Corp. (a) 158,700 5,019
First Financial Corp. of Wisconsin 100,000 1,775
Glendale Federal Bank Federal Savings Bank (a) 100,000 1,375
Long Island Bancorp, Inc. 150,000 3,130
Quaker City Bancorp (a) 97,600 1,232
Springfield Institution for Savings (a) 64,000 896
Standard Financial, Inc. (a) 50,000 669
WFS BanCorp, Inc. 35,000 683
Washington Federal, Inc. 120,000 2,610
Washington Mutual, Inc. 164,000 3,916
35,056
SECURITIES INDUSTRY - 0.2%
Eaton Vance Corp. 50,000 1,550
Quick & Reilly Group, Inc. (The) 50,000 1,925
3,475
TOTAL FINANCE 167,937
HEALTH - 8.3%
DRUGS & PHARMACEUTICALS - 3.8%
Amgen, Inc. (a) 209,200 17,808
Amylin Pharmaceuticals, Inc. (a) 200,000 1,475
Biochem Pharmaceuticals, Inc. (a) 26,900 666
Biogen, Inc. (a) 189,800 8,731
Cell Genesys, Inc. (a) 191,000 1,146
Centocor, Inc. (a) 101,500 1,294
Cygnus Therapeutics Systems (a) 114,800 1,593
Dura Pharmaceuticals, Inc. (a) 225,000 5,794
Genetics Institute, Inc. depositary share (a) 60,000 2,265
Genzyme Corp. 120,000 5,910
Genzyme Corp.-Tissue Repair (a) 30,000 345
Immunex Corp. (a) 99,100 1,387
Inhale Therapeutic Systems (a) 100,000 800
IVAX Corp. 128,546 3,101
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Natures Sunshine Products, Inc. 73,200 $ 1,373
Protein Design Labs, Inc. (a) 135,600 2,170
Sepracor, Inc. (a) 610,900 9,087
Sigma Aldrich Corp. 140,000 7,035
Somatix Therapy Corp. (a) 238,900 1,433
Telor Ophthalmic Pharmaceuticals, Inc. (a)(b) 500,000 1,000
Univax Biologics, Inc. (a) 41,300 299
Vertex Pharmaceuticals, Inc. (a) 120,900 2,040
Watson Pharmaceuticals, Inc. (a) 116,500 4,194
80,946
MEDICAL EQUIPMENT & SUPPLIES - 2.8%
ATS Medical, Inc. (a) 100,000 900
ADAC Laboratories 150,000 2,006
Advanced Technology Laboratories, Inc. (a) 142,200 2,453
American Medical Electronics, Inc. (a) 150,000 1,463
Baxter International, Inc. 126,600 4,716
Benson Eyecare Corp. (a) 100,000 850
Biomet, Inc. (a) 105,000 1,601
Circon Corp. (a) 99,700 2,031
Isolyser, Inc. (a) 100,000 3,575
Medisense, Inc. (a) 300,100 6,940
Nellcor, Inc. (a) 201,300 10,568
St. Jude Medical, Inc. 73,500 4,024
Spacelabs Medical, Inc. (a) 100,000 2,494
Thermo Cardiosystems, Inc. (a) 200,000 7,700
U.S. Surgical Corp. 50,000 1,200
Utah Medical Products, Inc. (a) 122,000 1,861
Vital Signs, Inc. 191,400 3,792
58,174
MEDICAL FACILITIES MANAGEMENT - 1.7%
Advantage Health Corp. (a) 100,600 3,043
Apria Healthcare Group, Inc. (a) 143,280 4,657
Coventry Corp. (a) 100,000 1,600
FHP International Corp. (a) 100,000 2,625
Health Management, Inc. (a) 100,000 1,363
Lincare Holdings, Inc. (a) 160,940 5,591
Maxicare Health Plans, Inc. (a) 242,000 3,857
Oxford Health Plans, Inc. (a) 50,900 2,628
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - CONTINUED
Renal Treatment Centers, Inc. (a) 100,000 $ 2,575
Rotech Medical Corp. (a) 60,000 1,755
U.S. Healthcare, Inc. 224,700 7,106
36,800
TOTAL HEALTH 175,920
HOLDING COMPANIES - 0.1%
Nolato AB Class B Free shares 296,500 2,556
INDUSTRIAL MACHINERY & EQUIPMENT - 3.6%
ELECTRICAL EQUIPMENT - 1.0%
Adtran, Inc. (a) 112,000 4,116
American Power Conversion Corp. (a) 75,000 1,406
California Microwave Corp. (a) 100,000 2,600
Glenayre Technologies, Inc. 153,900 9,619
Spectrum Control, Inc. (a) 250,000 719
Telular Corp. (a) 100,000 1,750
VWR Corp. 71,800 700
20,910
INDUSTRIAL MACHINERY & EQUIPMENT - 1.8%
BWIP Holdings, Inc. Class A 440,000 8,360
Brenco, Inc. 108,000 1,080
Duriron Co., Inc. 330,000 8,414
Enerflex Systems Ltd. 118,100 1,385
Goulds Pumps, Inc. 219,300 4,825
Greenfield Industries, Inc. 148,200 4,335
Ionics, Inc. (a) 60,000 2,288
NN Ball & Roller, Inc. 232,150 4,585
Park Ohio Industries, Inc. (a) 161,063 2,416
37,688
POLLUTION CONTROL - 0.8%
Continental Waste Industries, Inc. (a) 71,900 953
Safety Kleen Corp. 100,000 1,563
TETRA Technologies, Inc. (a) 100,000 1,200
United Waste Systems, Inc. (a) 70,200 2,650
WMX Technologies, Inc. 375,000 11,718
18,084
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 76,682
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 6.1%
BROADCASTING - 2.8%
ACS Enterprises, Inc. (a) 99,400 $ 1,814
American Telecasting, Inc. (a) 123,100 1,508
Citicasters, Inc. (a) 150,000 4,988
Evergreen Media Corp. Class A (a) 54,200 1,789
Heftel Broadcasting Corp. Class A (a) 100,000 1,875
Infinity Broadcasting Corp. (a) 91,950 3,402
Lin Television Corp. (a) 37,500 1,416
People's Choice TV Corp. (a) 65,100 1,611
Sinclair Broadcast Group, Inc. Class A (a) 3,000 92
TCA Cable TV, Inc. 185,000 5,504
Tele-Communications, Inc. Class A (a) 788,600 19,713
Telewest Communications PLC (a) 1,449,000 3,630
Valuevision International, Inc. (a) 116,100 682
Viacom, Inc. (a):
Class A 100,000 5,088
Class B (non-vtg.) 100,000 5,075
58,187
ENTERTAINMENT - 0.6%
American Classic Voyages Co. 146,800 1,707
Casino America, Inc. (a) 150,000 2,231
Livent, Inc. (a) 280,300 3,159
Players International, Inc. (a) 208,950 4,571
11,668
LEISURE DURABLES & TOYS - 0.2%
Arctco, Inc. 358,350 4,166
LODGING & GAMING - 0.3%
Harrah's Entertainment, Inc. 50,000 1,344
International Game Technology Corp. 100,000 1,450
President Casinos, Inc. (a) 104,100 423
Promus Hotel Corp. (a) 25,000 616
Showboat, Inc. 100,000 2,162
Station Casinos, Inc. (a) 46,700 870
6,865
PUBLISHING - 0.2%
News Corp. Ltd. ADR 100,000 2,363
Scholastic Corp. (a) 40,000 2,630
4,993
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 2.0%
Apple South, Inc. 170,000 $ 3,634
Applebee's International, Inc. 26,700 754
Bertucci's, Inc. (a) 118,800 757
Buffets, Inc. (a) 165,000 2,331
Cheesecake Factory, Inc. (a) 87,500 2,341
Cracker Barrel Old Country Store, Inc. 100,000 2,100
IHOP Corp. (a) 125,300 3,602
Landry's Seafood Restaurants, Inc. (a) 47,200 882
Longhorn Steaks, Inc. (a) 172,600 2,869
O Charleys, Inc. 50,000 681
Outback Steakhouse, Inc. (a) 301,800 10,525
Papa John's International, Inc. (a) 50,000 2,075
Starbucks Corp. (a) 225,000 8,409
Taco Cabana, Inc. (a) 85,000 531
41,491
TOTAL MEDIA & LEISURE 127,370
NONDURABLES - 0.9%
AGRICULTURE - 0.4%
Delta & Pine Land Co. 126,200 3,770
Kanthal AB Class B Free shares 225,200 4,170
7,940
BEVERAGES - 0.1%
LVMH 8,250 1,551
FOODS - 0.3%
Flagstar Companies, Inc. (a) 175,000 984
Tyson Foods, Inc. 274,600 6,814
7,798
HOUSEHOLD PRODUCTS - 0.1%
Helen of Troy Corp. (a) 54,600 1,146
TOTAL NONDURABLES 18,435
PRECIOUS METALS - 0.0%
Firstmiss Gold, Inc. (a) 50,000 1,050
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 5.3%
APPAREL STORES - 0.9%
Baby Superstore, Inc. (a) 130,000 $ 6,208
Baker (J.), Inc. 170,000 1,668
Cato Corp. Class A 200,000 1,575
Gymboree Corp. (a) 170,000 5,248
Ross Stores, Inc. 135,400 1,650
Sportmart, Inc. Class A (non-vtg) (a) 63,300 459
Urban Outfitters, Inc. (a) 97,300 2,068
18,876
GENERAL MERCHANDISE STORES - 1.3%
Bradlees, Inc. 131,000 229
Casey's General Stores, Inc. 242,500 4,880
Dollar Tree Stores (a) 114,000 3,449
Freds, Inc. Class A 228,200 2,282
K Mart Corp. 100,000 1,575
Lechters, Inc. (a) 100,000 1,331
Michaels Stores, Inc. (a) 110,000 2,613
Price/Costco, Inc. (a) 297,400 5,335
Proffitts, Inc. (a) 150,000 5,137
Younkers, Inc. (a) 50,000 900
27,731
GROCERY STORES - 0.8%
Food Lion, Inc.:
Class A 300,000 1,725
Class B 115,000 661
Quality Food Centers, Inc. 39,257 1,040
Richfood Holdings, Inc. Class A 265,000 6,160
Stop & Shop Companies, Inc. (a) 150,000 4,088
Vons Companies, Inc. (a) 152,700 3,398
Whole Foods Market, Inc. (a) 50,000 763
17,835
RETAIL & WHOLESALE, MISCELLANEOUS - 2.3%
Bed Bath & Beyond, Inc. (a) 240,600 7,459
Cameron Ashley, Inc. (a) 278,000 3,684
Corporate Express (a) 57,000 1,446
Futures Shops Ltd. (a) 211,400 2,828
Global Directmail Corp. (a) 17,000 425
Good Guys, Inc. (a) 155,800 2,064
Hechinger Co. Class A 100,000 663
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Micro Warehouse, Inc. (a) 114,300 $ 5,572
Rex Stores Corp. (a) 70,800 1,168
Sodak Gaming, Inc. (a) 135,000 2,464
Spiegel, Inc. Class A 191,200 2,390
Sun Television & Appliances, Inc. 200,000 1,438
Sunglass Hut International, Inc. (a) 102,500 4,151
Viking Office Products, Inc. (a) 120,000 4,230
Wickes Lumber Co. (a) 97,800 1,320
Williams-Sonoma, Inc. (a) 225,000 4,725
Zale Corp. (a) 100,000 1,425
47,452
TOTAL RETAIL & WHOLESALE 111,894
SERVICES - 1.4%
LEASING & RENTAL - 0.7%
Danka Business Systems PLC sponsored ADR 15,000 448
Hollywood Entertainment Corp. (a) 306,600 8,585
Movie Gallery, Inc. (a) 120,400 4,605
13,638
PRINTING - 0.1%
Valassis Communications, Inc. (a) 150,000 2,138
SERVICES - 0.6%
Borg Warner Security Corp. (a) 383,200 3,353
ThermoLase Corp. (a) 220,000 4,648
U.S. Delivery Systems, Inc. (a) 100,000 3,100
Zebra Technologies Corp. Class A (a) 32,500 2,039
13,140
TOTAL SERVICES 28,916
TECHNOLOGY - 42.4%
COMMUNICATIONS EQUIPMENT - 6.5%
ADC Telecommunications, Inc. (a) 215,000 8,331
Active Voice Corp. (a) 100,800 2,911
Brite Voice Systems, Inc. (a) 120,600 2,683
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMMUNICATIONS EQUIPMENT - CONTINUED
Broadband Technologies, Inc. (a) 50,000 $ 1,275
Centigram Communications Corp. (a) 150,000 2,288
Cisco Systems, Inc. (a) 239,400 13,347
Coherent Communications Systems Corp. (a) 37,200 744
DSC Communications Corp. (a) 180,500 9,702
DSP Communications, Inc. (a) 100,000 2,525
Dialogic Corp. (a) 138,300 3,423
Digital Systems International, Inc. (a) 283,700 3,085
Dynatech Corp. (a) 289,000 5,925
Ericsson (L.M.) Telephone Co. Class B ADR 882,400 16,435
General Instrument Corp. (a) 67,600 2,493
InterVoice, Inc. (a) 150,000 3,375
Network Equipment Technologies (a) 70,000 2,118
Network General Corp. (a) 76,600 2,604
Nokia Corp. AB sponsored ADR 120,000 7,890
Northern Telecom Ltd. 100,000 3,785
Octel Communications Corp. (a) 260,000 10,043
Telco Systems, Inc. (a) 150,000 1,931
3Com Corp. (a) 279,800 20,720
U.S. Robotics Corp. 61,651 8,970
136,603
COMPUTER SERVICES & SOFTWARE - 16.5%
Adobe Systems, Inc. 100,000 6,175
America Online, Inc. (a) 50,000 2,756
American Business Information, Inc. (a) 125,000 3,859
American Management Systems, Inc. (a) 50,000 1,256
BDM International, Inc. (a) 1,600 39
Bisys Group, Inc. (The) (a) 181,075 4,346
Black Box Corp. (a) 307,500 4,651
Boole & Babbage, Inc. (a) 90,300 2,732
Broderbund Software, Inc. (a) 34,200 2,462
Cerner Corp. (a) 50,000 3,081
Cognos, Inc. (a) 53,400 1,649
CompUSA, Inc. (a) 519,900 18,002
Datastream Systems, Inc. (a) 15,000 450
Dendrite International Corp. (a) 2,000 33
Frame Technology Corp. (a) 122,000 3,828
General Magic, Inc. (a) 98,200 1,645
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
HBO & Co. 170,000 $ 9,393
Hummingbird Communications Ltd. (a) 100,000 3,372
Informix Corp. (a) 418,000 12,383
Integrated Systems, Inc. (a) 27,300 741
Intelligent Electronics, Inc. 100,000 1,350
Intersolv, Inc. (a) 44,300 1,102
Legato Systems, Inc. (a) 1,000 27
McAfee Associates, Inc. (a) 180,700 6,867
Medic Computer Systems, Inc. (a) 110,000 4,895
Mentor Graphics Corp. (a) 100,000 1,850
Mercury Interactive Group Corp. (a) 175,300 4,383
Microsoft Corp. (a) 1,213,200 109,791
MicroAge, Inc. (a) 100,500 1,319
Novell, Inc. (a) 901,100 16,332
Oracle Systems Corp. (a) 747,350 31,295
Parametric Technology Corp. (a) 104,980 5,905
Peoplesoft, Inc. (a) 57,000 4,076
Platinum Technology, Inc. (a) 67,500 1,671
Policy Management Systems Corp. (a) 100,000 5,363
Reuters Holdings PLC ADR Class B 100,000 5,038
SPSS, Inc. (a) 136,200 2,349
Santa Cruz Operation, Inc. (a) 74,700 495
Seer Technologies, Inc. (a) 1,500 32
Shared Medical Systems Corp. 50,000 2,081
Sierra On-Line, Inc. (a) 232,000 8,468
Softdesk, Inc. (a) 171,700 4,443
Softkey International, Inc. (a) 200,000 8,675
Spectrum Holobyte, Inc. (a) 94,200 1,666
Stratacom, Inc. (a) 60,000 3,255
SunGard Data Systems, Inc. (a) 285,200 8,271
Sybase, Inc. (a) 48,000 1,572
Symantec Corp. (a) 699,800 19,070
Systems & Computer Technology Corp. (a) 100,000 2,675
347,169
COMPUTERS & OFFICE EQUIPMENT - 8.3%
AST Research, Inc. (a) 690,000 10,609
ADAPTEC, Inc. (a) 142,500 6,092
Apple Computer, Inc. 668,200 30,069
Bay Networks, Inc. (a) 170,000 7,629
Canon, Inc. 500,000 9,053
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - CONTINUED
Comverse Technology, Inc. (a) 229,000 $ 4,208
Discreet Logic, Inc. (a) 2,000 84
Encad, Inc. (a) 185,000 4,903
Filenet Corp. (a) 289,900 12,719
Gateway 2000, Inc. (a) 194,600 5,619
Hutchinson Technology, Inc. 100,000 8,000
Itron, Inc. (a) 125,000 2,875
Maxtor Corp. (a) 165,000 701
Merisel, Inc. (a) 165,000 1,114
Micom Communication Corp. (a) 72,533 607
Norand Corp. (a) 126,300 5,936
PSC, Inc. (a) 150,000 2,100
Plannar Systems, Inc. (a) 100,000 2,100
Radius, Inc. (a) 250,000 2,438
Silicon Graphics, Inc. (a) 60,500 2,541
Sun Microsystems, Inc. (a) 664,500 31,979
Tech Data Corp. (a) 355,500 4,888
Wang Laboratories, Inc. (a) 1,000,100 18,752
175,016
ELECTRONIC INSTRUMENTS - 1.4%
Analogic Corp. 168,500 3,202
Applied Materials, Inc. (a) 92,800 9,603
KLA Instruments Corp. (a) 57,900 5,023
Sensonor AS (a) 200,000 1,628
Silicon Valley Group, Inc. (a) 180,000 8,393
Wandel & Goltermann Technologies, Inc. (a) 140,000 1,575
29,424
ELECTRONICS - 9.7%
Advanced Micro Devices, Inc. 53,500 1,745
Allgon AB Class B Free shares 200,000 4,777
Altera Corp. (a) 231,200 12,933
C-Cube Microsystems, Inc. (a) 225,000 7,875
Cascade Communications Corp. (a) 15,000 761
DH Technology, Inc. (a) 77,500 2,093
Information Storage Devices (a) 62,100 1,568
Intel Corp. 1,992,800 129,532
Kemet Corp. (a) 35,000 2,266
Linear Technology Corp. 124,300 9,633
MEMC Electronic Materials, Inc. (a) 9,000 271
Maxim Integrated Products, Inc. (a) 125,200 7,402
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Microchip Technology, Inc. (a) 32,650 $ 1,257
Micron Technology, Inc. 30,000 1,882
Molex, Inc. 168,750 7,172
OnTrak Systems, Inc. (a) 1,500 44
Paradigm Technology, Inc. (a) 1,100 33
Robinson Nugent, Inc. (b) 281,500 2,604
Sanmina Corp. (a) 8,700 418
Sierra Semiconductor Corp. (a) 45,000 2,003
Smartflex Systems 5,000 60
Tencor Instruments (a) 52,800 2,323
VLSI Technology, Inc. (a) 100,000 2,963
Xilinx, Inc. (a) 11,200 1,343
Zilog, Inc. (a) 26,300 1,210
204,168
TOTAL TECHNOLOGY 892,380
TRANSPORTATION - 4.1%
AIR TRANSPORTATION - 2.1%
AMR Corp. (a) 37,100 2,783
Delta Air Lines, Inc. 100,000 7,925
Mesa Airlines, Inc. (a) 25,300 275
Northwest Airlines Corp. Class A (a) 405,000 15,542
SkyWest, Inc. 220,000 4,455
ValuJet Airlines (a) 384,200 11,862
42,842
RAILROADS - 0.7%
Wisconsin Central Transportation Corp. (a) 235,600 14,960
TRUCKING & FREIGHT - 1.3%
Air Express International Corp. 37,900 952
Arkansas Best Corp. 45,600 564
Arnold Industries, Inc. 102,500 1,871
Builders Transport, Inc. (a) 181,200 2,265
Hunt (J.B.) Transport Services Inc. 164,000 2,829
Landair Services, Inc. (a) 219,100 3,396
Landstar System, Inc. (a) 152,100 4,563
Mark VII, Inc. (a) 160,900 2,836
Roadway Services, Inc. 58,000 2,929
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - CONTINUED
TNT Freightways Corp. 219,300 $ 4,825
Werner Enterprises, Inc. 40,000 790
27,820
TOTAL TRANSPORTATION 85,622
UTILITIES - 4.1%
CELLULAR - 1.5%
A Plus Communications, Inc. (a) 122,000 1,617
Arch Communications Group, Inc. (a) 52,000 1,385
Cellular Communications, Inc. Series A (redeemable) (a) 146,400 7,610
Cellular Communications Puerto Rico, Inc. (a) 50,000 1,550
International Cabletel, Inc. (a) 81,900 2,795
Mobile Telecommunications Technologies, Inc. (a) 128,600 3,971
Mobilemedia Corp. (a) 8,000 202
Nextel Communications, Inc. Class A (a) 50,000 969
Paging Network, Inc. (a) 35,000 1,383
Palmer Wireless, Inc. (a) 153,400 3,183
QUALCOMM, Inc. (a) 80,000 3,420
Rogers Cantel Mobile Communications, Inc.
Class B (non-vtg.) (a) 33,800 790
Vanguard Cellular Systems, Inc. Class A (a) 146,700 3,888
32,763
TELEPHONE SERVICES - 2.6%
ALC Communications Corp. (a) 50,000 2,644
Incomnet, Inc. (a) 100,000 2,175
LCI International, Inc. (a) 127,700 4,374
MCI Communications Corp. 832,400 19,977
MFS Communications, Inc. (a) 165,000 6,188
U.S. Long Distance Corp. (a) 399,200 6,836
WorldCom, Inc. (a) 411,087 12,281
54,475
TOTAL UTILITIES 87,238
TOTAL COMMON STOCKS
(Cost $1,369,623) 1,898,060
NONCONVERTIBLE PREFERRED STOCKS - 0.2%
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE - 0.2%
SAP AG (Cost $2,047) 2,500 $ 4,049
NONCONVERTIBLE BONDS - 0.2%
MOODY'S RATINGS (C) PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) AMOUNT (B) (000S) (000S)
UTILITIES - 0.2%
CELLULAR - 0.2%
Nextel Communications, Inc. 0%,
8/15/04 (c) (Cost $3,516) B3 $ 7,125 3,732
REPURCHASE AGREEMENTS - 9.6%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 5.82%
dated 7/31/95 due 8/1/95 $ 202,015 201,982
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,577,168) $ 2,107,823
LEGEND
1. Non-income producing
2. Affiliated company (see Note 7 of Notes to Financial Statements).
3. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
INCOME TAX INFORMATION
At July 31, 1995, the aggregate cost of investment securities for income
tax purposes was $1,581,434,000. Net unrealized appreciation aggregated
$526,389,000, of which $569,480,000 related to appreciated investment
securities and $43,091,000 related to depreciated investment securities.
The fund hereby designates $6,241,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER SHARE AMOUNTS) JULY 31, 1995
ASSETS
Investment in securities, at value (including repurchase $ 2,107,823
agreements of $201,982) (cost $1,577,168) - See
accompanying schedule
Cash 1
Receivable for investments sold 10,887
Receivable for fund shares sold 13,986
Dividends receivable 368
Other receivables 1,100
TOTAL ASSETS 2,134,165
LIABILITIES
Payable for investments purchased $ 14,752
Payable for fund shares redeemed 7,887
Accrued management fee 894
Other payables and accrued expenses 554
TOTAL LIABILITIES 24,087
NET ASSETS $ 2,110,078
Net Assets consist of:
Paid in capital $ 1,533,045
Accumulated undistributed net realized gain (loss) on 46,379
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 530,654
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 67,863 shares outstanding $ 2,110,078
NET ASSET VALUE and redemption price per share $31.09
($2,110,078 (divided by) 67,863 shares)
Maximum offering price per share (100/97.00 of $31.09) $32.05
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1995
INVESTMENT INCOME $ 7,969
Dividends (including $92 received from affiliated issuers)
Interest 9,476
TOTAL INCOME 17,445
EXPENSES
Management fee $ 10,041
Basic fee
Performance adjustment (2,430)
Transfer agent fees 3,711
Accounting fees and expenses 606
Non-interested trustees' compensation 24
Custodian fees and expenses 68
Registration fees 131
Audit 77
Legal 8
Interest 3
Reports to shareholders 4
Miscellaneous 12
Total expenses before reductions 12,255
Expense reductions (20) 12,235
NET INVESTMENT INCOME 5,210
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain of $1,587 60,332
on sales of investments in affiliated issuers)
Foreign currency transactions (121) 60,211
Change in net unrealized appreciation (depreciation) on:
Investment securities 493,274
Assets and liabilities in foreign currencies (1) 493,273
NET GAIN (LOSS) 553,484
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 558,694
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1995 1994
INCREASE (DECREASE) IN NET ASSETS
Operations $ 5,210 $ 6,204
Net investment income
Net realized gain (loss) 60,211 72,014
Change in net unrealized appreciation (depreciation) 493,273 (82,465)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 558,694 (4,247)
FROM OPERATIONS
Distributions to shareholders (5,090) (6,136)
From net investment income
From net realized gain (6,456) (169,881)
TOTAL DISTRIBUTIONS (11,546) (176,017)
Share transactions 1,283,245 622,732
Net proceeds from sales of shares
Reinvestment of distributions 11,034 169,434
Cost of shares redeemed (961,208) (709,063)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 333,071 83,103
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 880,219 (97,161)
NET ASSETS
Beginning of period 1,229,859 1,327,020
End of period. $ 2,110,078 $ 1,229,859
OTHER INFORMATION
Shares
Sold 50,478 25,273
Issued in reinvestment of distributions 495 7,025
Redeemed (37,963) (28,688)
Net increase (decrease) 13,010 3,610
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JULY 31,
1995 1994 C 1993 1992 1991
SELECTED PER-SHARE DATA
Net asset value, beginning $ 22.42 $ 25.90 $ 24.65 $ 24.28 $ 20.42
of period
Income from Investment
Operations
Net investment income .09 .12 .06 .08 .19
Net realized and unrealized 8.79 (.08) 3.68 2.92 4.30
gain (loss)
Total from investment operations 8.88 .04 3.74 3.00 4.49
Less Distributions (.09) (.12) (.25) (.12) (.05)
From net investment income
From net realized gain (.12) (3.40) (2.24) (2.51) (.58)
Total distributions (.21) (3.52) (2.49) (2.63) (.63)
Net asset value, end of period $ 31.09 $ 22.42 $ 25.90 $ 24.65 $ 24.28
TOTAL RETURN A, B 39.98% (.36) 16.67% 13.30% 23.03%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,110 $ 1,230 $ 1,327 $ 1,037 $ 864
(in millions)
Ratio of expenses to average .81% .88% 1.08% 1.17% 1.29%
net assets
Ratio of expenses to average .82% .89% 1.08% 1.17% 1.29%
net assets before expense
reductions
Ratio of net investment income .35% .48% .53% .59% 1.00%
to average net assets
Portfolio turnover rate 62% 222% 213% 245% 198%
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD
SHOWN.
C EFFECTIVE AUGUST 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION,
DISCLOSURE, AND FINANCIAL STATEMENT PRESENTION OF
INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A
RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity OTC Portfolio (the fund) is a fund of Fidelity Securities Fund
(the trust) and is authorized to issue an unlimited number of shares. The
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a
Massachusetts business trust. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities maturing within sixty days of their purchase date are
valued at amortized cost or original cost plus accrued interest, both of
which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Accumulated undistributed net realized gain
(loss) on investments and foreign currency transactions may include
temporary book and tax basis differences that will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
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 that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying U.S. Treasury or Federal Agency Securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. The fund's investment adviser, FMR, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,233,145,000 and $838,755,000, 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ranged from .2700% to .5200% for the period. In the event that these rates
were lower than the contractual rates in effect during those periods, FMR
voluntarily implemented the above rates, as they resulted in the same or a
lower management fee. The annual individual fund fee rate is .35%. The
basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .20%) based on the fund's investment performance as compared
to the appropriate index over a 36-month period (the most recent plus the
previous 35 months). For the period, the management fee was equivalent to
an annual rate of .51% of average net assets after the performance
adjustment.
SALES LOAD. For the period, Fidelity Distributors Corporation (FDC), an
affiliate of FMR and the general distributor of the fund, received sales
charges of $480,000 on sales of shares of the fund.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
During the period August 1, 1994 to December 31, 1994, FSC received fees
based on the type, size, number of accounts and the number of transactions
made by shareholders. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which 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.
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 $102,000 for the period.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $7,109,000 and $6,949,000,
respectively. The weighted average interest rate was 5.17%.
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
$20,000 under this arrangement.
7. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
ATS Automation $ - $ 1,205 $ - $ -
Cameron Ashley, Inc. (a) 45 - - -
Commerce Bank - 1,952 - -
Conservative Savings Corp. - 713 8 -
Robinson Nugent, Inc. - 188 36 2,604
Schnitzer Steel, Inc. Class A - 5,584 48 -
Telor Ophthalmic
Pharmaceutical Care, Inc. (a) - - - 1,000
TOTALS $ 45 $ 9,642 $ 92 $ 3,604
(a) Non-income producing.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity OTC Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Securities Fund: Fidelity OTC Portfolio, including the schedule of
portfolio investments, as of July 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1995 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Securities Fund: Fidelity OTC Portfolio as of July 31, 1995,
the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 1,1995
DISTRIBUTIONS
A total of 34.32% of the dividends distributed during the fiscal year was
derived from interest on U.S. government securities which is generally
exempt from state income tax.
A total of 56% of the dividends distributed during the fiscal year
qualifies for the dividends-received deductions for corporate shareholders.
The fund will notify shareholders in January 1996 of these percentages for
use in preparing 1995 income tax returns.
TO CALL FIDELITY
FOR FUND INFORMATION AND QUOTES
The Fidelity Telephone Connection offers you special automated telephone
services for quotes and balances. The services are easy to use,
confidential and quick. All you need is a Touch Tone telephone.
YOUR PERSONAL IDENTIFICATION NUMBER
(PIN)
The first time you call one of our automated telephone services, we'll ask
you
to set up your Personal Identification
Number (PIN). The PIN assures that
only you have automated telephone
access to your account information.
Please have your Customer Number
(T-account #) handy when you call -
you'll need it to establish your PIN. If
you would ever like to change your PIN, just choose the "Change your
Personal
Identification Number" option when
you call. If you forget your PIN, please
call a Fidelity representative at 1-800-
544-6666 for assistance.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)MUTUAL FUND QUOTES*
1-800-544-8544
Just make a selection from this record-ed menu:
PRESS
For quotes on funds you own.
1.
For an individual fund quote.
2.
For the ten most frequently
requested Fidelity fund quotes.
3.
For quotes on Fidelity Select
Portfolios(registered trademark).
4.
To change your Personal
Identification Number (PIN).
5.
To speak with a Fidelity
representative.
6.
(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC)(PHONE_GRAPHIC
(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT
BALANCES 1-800-544-7544
Just make a selection from this record-
ed menu:
PRESS
For balances on funds you own.
1.
For your most recent fund activity
(purchases, redemptions, and
dividends).
2.
To change your Personal
Identification Number (PIN).
3.
To speak with a Fidelity
representative.
4.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND
RETURN WILL
VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS
MEANS THAT
YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO
ASSURANCE THAT
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN
INVESTMENT IN
A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
TOTAL
RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF
DIVIDENDS
AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
811 Wilshire Boulevard
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
185 Asylum Street
Hartford, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
4001 Tamiami Trail, North
Naples, FL
1907 West State Road 434
Orlando, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
2000 66th Street, North
St. Petersburg, FL
GEORGIA
3525 Piedmont Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
215 East Erie Street
Chicago, IL
One North Franklin
Chicago, IL
540 Lake Cook Road
Deerfield, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
LOUISIANA
201 St. Charles Avenue
New Orleans, LA
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
21 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
60B South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
505 Millburn Avenue
Short Hills, NJ
NEW YORK
1050 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the
Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
10 Bank Street
White Plains, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
1903 East Ninth Street
Cleveland, OH
OREGON
121 S.W. Morrison Street
Portland, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
5100 Poplar Avenue
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
7001 Preston Road
Dallas, TX
1155 Dairy Ashford
Houston, TX
2701 Drexel Drive
Houston, TX
1010 Lamar Street
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
UTAH
215 South State Street
Salt Lake City, UT
VERMONT
199 Main Street
Burlington, VT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1775 K Street, N.W.
Washington, DC
WISCONSIN
222 East Wisconsin Avenue
Milwaukee, WI
INVESTMENT ADVISER
Fidelity Management & Research
Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
Abigail P. Johnson, Vice President
Arthur S. Loring, Secretary
Kenneth A. Rathgeber, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Export Fund
Fidelity Fifty
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Stock Fund
Stock Selector
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Account Balances 1-800-544-7544
Exchanges/Redemptions 1-800-544-7777
Mutual Fund Quotes 1-800-544-8544
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
* INDEPENDENT TRUSTEES
AUTOMATED LINES FOR QUICKEST SERVICE
