FIDELITY
(REGISTERED TRADEMARK)
DIVIDEND GROWTH
FUND
ANNUAL REPORT
JULY 31, 1996
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 26 Notes to the financial statements.
REPORT OF INDEPENDENT 30 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 31
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first seven
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in both the stock and bond markets so far
this year. In 1995, both stock and bond markets posted strong results,
while the year before, stocks posted below-average returns and bonds had
one of the worst years in history.
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. 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, 1996 PAST 1 LIFE OF
YEAR FUND
Dividend Growth 15.44% 89.97%
S&P 500(registered trademark) 16.57% 61.01%
Growth Funds Average 9.72% 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 return to the performance of the Standard &
Poor's 500 Index - a widely recognized, unmanaged index of common stocks.
To measure how the fund's performance stacked up against its peers, you can
compare it to the growth funds average, which reflects the performance of
622 mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. over the past 12 months. Both benchmarks reflect
reinvestment of dividends and capital gains, if any, but do not reflect any
sales charges, brokerage commissions, or other costs of investing.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 LIFE OF
YEAR FUND
Dividend Growth 15.44% 21.71%
S&P 500 16.57% 15.70%
Growth Funds Average 9.72% 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
IMAHDR PRASUN SHR__CHT 19960731 19960814 102534 S00000000000001
Dividend Growth SP Standard & Poor 500
00330 SP001
1993/04/27 10000.00 10000.00
1993/04/30 10150.00 10155.08
1993/05/31 10480.00 10427.23
1993/06/30 10700.00 10457.47
1993/07/31 10800.00 10415.64
1993/08/31 11550.00 10810.40
1993/09/30 11820.00 10727.16
1993/10/31 12080.00 10949.21
1993/11/30 11680.00 10845.19
1993/12/31 12171.52 10976.42
1994/01/31 12493.15 11349.62
1994/02/28 12302.18 11042.04
1994/03/31 11715.49 10560.61
1994/04/30 11786.37 10695.78
1994/05/31 11604.11 10871.20
1994/06/30 11310.46 10604.85
1994/07/31 11826.87 10952.69
1994/08/31 12616.68 11401.75
1994/09/30 12485.05 11122.41
1994/10/31 13041.96 11372.66
1994/11/30 12474.92 10958.47
1994/12/31 12691.18 11120.98
1995/01/31 12732.22 11409.35
1995/02/28 13142.60 11853.97
1995/03/31 13768.44 12203.78
1995/04/30 14404.54 12563.19
1995/05/31 14907.26 13065.34
1995/06/30 15728.03 13368.84
1995/07/31 16456.47 13812.15
1995/08/31 16528.28 13846.82
1995/09/30 16956.49 14431.16
1995/10/31 16359.88 14379.64
1995/11/30 17176.30 15010.91
1995/12/31 17454.52 15300.02
1996/01/31 17928.35 15820.83
1996/02/29 18479.31 15967.49
1996/03/31 18964.16 16121.25
1996/04/30 19845.70 16358.88
1996/05/31 20484.81 16780.78
1996/06/30 19933.85 16844.71
1996/07/31 18997.21 16100.51
IMATRL PRASUN SHR__CHT 19960731 19960814 102536 R00000000000043
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Dividend Growth Fund on April 27, 1993, when the fund
started. As the chart shows, by July 31, 1996, the value of the investment
would have grown to $18,997 - an 89.97% increase on the initial investment.
For comparison, look at how the S&P 500 did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $16,101 - a 61.01% 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
Although growing fears of lower
corporate earnings dampened the
stock market's momentum at the
end of the period, the U.S. stock
market posted solid gains over the
12 months ended July 31, 1996.
While several corporate earnings
disappointments made for a
volatile stock market in May, June
and July, the Standard & Poor's
500 Index finished the 12 months
with a return of 16.57% - above
its long-term historical annual
average of about 12%. The stock
market spent much of the past
year breaking price and trading
volume records as strong
corporate earnings reports, large
cash inflows into mutual funds and
widespread optimism propelled
equity share prices higher. In
addition, the period was
peppered with several high-profile
merger announcements,
especially in the media,
telecommunications and
technology sectors.
Smaller-company stocks posted
strong gains during the first few
months of 1996, and high-tech
firms involved in the networking
and software fields benefited from
strong earnings. Semiconductor
stocks, however, suffered during
the latter half of the period as a
result of overcapacity. In March,
better-than-expected employment
figures spooked the bond market,
pushing long-term interest rates
over 7%. Because smaller
companies tend to be more
adversely affected by the higher
borrowing costs brought on by
higher rates, their stock prices
trended downward in the spring.
While larger, multinational firms
recorded positive gains, their
returns were hurt somewhat by
the strengthening dollar.
An interview with Steve Wymer, Portfolio Manager of Fidelity Dividend
Growth Fund
Q. HOW DID THE FUND PERFORM, STEVE?
A. Overall, I think it turned in a fairly solid performance. For the
one-year period ended July 31, 1996, the fund had a return of 15.44%. This
topped the growth funds average, as monitored by Lipper Analytical
Services, which had a 9.72% return over the same period. The Standard &
Poor's 500 Index, on the other hand, slightly outperformed the fund as it
posted a 16.57% return for the one-year period.
Q. WERE THERE ANY UNDERLYING FACTORS WHICH CAUSED THE FUND TO PERFORM AS IT
DID?
A. A number of market factors combined to make it a very interesting year.
Relative to the S&P 500, I was underweighted in the technology sector at
the beginning of the 12-month period - a strategy which benefited the fund
in the fourth quarter of 1995 as it became apparent that the honeymoon was
over for technology stocks. At the same time, I focused more on finding
investments within the small- and mid-cap stock arenas. As market
opportunities narrowed toward the end of 1995, however, this strategy hurt
the fund as large-cap stocks outperformed their smaller counterparts. If we
flip ahead to the first six months of 1996, we see an altogether different
story as market opportunities expanded and the fund's small- and mid-cap
positions turned out to be strong performers.
Q. SO THERE REALLY WASN'T ONE DOMINANT TREND THROUGHOUT THE PERIOD . . .
A. That's true. The trends that I followed were extremely short-lived. No
individual sector stood out in terms of performance, and this contributed
to increased sector rotation. By that, I mean that sectors fell into and
out of favor with investors throughout the period; there was no one sector
which stood out above the rest. We also saw separate and distinct periods
when it was advantageous to be invested in either small- and mid-cap stocks
or large-cap stocks.
Q. AMONG OTHER HOLDINGS, THE FUND HELD SIGNIFICANT POSITIONS IN TWO
COMPANIES - TUPPERWARE AND EARTHGRAINS - AT THE END OF THE PERIOD. WHAT
MADE THESE HOLDINGS ATTRACTIVE?
A. Both Tupperware and Earthgrains have spun off from their respective
"mother companies" - Tupperware from Premark International and Earthgrains
from Anheuser-Busch. Tupperware is a growth story and Earthgrains is a
turnaround story. Both should be more focused as stand-alone companies with
incentives tied to their own results and without distractions from
unrelated operations.
Q. ARE THERE OTHER COMPANY-SPECIFIC FACTORS THAT MAY MAKE A STOCK MORE
APPEALING TO YOU?
A. I tend to favor companies that practice self-help. By this, I mean the
company has engaged in some type of activity - be it an acquisition, a
divestiture or a general restructuring move - designed solely to improve
its growth prospects. In an unpredictable economy, companies are doing a
little extra to try to distance themselves from their competition. An
example is Tosco Corp. (oil refinery), one of the fund's top holdings,
which acquired Circle K (convenience store/gas station chain) as well as
British Petroleum's northeast refinery during the period. In doing so,
Tosco made the decision to continue to make acquisitions and attempt to add
shareholder value.
Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
A. I think it's fruitless to spend a lot of time guessing what will happen
with interest rates or gauging the ever-changing economy. Instead, I focus
on solid companies that I think will benefit the fund and its shareholders.
That being said, if the economy stays strong, I think companies will
continue to feel a certain amount of pressure. Even though a company's
operating or production costs may spiral upward, that company is going to
find it very difficult to raise prices in a competitive environment. If the
economy gets tougher, I think we'll see a lot more of the self-help stories
that I mentioned.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
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, 1996,
more than $1.2 billion
MANAGER: Steve Wymer,
since May 1995; assistant
manager, Fidelity OTC
Portfolio, January 1995-May
1995; manager, Fidelity
Select Chemicals Portfolio,
1993-1994; assistant, Fidelity
Magellan Fund, 1992-
1994; manager, Fidelity Select
Automotive Portfolio, 1990-
1993; joined Fidelity in 1989
(checkmark)
STEVE WYMER ON THE
NATURE OF FIDELITY DIVIDEND
GROWTH FUND:
"The name of the fund -
Dividend Growth - seems to
cause confusion among
investors. When people see
the word "dividend," it's
natural to equate that with
yields. But it's important to
remember that this isn't a
yield fund. Rather, it's a growth
fund which trains its sights on
companies showing good
potential to grow their
dividends. This can mean
either a company that can
increase an existing dividend
or one that plans to implement
a dividend policy in the future.
As a result, this fund won't
concentrate on utility stocks,
nor will it emphasize "concept
stocks" like start-up
biotechnology stocks or those
with an Internet focus that are
unlikely to pay a dividend.
The only way a company can
pay a cash dividend is from
cash on the balance sheet or
through future cash flow. In an
uncertain economy, I'm
looking for companies that are
in typically good business
environments or that have
self-help programs in order to
identify those with the best
dividend growth prospects."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 3.5 2.8
Tupperware Corp. 3.3 0.0
Earthgrains Co. 2.8 0.0
Melville Corp. 1.7 0.0
PepsiCo, Inc. 1.6 1.5
Dial Corp. (The) 1.6 0.4
Nalco Chemical Co. 1.6 0.3
Federal National Mortgage 1.4 2.7
Association
Tosco Corp. 1.4 0.4
Procter & Gamble Co. 1.4 0.4
TOP FIVE MARKET SECTORS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Nondurables 13.4 10.2
Basic Industries 9.6 8.3
Energy 9.3 8.6
Finance 8.2 9.3
Retail & Wholesale 7.8 6.0
ASSET ALLOCATION
AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 **
Row: 1, Col: 1, Value: 6.3
Row: 1, Col: 2, Value: 43.7
Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 1, Value: 7.9
Row: 1, Col: 2, Value: 42.1
Row: 1, Col: 3, Value: 50.0
Stocks 93.7%
Short-term
investments 6.3%
FOREIGN
INVESTMENTS 4.3%
Stocks 92.1%
Short-term
investments 7.9%
FOREIGN
INVESTMENTS 5.9%
*
**
INVESTMENTS JULY 31, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 93.7%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.7%
AAR Corp. 45,500 $ 870
Aviall, Inc. 320,500 2,604
Boeing Co. 140,000 12,390
Northrop Grumman Corp. 35,000 2,406
Sundstrand Corp. 60,000 2,168
20,438
BASIC INDUSTRIES - 9.6%
CHEMICALS & PLASTICS - 4.6%
Air Products & Chemicals, Inc. 10,000 534
Betz Laboratories, Inc. 165,300 7,500
Cambrex Corp. 70,500 2,168
du Pont (E.I.) de Nemours & Co. 30,000 2,423
Monsanto Co. 50,000 1,563
Nalco Chemical Co. 640,000 19,200
Praxair, Inc. 20,000 768
Quaker State Corp. 265,200 3,945
Raychem Corp. 40,000 2,645
Union Carbide Corp. 253,500 10,646
Witco Corp. 141,800 4,112
55,504
IRON & STEEL - 0.2%
Birmingham Steel Corp. 25,000 406
Inland Steel Industries, Inc. 102,800 1,786
2,192
METALS & MINING - 0.0%
Oregon Metallurgical Corp. (a) 14,300 343
PACKAGING & CONTAINERS - 3.3%
Tupperware Corp. 937,300 40,070
PAPER & FOREST PRODUCTS - 1.5%
Boise Cascade Corp. 105,000 3,413
Chesapeake Corp. 45,000 1,058
Georgia-Pacific Corp. 30,000 2,243
International Paper Co. 285,500 10,812
Mosinee Paper Corp. 34,466 922
18,448
TOTAL BASIC INDUSTRIES 116,557
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONGLOMERATES - 1.8%
AlliedSignal, Inc. 25,000 $ 1,469
Dial Corp. (The) 657,100 19,220
Lancaster Colony Corp. 25,000 894
21,583
CONSTRUCTION & REAL ESTATE - 2.1%
BUILDING MATERIALS - 0.9%
Fastenal Co. 30,000 1,290
Masco Corp. 229,900 6,408
Sherwin-Williams Co. 70,000 3,168
10,866
CONSTRUCTION - 0.4%
McDermott (J. Ray) SA 210,600 5,212
ENGINEERING - 0.0%
MasTec, Inc. (a) 18,800 456
REAL ESTATE - 0.5%
Catellus Development Corp. (a) 337,100 2,950
Rouse Co. (The) 100,000 2,500
5,450
REAL ESTATE INVESTMENT TRUSTS - 0.3%
Beacon Properties Corp. 50,000 1,313
Starwood Lodging Trust combined certificate (SBI) 50,300 1,710
3,023
TOTAL CONSTRUCTION & REAL ESTATE 25,007
DURABLES - 6.6%
AUTOS, TIRES, & ACCESSORIES - 1.5%
Daimler Benz AG sponsored ADR 50,000 2,700
Ford Motor Co. 313,600 10,192
SPX Corp. 234,000 5,821
18,713
CONSUMER DURABLES - 1.1%
Minnesota Mining & Manufacturing Co. 207,200 13,468
CONSUMER ELECTRONICS - 1.2%
Newell Co. 53,900 1,732
Sunbeam-Oster, Inc. 676,100 13,015
14,747
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
TEXTILES & APPAREL - 2.8%
Adidas AG 125,000 $ 9,763
Fila Holding Spa sponsored ADR 55,000 4,434
Mossimo, Inc. (a) 70,500 2,670
NIKE, Inc. Class B 120,000 12,345
Reebok International Ltd. 40,000 1,400
Wolverine World Wide, Inc. 79,600 2,746
33,358
TOTAL DURABLES 80,286
ENERGY - 9.3%
COAL - 0.2%
MAPCO, Inc. 35,000 1,916
ENERGY SERVICES - 1.0%
Baker Hughes, Inc. 83,000 2,438
Carbo Ceramics, Inc. 56,000 1,134
Dresser Industries, Inc. 94,000 2,538
Weatherford Enterra, Inc. (a) 74,500 1,835
Western Atlas, Inc. (a) 70,000 3,797
11,742
OIL & GAS - 8.1%
Anadarko Petroleum Corp. 30,000 1,534
British Petroleum PLC ADR 20,919 2,298
Chevron Corp. 215,000 12,443
Cooper Cameron Corp. (a) 65,076 3,010
Enron Oil & Gas Co. 94,400 2,360
Flores & Rucks, Inc. (a) 70,000 2,415
Mobil Corp. 90,000 9,934
NGC Corp. 230,400 3,744
Pennzoil Co. 65,000 3,193
Pogo Producing Co. 60,000 2,003
Royal Dutch Petroleum Co. ADR 50,000 7,544
Sun Co., Inc. 85,100 2,202
Tosco Corp. 347,500 16,983
Ultramar Corp. 283,000 7,464
Union Pacific Resources Group, Inc. 519,200 13,694
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Unocal Corp. 155,000 $ 5,057
Vintage Petroleum, Inc. 95,300 2,204
98,082
TOTAL ENERGY 111,740
FINANCE - 8.2%
BANKS - 1.7%
Banc One Corp. 215,790 7,471
Bank of New York Co., Inc. 35,000 1,803
Citicorp 80,000 6,550
U.S. Bancorp. 135,000 4,624
20,448
CREDIT & OTHER FINANCE - 1.6%
Aames Financial Corp. 25,000 981
American Express Co. 298,092 13,041
Associates First Capital Corp. (a) 31,000 1,190
First Chicago NBD Corp. 70,000 2,695
United Companies Financial Corp. 25,000 825
18,732
FEDERAL SPONSORED CREDIT - 2.0%
Federal National Mortgage Association 550,000 17,463
Student Loan Marketing Association 94,000 6,862
24,325
INSURANCE - 2.3%
Aetna, Inc. 230,000 13,368
Allmerica Financial Corp. 141,800 4,201
Provident Companies, Inc. 20,000 730
Travelers/Aetna Property Casualty Corp. Class A 210,000 5,644
UNUM Corp. 35,100 2,141
US Facilities Corp. 135,000 2,211
28,295
SAVINGS & LOANS - 0.1%
TCF Financial Corp. 44,900 1,549
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 0.5%
Franklin Resources, Inc. 40,500 $ 2,267
Lehman Brothers Holdings, Inc. 100,400 2,322
Schwab (Charles) Corp. 45,000 1,086
5,675
TOTAL FINANCE 99,024
HEALTH - 2.7%
DRUGS & PHARMACEUTICALS - 1.4%
Pharmacia & Upjohn, Inc. 285,500 11,777
Schering-Plough Corp. 50,000 2,756
SmithKline Beecham PLC ADR 50,000 2,688
17,221
MEDICAL EQUIPMENT & SUPPLIES - 1.0%
Bard (C.R.), Inc. 31,600 964
Baxter International, Inc. 36,800 1,532
Beckman Instruments, Inc. 30,000 1,080
Becton, Dickinson & Co. 74,200 5,537
Johnson & Johnson 20,000 955
Medtronic, Inc. 30,000 1,421
Ventritex, Inc. (a) 40,000 500
11,989
MEDICAL FACILITIES MANAGEMENT - 0.3%
Columbia/HCA Healthcare Corp. 40,000 2,050
Magellan Health Services, Inc. (a) 80,000 1,480
3,530
TOTAL HEALTH 32,740
INDUSTRIAL MACHINERY & EQUIPMENT - 5.3%
ELECTRICAL EQUIPMENT - 1.5%
Alcatel Alsthom sponsored ADR 131,510 2,137
California Amplifier, Inc. (a) 22,800 288
General Electric Co. 40,000 3,295
General Signal Corp. 254,600 9,961
Westinghouse Electric Corp. 140,000 2,345
18,026
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 3.8%
BW/IP Holdings, Inc. Class A 903,900 $ 15,253
Deere & Co. 10,000 358
Ingersoll-Rand Co. 60,000 2,558
Stanley Works 561,200 15,994
Stewart & Stevenson Services, Inc. 451,800 9,770
Timken Co. 72,600 2,659
46,592
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 64,618
MEDIA & LEISURE - 4.6%
ENTERTAINMENT - 0.2%
Disney (Walt) Co. 50,000 2,781
LEISURE DURABLES & TOYS - 0.4%
Arctco, Inc. 100,000 1,063
Callaway Golf Co. 43,100 1,292
Golden Bear Golf, Inc. 3,000 48
Mattel, Inc. 50,000 1,238
Sports and Recreation, Inc. (a) 128,500 867
4,508
LODGING & GAMING - 0.8%
Doubletree Corp. (a) 8,100 265
Hilton Hotels Corp. 30,000 3,060
International Game Technology Corp. 50,000 875
Showboat, Inc. 94,700 1,941
Sun International Hotels Ltd. Ord. (a) 31,400 1,484
Wyndham Hotel Corp. (a) 70,000 1,409
9,034
PUBLISHING - 2.6%
Dun & Bradstreet Corp. 234,400 13,478
Knight-Ridder, Inc. 138,200 4,526
New York Times Co. (The) Class A 302,700 8,816
Times Mirror Co. Class A 122,700 5,077
31,897
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.6%
CKE Restaurants, Inc. 157,000 $ 3,219
Cracker Barrel Old Country Store, Inc. 27,900 593
Darden Restaurants, Inc. 74,600 587
Longhorn Steaks, Inc. (a) 50,000 775
Starbucks Corp. (a) 70,000 1,820
6,994
TOTAL MEDIA & LEISURE 55,214
NONDURABLES - 13.4%
BEVERAGES - 1.6%
PepsiCo, Inc. 620,000 19,608
FOODS - 5.5%
Chiquita Brands International, Inc. 600,000 7,200
Dole Food, Inc. 80,000 3,210
Earthgrains Co. (c) 1,014,272 33,217
Flowers Industries, Inc. 485,600 8,316
General Mills, Inc. 80,000 4,340
Interstate Bakeries Corp. 399,000 10,574
66,857
HOUSEHOLD PRODUCTS - 2.0%
Premark International, Inc. 385,000 6,930
Procter & Gamble Co. 190,000 16,981
23,911
TOBACCO - 4.3%
Philip Morris Companies, Inc. 404,900 42,362
RJR Nabisco Holdings Corp. 253,840 7,806
Schweitzer-Mauduit International, Inc. 50,000 1,431
51,599
TOTAL NONDURABLES 161,975
PRECIOUS METALS - 1.6%
Ashanti Goldfields Co. Ltd. GDR 100,000 1,788
Barrick Gold Corp. 185,000 5,147
Getchell Gold Corp. (a) 78,692 2,548
Newmont Mining Corp. 191,100 9,435
18,918
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 7.8%
APPAREL STORES - 3.6%
Brown Group, Inc. 120,000 $ 1,635
Charming Shoppes, Inc. 335,200 2,158
Gap, Inc. 80,000 2,380
Melville Corp. 510,000 19,953
Payless ShoeSource, Inc. (a) 78,256 2,534
Ross Stores, Inc. 299,500 8,835
TJX Companies, Inc. 172,300 5,191
42,686
DRUG STORES - 0.1%
General Nutrition Companies, Inc. (a) 3,300 47
Thrifty Payless Holdings, Inc. Class B (a) 110,000 1,540
1,587
GENERAL MERCHANDISE STORES - 2.6%
Dillard Department Stores, Inc. Class A 120,000 3,765
Dollar General Corp. 156,000 4,037
Family Dollar Stores, Inc. 100,000 1,575
K mart Corp. 240,000 2,400
Sears, Roebuck & Co. 25,000 1,025
Wal-Mart Stores, Inc. 285,000 6,840
Woolworth Corp. (a) 625,100 12,033
31,675
GROCERY STORES - 0.9%
Albertson's, Inc. 70,000 2,870
Food Lion, Inc. Class A 125,000 1,125
Smith's Food & Drug Center, Inc. 143,083 3,935
Supervalu, Inc. 110,000 3,066
10,996
RETAIL & WHOLESALE, MISCELLANEOUS - 0.6%
Borders Group, Inc. (a) 115,000 3,680
Circuit City Stores, Inc. 37,100 1,169
Tiffany & Co., Inc. 70,000 2,301
7,150
TOTAL RETAIL & WHOLESALE 94,094
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 2.2%
PRINTING - 1.7%
Alco Standard Corp. 72,000 $ 3,150
Deluxe Corp. 173,500 6,397
New England Business Service, Inc. 610,200 10,450
19,997
SERVICES - 0.5%
Borg Warner Security Corp. (a) 716,900 6,273
TOTAL SERVICES 26,270
TECHNOLOGY - 6.7%
COMPUTER SERVICES & SOFTWARE - 2.9%
Automatic Data Processing, Inc. 40,000 1,585
Baan Co. NV 30,000 893
Broadway & Seymour, Inc. (a) 41,100 442
CompUSA, Inc. (a) 309,900 12,241
DST Systems, Inc. (a) 257,000 7,325
First Data Corp. 80,000 6,210
National Data Corp. 28,900 1,149
PC Docs Group International, Inc. (a) 250,000 3,782
Policy Management Systems Corp. (a) 52,500 1,949
35,576
COMPUTERS & OFFICE EQUIPMENT - 2.1%
Digital Equipment Corp. (a) 25,000 884
Exabyte Corp. (a) 760,300 9,124
FileNet Corp. (a) 232,200 5,166
Pitney Bowes, Inc. 71,700 3,477
Wang Laboratories, Inc. (a) 361,700 6,465
25,116
ELECTRONICS - 1.2%
Intel Corp. 120,000 9,014
Linear Technology Corp. 155,000 4,883
S-3, Inc. (a) 55,900 741
14,638
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.5%
Imation Corp. 208,620 $ 4,746
Polaroid Corp. 25,700 1,086
5,832
TOTAL TECHNOLOGY 81,162
TRANSPORTATION - 6.4%
AIR TRANSPORTATION - 1.1%
Delta Air Lines, Inc. 129,600 9,056
SkyWest, Inc. 112,700 1,888
Southwest Airlines Co. 73,500 1,819
12,763
RAILROADS - 0.2%
Canadian National Railway Co. 1st Installment Receipt (b) 100,000 1,822
Railtex, Inc. (a) 52,300 1,180
3,002
TRUCKING & FREIGHT - 5.1%
Airborne Freight Corp. 183,000 3,912
Arkansas Best Corp. 10,000 61
Caliber System, Inc. 95,000 1,734
Celadon Group, Inc. (a) 200,000 1,400
Consolidated Freightways, Inc. 625,000 12,265
Expeditors International of Washington, Inc. 50,000 1,438
Heartland Express, Inc. (a) 30,000 780
Hunt (J.B.) Transport Services, Inc. 94,300 1,733
M.S. Carriers, Inc. (a) 182,000 3,822
Pittston Co. (Brinks Group) 236,000 6,726
Roadway Express, Inc. 631,590 9,236
Rollins Truck Leasing Corp. 10,000 108
U.S. Freightways Corp. 310,200 5,487
Werner Enterprises, Inc. 165,000 4,187
Yellow Corp. (a) 635,600 8,103
60,992
TOTAL TRANSPORTATION 76,757
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 3.7%
ELECTRIC UTILITY - 0.4%
CILCORP, Inc. 48,800 $ 2,037
Portland General Corp. 75,000 2,663
4,700
GAS - 0.8%
Aquila Gas Pipeline Corp. 120,000 1,515
El Paso Natural Gas Co. 25,000 975
Enron Corp. 201,600 7,938
10,428
TELEPHONE SERVICES - 2.5%
Ameritech Corp. 50,000 2,775
Lucent Technologies, Inc. 316,500 11,750
NYNEX Corp. 110,000 4,936
SBC Communications, Inc. 135,000 6,598
US West, Inc. (Media Group) (a) 230,000 3,968
30,027
TOTAL UTILITIES 45,155
TOTAL COMMON STOCKS
(Cost $1,088,235) 1,131,538
REPURCHASE AGREEMENTS - 6.3%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.65%, dated
7/31/96 due 8/1/96 $ 76,138 76,126
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,164,361) $ 1,207,664
CURRENCY ABBREVIATIONS
CAD - Canadian dollar
LEGEND
1. Non-income producing
2. Purchased on an installment basis. Market value reflects only those
payments made through July 31, 1996. The remaining installment aggregating
CAD 1,075,000
is due November 26, 1996.
3. Affiliated company (see Note 6 of Notes to Financial Statements).
INCOME TAX INFORMATION
At July 31, 1996, the aggregate cost of investment securities for income
tax purposes was $1,165,982,000. Net unrealized appre- ciation aggregated
$41,682,000, of which $96,173,000 related to appreciated invest- ment
securities and $54,491,000 related to depreciated investment securities.
The fund hereby designates approximately $16,180,000 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 AMOUNT) JULY 31, 1996
ASSETS
Investment in securities, at value (including repurchase $ 1,207,664
agreements of $76,126) (cost $1,164,361) -
See accompanying schedule
Receivable for investments sold 6,549
Receivable for fund shares sold 20,733
Dividends receivable 1,262
TOTAL ASSETS 1,236,208
LIABILITIES
Payable for investments purchased $ 11,479
Payable for fund shares redeemed 3,571
Accrued management fee 681
Other payables and accrued expenses 608
TOTAL LIABILITIES 16,339
NET ASSETS $ 1,219,869
Net Assets consist of:
Paid in capital $ 1,130,867
Undistributed net investment income 4,406
Accumulated undistributed net realized gain (loss) on 41,293
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 43,303
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 70,739 shares outstanding $ 1,219,869
NET ASSET VALUE, offering price and redemption price per $17.24
share ($1,219,869 (divided by) 70,739 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME $ 11,016
Dividends
Interest 2,637
TOTAL INCOME 13,653
EXPENSES
Management fee $ 4,500
Basic fee
Performance adjustment 408
Transfer agent fees 1,712
Accounting fees and expenses 374
Non-interested trustees' compensation 3
Custodian fees and expenses 51
Registration fees 452
Audit 32
Legal 3
Miscellaneous 4
Total expenses before reductions 7,539
Expense reductions (230) 7,309
NET INVESTMENT INCOME 6,344
REALIZED AND UNREALIZED GAIN (LOSS) 65,571
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on (14,621)
investment securities
NET GAIN (LOSS) 50,950
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 57,294
FROM OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 6,344 $ 1,351
Net investment income
Net realized gain (loss) 65,571 15,508
Change in net unrealized appreciation (depreciation) (14,621) 55,023
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 57,294 71,882
FROM OPERATIONS
Distributions to shareholders (2,757) (74)
From net investment income
From net realized gain (32,750) (1,107)
TOTAL DISTRIBUTIONS (35,507) (1,181)
Share transactions 1,696,572 687,747
Net proceeds from sales of shares
Reinvestment of distributions 34,964 1,159
Cost of shares redeemed (998,307) (367,109)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 733,229 321,797
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 755,016 392,498
NET ASSETS
Beginning of period 464,853 72,355
End of period (including undistributed net investment $ 1,219,869 $ 464,853
income of $4,406 and $1,276, respectively)
OTHER INFORMATION
Shares
Sold 97,237 49,213
Issued in reinvestment of distributions 2,199 96
Redeemed (57,679) (26,523)
Net increase (decrease) 41,757 22,786
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, APRIL 27,1993
(COMMENCEMEN
T OF OPERATIONS)
TO
1996 1995 1994 E JULY 31, 1993
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 16.04 $ 11.68 $ 10.80 $ 10.00
Income from Investment Operations
Net investment income (loss) .11 .05 .02 (.01)
Net realized and unrealized 2.25 4.47 1.01 .81
gain (loss)
Total from investment operations 2.36 4.52 1.03 .80
Less Distributions
From net investment income (.09) (.01) (.01) -
From net realized gain (1.07) (.15) - -
In excess of net realized gain - - (.14) -
Total distributions (1.16) (.16) (.15) -
Net asset value, end of period $ 17.24 $ 16.04 $ 11.68 $ 10.80
TOTAL RETURN B, C 15.44% 39.14% 9.51% 8.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 1,220 $ 465 $ 72 $ 18
Ratio of expenses to average net 1.02% 1.21% 1.43% 2.50% A,
assets D
Ratio of expenses to average net .99% F 1.19% 1.40% F 2.50% A
assets after expense reductions F
Ratio of net investment income (loss) .86% .78% .13% (.73)% A
to average net assets
Portfolio turnover rate 129% 162% 291% 90% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION.
E 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.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1996
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 financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an exchange)
are valued primarily using dealer-supplied valuations or at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Board of Trustees. Short-term
securities 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.
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, 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 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 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
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
are invested in one or more repurchase agreements that mature in 60 days or
less from the date of purchase for U.S. Treasury or Federal Agency
obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,558,848,000 and $911,402,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2500% to .5200% for the period. 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 .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 .66% 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.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .23%
of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $623,000 for the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$211,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $4,000 and $15,000,
respectively, under these arrangements.
6. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
DOLLAR AMOUNTS IN THOUSANDS PURCHASES SALES DIVIDEND VALUE
AFFILIATES COST COST INCOME
Earthgrains Co. $ 16,564 $ - $ - $ 33,217
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, 1996, 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 three 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, 1996 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,
1996, 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 three 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.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 6, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity Dividend Growth Fund voted to pay on
September 9, 1996, to shareholders of record at the opening of business on
September 6, 1996, a distribution of $.37 per share derived from capital
gains realized from sales of portfolio securities and a dividend of $.04
per share from net investment income.
A total of 14% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of the applicable
percentage for use in preparing 1996 income tax returns.
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 *
ADVISORY BOARD
William O. McCoy
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)
BLUE CHIP GROWTH
FUND
ANNUAL REPORT
JULY 31, 1996
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 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 30 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 31
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first seven
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in both the stock and bond markets so far
this year. In 1995, both stock and bond markets posted strong results,
while the year before, stocks posted below-average returns and bonds had
one of the worst years in history.
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. 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, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Blue Chip Growth 2.19% 119.79% 330.81%
Blue Chip Growth (incl. 3% sales -0.88% 113.20% 317.89%
charge)
S&P 500(registered trademark) 16.57% 89.62% 236.37%
Growth Funds Average 9.72% 79.19% 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 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 return to the performance of the
Standard & Poor's 500 Index - a widely recognized, unmanaged index of
common stocks. To measure how the fund's performance stacked up against its
peers, you can compare it to the growth funds average, which reflects the
performance of 622 mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. over the past 12 months. Both benchmarks reflect
reinvestment of dividends and capital gains, if any, but do not reflect any
sales charges, brokerage commissions, or other costs of investing.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Blue Chip Growth 2.19% 17.06% 18.53%
Blue Chip Growth (incl. 3% sales charge) -0.88% 16.35% 18.11%
S&P 500 16.57% 13.65% 15.16%
Growth Funds Average 9.72% 12.12% 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
IMAHDR PRASUN SHR__CHT 19960731 19960812 164628 S00000000000001
Blue Chip Growth SP Standard & Poor 500
00312 SP001
1987/12/31 9700.00 10000.00
1988/01/31 9767.90 10389.22
1988/02/29 10185.00 10873.35
1988/03/31 9816.40 10537.37
1988/04/30 9797.00 10654.33
1988/05/31 9797.00 10747.03
1988/06/30 10359.60 11240.31
1988/07/31 10155.90 11197.60
1988/08/31 9729.10 10816.88
1988/09/30 10165.60 11277.68
1988/10/31 10146.20 11591.20
1988/11/30 9961.90 11425.45
1988/12/31 10272.95 11625.39
1989/01/31 11031.75 12476.37
1989/02/28 10700.99 12165.71
1989/03/31 10953.92 12449.17
1989/04/30 11702.99 13095.28
1989/05/31 12461.79 13625.64
1989/06/30 12024.02 13547.98
1989/07/31 13191.40 14771.36
1989/08/31 13512.43 15060.88
1989/09/30 13846.77 14999.13
1989/10/31 13640.69 14651.15
1989/11/30 13876.21 14950.03
1989/12/31 13995.40 15308.83
1990/01/31 12823.32 14281.61
1990/02/28 13170.98 14465.84
1990/03/31 13826.54 14849.19
1990/04/30 13697.42 14477.96
1990/05/31 15246.94 15889.56
1990/06/30 15594.59 15781.51
1990/07/31 15227.08 15731.01
1990/08/31 13915.94 14308.92
1990/09/30 13258.58 13612.08
1990/10/31 13178.88 13553.55
1990/11/30 14015.64 14429.11
1990/12/31 14485.44 14831.68
1991/01/31 15619.78 15478.34
1991/02/28 16824.39 16585.04
1991/03/31 17667.62 16986.40
1991/04/30 17476.89 17027.17
1991/05/31 18400.43 17762.74
1991/06/30 17476.89 16949.21
1991/07/31 19012.77 17739.04
1991/08/31 19845.96 18159.45
1991/09/30 19534.98 17856.19
1991/10/31 19926.88 18095.46
1991/11/30 19504.83 17366.22
1991/12/31 22424.76 19352.91
1992/01/31 21719.26 18992.95
1992/02/29 21820.04 19239.86
1992/03/31 21225.41 18864.68
1992/04/30 21507.61 19419.30
1992/05/31 21951.06 19514.46
1992/06/30 21316.12 19223.69
1992/07/31 22192.95 20009.94
1992/08/31 21961.14 19599.74
1992/09/30 22252.76 19831.01
1992/10/31 22561.69 19900.42
1992/11/30 23745.89 20579.03
1992/12/31 23808.73 20832.15
1993/01/31 23860.87 21007.14
1993/02/28 23704.44 21292.83
1993/03/31 24851.60 21742.11
1993/04/30 25247.89 21215.95
1993/05/31 26572.33 21784.54
1993/06/30 26822.62 21847.72
1993/07/31 26822.62 21760.33
1993/08/31 28491.21 22585.04
1993/09/30 29084.11 22411.14
1993/10/31 29409.21 22875.05
1993/11/30 28515.20 22657.74
1993/12/31 29642.54 22931.89
1994/01/31 30819.90 23711.58
1994/02/28 30844.43 23068.99
1994/03/31 29875.56 22063.19
1994/04/30 30758.58 22345.60
1994/05/31 31151.04 22712.06
1994/06/30 30071.79 22155.62
1994/07/31 30832.17 22882.32
1994/08/31 32500.10 23820.50
1994/09/30 32403.56 23236.89
1994/10/31 33899.49 23759.73
1994/11/30 32131.58 22894.40
1994/12/31 32562.32 23233.92
1995/01/31 31746.69 23836.38
1995/02/28 32800.73 24765.28
1995/03/31 34181.02 25496.10
1995/04/30 35448.38 26246.96
1995/05/31 36238.91 27296.05
1995/06/30 38246.61 27930.14
1995/07/31 40894.26 28856.30
1995/08/31 41320.89 28928.73
1995/09/30 41775.91 30149.53
1995/10/31 40723.95 30041.89
1995/11/30 42130.94 31360.73
1995/12/31 41802.28 31964.74
1996/01/31 42372.87 33052.82
1996/02/29 42033.23 33359.22
1996/03/31 42549.48 33680.47
1996/04/30 42780.43 34176.92
1996/05/31 43649.89 35058.34
1996/06/30 43785.75 35191.91
1996/07/31 41788.69 33637.13
IMATRL PRASUN SHR__CHT 19960731 19960812 164632 R00000000000106
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Blue Chip Growth Fund on December 31, 1987, and the
maximum 3% sales charge was paid. As the chart shows, by July 31, 1996, the
value of the investment would have grown to $41,789 - a 317.89% increase on
the initial investment. For comparison, look at how the S&P 500 did over
the same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $33,637 - a 236.37% 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
Although growing fears of lower
corporate earnings dampened
the stock market's momentum at
the end of the period, the U.S.
stock market posted solid gains
over the 12 months ended July 31,
1996. While several corporate
earnings disappointments made
for a volatile stock market in May,
June and July, the Standard &
Poor's 500 Index finished the 12
months with a return of 16.57% -
above its long-term historical
annual average of about 12%.
The stock market spent much of
the past year breaking price and
trading volume records as strong
corporate earnings reports, large
cash inflows into mutual funds
and widespread optimism
propelled equity share prices
higher. In addition, the period
was peppered with several
high-profile merger
announcements, especially in the
media, telecommunications and
technology sectors.
Smaller-company stocks posted
strong gains during the first few
months of 1996, and high-tech
firms involved in the networking
and software fields benefited
from strong earnings.
Semiconductor stocks, however,
suffered during the latter half of the
period as a result of overcapacity.
In March, better-than-expected
employment figures spooked the
bond market, pushing long-term
interest rates over 7%. Because
smaller companies tend to be
more adversely affected by the
higher borrowing costs brought
on by higher rates, their stock
prices trended downward in the
spring. While larger, multinational
firms recorded positive gains,
their returns were hurt somewhat
by the strengthening dollar.
NOTE TO SHAREHOLDERS: John
McDowell became manager of Fidelity Blue Chip Growth Fund
on March 26, 1996.
Q. HOW DID THE FUND PERFORM, JOHN?
A. For the year ended July 31, 1996, the fund had a total return of 2.19%.
For the same period, the Standard & Poor's 500 Index returned 16.57%.
Additionally, the growth funds average, according to Lipper Analytical
Services, was 9.72% for the past year.
Q. WHY DO YOU THINK THE FUND UNDERPERFORMED SO GREATLY?
A. Prior to my taking over the fund in March, there were two key factors
that hurt performance. First, as described by the previous manager in the
fund's semiannual report, its large position in technology companies -
particularly semiconductor firms - hurt its return in the first half of the
fiscal year. Then, later in the fiscal year, the fund had substantial
positions in bonds and short-term investments (cash) that caused it to miss
out on some of the gain of the S&P 500 and hurt its performance relative to
its peers.
Q. SINCE TAKING OVER THE FUND, YOU'VE MADE SOME SUBSTANTIAL CHANGES TO ITS
HOLDINGS . . .
A. Basically, I took the fund's bond position - and a portion of its cash
position - and reallocated it into equities. The bulk of this reallocation
was devoted to the technology, health care and consumer nondurable sectors.
Additionally, I changed the fund's market sector weightings to be more
modestly positioned relative to the S&P 500.
Q. WHY HAVE YOU RAISED THE FUND'S TECHNOLOGY POSITION WHEN YOU JUST SAID
THAT TECHNOLOGY HURT THE FUND IN THE FIRST HALF OF THE FISCAL YEAR?
A. Let me explain. The fund's technology position is invested among firms
that are considered to be leaders in their respective industries. In my
view, the fund's current technology position is diversified. Obviously,
diversification offers no guarantees; however, many of the technology
companies in the fund are not dependent on the price performance of a
particular technological commodity - such as semiconductors.
Q. WHAT WERE SOME OF THESE TECHNOLOGY-RELATED INDUSTRIES AND COMPANIES YOU
FAVORED DURING THE PERIOD?
A. Networking, systems integration, systems consulting and software were
all attractive areas of the technology market during the period. Some of
the fund's holdings in these areas included Cisco Systems, IBM, Electronic
Data Systems, Compaq Computer and Microsoft. Additionally, while demand for
personal computers has slowed recently, I believe in the long run there
will be opportunities for growth in this part of the market.
Q. WHAT ABOUT HEALTH CARE?
A. The fund's health care exposure was primarily in drug companies. The
fund's investment approach emphasized companies that were producing
attractive relative-earnings growth and a number of drug companies fit the
bill. Also, substantial research and development spending has brought about
many new and exciting drugs, which should allow continued earnings growth
in many drug companies. Some drug companies I favored were Merck, Pharmacia
& Upjohn and SmithKline Beecham.
Q. WHILE DRUG STOCKS DID FAIRLY WELL, HMOS LAGGED SOMEWHAT . . .
A. The flip side to the performance of the drug stocks was the
underperformance of HMOs. While surging consumption of medicine is good for
drug companies, it raised costs for HMOs. Therefore, companies like United
HealthCare underperformed during the period.
Q. YOU ALSO MENTIONED CONSUMER STOCKS . . .
A. Yes, the fund benefited from the decision to add holdings in consumer
nondurable companies such as Avon Products, Coca-Cola, Gillette and Procter
& Gamble. That said, because the valuations of these companies are at
historically high levels, I am cautious on overweighting the sector versus
the benchmark. My two key steps in stock selection are a company's
short-term relative earnings growth and long-term valuation - which
compares the stock's price-to-earnings ratio to its expected long-term
earnings growth. Judging by the first step - short-term earnings growth -
many consumer products companies looked reasonable, but judging by the
second step - long-term valuation - they were not particularly attractive.
Q. THE STRONG PERFORMANCE OF ENERGY AND OIL-SERVICE STOCKS HAS BEEN
THOROUGHLY CHRONICLED IN THE FINANCIAL MEDIA. DID THE FUND OWN ANY OF THESE
STOCKS?
A. Yes. Energy companies in oil and the oil service industry benefited from
firming oil prices and solid earnings growth. Some companies I favored
during the period included Schlumberger, Royal Dutch Petroleum, Halliburton
and British Petroleum.
Q. JOHN, IT SEEMS YOUR EXPERIENCE AS A PORTFOLIO MANAGER WOULD LEND ITSELF
WELL TO MANAGING A FUND THAT EMPHASIZES BLUE CHIP AND LARGE-CAPITALIZATION
STOCKS . . .
A. In my 11 years at Fidelity - serving as an institutional portfolio
manager, a manager of Fidelity Large Cap Stock Fund and leader of
Fidelity's Growth Funds Group - I've followed blue chip and
large-capitalization stocks extensively. I've found that many of these
companies are in the forefront of their respective industries and offer an
investor the potential for good long-term earnings growth.
Q. WHAT'S YOUR OUTLOOK?
A. I'm a firm believer that in the long term, the performance of an
individual company's stock price is driven by earnings growth. Just as it's
important to study a company's earnings outlook in order to understand its
potential as an investment opportunity, I think the same holds true for the
overall market. Since the last economic downturn in 1990-91, earnings of
S&P 500 companies have more than doubled and corporate profitability has
grown to a historically high level. With interest rates increasing sharply
in the past six months and sluggish economic performance in key foreign
countries, it seems most likely that S&P 500 earnings growth will slow
through the end of the year. This, in turn, leads me to be cautious on the
stock market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
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, 1996,
more than $1.2 billion
MANAGER: Steve Wymer,
since May 1995; assistant
manager, Fidelity OTC
Portfolio, January 1995-May
1995; manager, Fidelity
Select Chemicals Portfolio,
1993-1994; assistant, Fidelity
Magellan Fund, 1992-
1994; manager, Fidelity Select
Automotive Portfolio, 1990-
1993; joined Fidelity in 1989
(checkmark)
STEVE WYMER ON THE
NATURE OF FIDELITY DIVIDEND
GROWTH FUND:
"The name of the fund -
Dividend Growth - seems to
cause confusion among
investors. When people see
the word "dividend," it's
natural to equate that with
yields. But it's important to
remember that this isn't a
yield fund. Rather, it's a growth
fund which trains its sights on
companies showing good
potential to grow their
dividends. This can mean
either a company that can
increase an existing dividend
or one that plans to implement
a dividend policy in the future.
As a result, this fund won't
concentrate on utility stocks,
nor will it emphasize "concept
stocks" like start-up
biotechnology stocks or those
with an Internet focus that are
unlikely to pay a dividend.
The only way a company can
pay a cash dividend is from
cash on the balance sheet or
through future cash flow. In an
uncertain economy, I'm
looking for companies that are
in typically good business
environments or that have
self-help programs in order to
identify those with the best
dividend growth prospects."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 2.6 1.7
General Electric Co. 2.6 0.5
International Business Machines Corp. 1.5 0.0
Federal National Mortgage Association 1.5 0.6
Merck & Co., Inc. 1.4 0.0
Citicorp 1.2 0.0
PepsiCo, Inc. 1.2 0.0
Cisco Systems, Inc. 1.1 0.0
Ameritech Corp. 1.1 0.0
AT&T Corp. 1.1 0.0
TOP FIVE MARKET SECTORS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Technology 14.6 6.6
Health 13.8 2.9
Finance 11.5 17.0
Nondurables 9.6 3.2
Energy 7.8 8.0
ASSET ALLOCATION
AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 **
Row: 1, Col: 1, Value: 8.5
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 45.0
Row: 1, Col: 4, Value: 46.6
Row: 1, Col: 1, Value: 12.0
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 9.699999999999999
Row: 1, Col: 4, Value: 36.3
Row: 1, Col: 5, Value: 40.0
Stocks 91.6%
Bonds 0.0%
Other 0.0%
Short-term
investments 8.4%
FOREIGN
INVESTMENTS 2.9%
Stocks 77.9%
Bonds 9.7%
Other 0.4%
Short-term
investments 12.0%
FOREIGN
INVESTMENTS 10.0%
*
*
*
INVESTMENTS JULY 31, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 91.6%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.2%
Boeing Co. 284,500 $ 25,177
Lockheed Martin Corp. 431,900 35,794
Precision Castparts Corp. 661,800 28,706
Rohr Industries, Inc. (a) 372,800 8,202
97,879
BASIC INDUSTRIES - 3.5%
CHEMICALS & PLASTICS - 3.4%
Air Products & Chemicals, Inc. 504,200 26,912
du Pont (E.I.) de Nemours & Co. 593,800 47,949
Hanna (M.A.) Co. 1,048,700 19,925
Monsanto Co. 2,132,300 66,634
Praxair, Inc. 1,147,000 44,016
Rohm & Haas Co. 624,100 37,134
Sealed Air Corp. (a) 391,700 13,612
Union Carbide Corp. 516,900 21,710
277,892
PACKAGING & CONTAINERS - 0.1%
Owens-Illinois, Inc. (a) 617,000 9,641
TOTAL BASIC INDUSTRIES 287,533
CONGLOMERATES - 0.9%
AlliedSignal, Inc. 1,048,300 61,588
Tyco International Ltd. 249,300 10,221
71,809
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.4%
Sherwin-Williams Co. 659,100 29,824
CONSTRUCTION - 0.1%
Lennar Corp. 451,100 10,093
ENGINEERING - 0.3%
Fluor Corp. 388,600 23,413
TOTAL CONSTRUCTION & REAL ESTATE 63,330
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - 3.8%
AUTOS, TIRES, & ACCESSORIES - 1.8%
AutoZone, Inc. (a) 998,500 $ 28,832
Echlin, Inc. 488,800 16,314
General Motors Corp. 1,236,067 60,258
Lear Corp. (a) 710,000 24,140
Snap-on Tools Corp. 463,500 20,567
150,111
CONSUMER ELECTRONICS - 0.8%
Black & Decker Corp. 856,200 31,466
Newell Co. 1,056,100 33,927
65,393
HOME FURNISHINGS - 0.5%
Leggett & Platt, Inc. 1,513,900 39,361
TEXTILES & APPAREL - 0.7%
NIKE, Inc. Class B 339,300 34,905
Nine West Group, Inc. (a) 516,100 24,967
59,872
TOTAL DURABLES 314,737
ENERGY - 7.8%
ENERGY SERVICES - 1.7%
Baker Hughes, Inc. 377,600 11,092
ENSCO International, Inc. (a) 668,700 18,055
Halliburton Co. 969,400 50,530
Schlumberger Ltd. 728,900 58,312
137,989
OIL & GAS - 6.1%
Amerada Hess Corp. 140,300 6,822
Amoco Corp. 487,000 32,568
Anadarko Petroleum Corp. 713,000 36,452
Atlantic Richfield Co. 393,700 45,669
British Petroleum PLC:
Ord. 3,206,728 29,041
ADR 440,183 48,365
Burlington Resources, Inc. 1,103,800 47,187
Enron Oil & Gas Co. 1,529,200 38,230
Occidental Petroleum Corp. 860,100 19,245
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Phillips Petroleum Co. 930,800 $ 36,767
Royal Dutch Petroleum Co.:
Ord. 345,200 51,900
ADR 299,400 45,172
Union Pacific Resources Group, Inc. 854,900 22,548
Unocal Corp. 1,150,281 37,528
497,494
TOTAL ENERGY 635,483
FINANCE - 11.5%
BANKS - 2.1%
Bank of New York Co., Inc. 245,800 12,659
Bank of Tokyo-Mitsubishi Ltd. 450 9
Citicorp 1,200,000 98,250
NationsBank Corp. 669,100 57,459
168,377
CREDIT & OTHER FINANCE - 1.5%
American Express Co. 1,836,243 80,336
Household International, Inc. 584,808 43,568
123,904
FEDERAL SPONSORED CREDIT - 3.1%
Federal Home Loan Mortgage Corporation 905,300 76,272
Federal National Mortgage Association 3,769,300 119,675
Student Loan Marketing Association 749,600 54,721
250,668
INSURANCE - 4.4%
Aetna, Inc. 972,150 56,506
Allstate Corp. 1,717,300 76,849
American International Group, Inc. 568,600 53,519
General Re Corp. 244,900 35,939
MGIC Investment Corp. 1,136,400 68,184
Old Republic International Corp. 886,300 18,613
Provident Companies, Inc. 599,700 21,889
UNUM Corp. 538,700 32,861
364,360
SECURITIES INDUSTRY - 0.4%
Merrill Lynch & Co., Inc. 528,100 31,884
TOTAL FINANCE 939,193
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 13.8%
DRUGS & PHARMACEUTICALS - 7.8%
Allergan, Inc. 152,900 $ 6,231
American Home Products Corp. 1,308,000 74,229
Amgen, Inc. (a) 452,900 24,740
Bristol-Myers Squibb Co. 978,600 84,771
Genentech, Inc. special (a) 493,000 25,944
Lilly (Eli) & Co. 763,600 42,762
Merck & Co., Inc. 1,835,300 117,918
Pharmacia & Upjohn, Inc. 1,699,500 70,104
Pfizer, Inc. 963,800 67,346
Schering-Plough Corp. 841,500 46,387
SmithKline Beecham PLC ADR 886,500 47,649
Warner-Lambert Co. 570,200 31,076
639,157
MEDICAL EQUIPMENT & SUPPLIES - 3.6%
Baxter International, Inc. 989,800 41,200
Becton, Dickinson & Co. 658,800 49,163
Bergen Brunswig Corp. Class A 405,200 10,535
Cardinal Health, Inc. 473,700 32,922
Johnson & Johnson 1,475,800 70,469
McKesson Corp. 96,200 4,185
Medtronic, Inc. 608,800 28,842
Pall Corp. 1,364,200 32,911
St. Jude Medical, Inc. (a) 701,400 23,586
293,813
MEDICAL FACILITIES MANAGEMENT - 2.4%
Columbia/HCA Healthcare Corp. 1,450,400 74,333
Health Management Associates, Inc. Class A (a) 1,055,600 21,244
Health Care & Retirement Corp. 991,050 23,537
Oxford Health Plans, Inc. (a) 673,400 23,232
Tenet Healthcare Corp. (a) 1,154,800 22,374
United HealthCare Corp. 357,000 12,049
Vencor, Inc. (a) 820,700 22,467
199,236
TOTAL HEALTH 1,132,206
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - 5.4%
ELECTRICAL EQUIPMENT - 3.0%
Emerson Electric Co. 420,000 $ 35,438
General Electric Co. 2,543,300 209,504
Omron Corp. 72,000 1,321
246,263
INDUSTRIAL MACHINERY & EQUIPMENT - 2.4%
Case Corp. 520,500 23,032
Caterpillar, Inc. 1,279,350 84,277
Ingersoll-Rand Co. 542,300 23,116
Stanley Works 1,830,400 52,166
Timken Co. 341,011 12,490
195,081
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 441,344
MEDIA & LEISURE - 4.3%
BROADCASTING - 0.0%
Time Warner, Inc. 1 -
ENTERTAINMENT - 0.3%
Disney (Walt) Co. 442,000 24,586
LODGING & GAMING - 2.6%
HFS, Inc. (a) 849,590 50,975
Hilton Hotels Corp. 239,800 24,460
ITT Corp. 1,200,500 68,128
Marriott International, Inc. 658,830 33,847
Mirage Resorts, Inc. (a) 1,765,600 39,727
217,137
PUBLISHING - 1.1%
Knight-Ridder, Inc. 1,189,800 38,966
New York Times Co. (The) Class A 749,000 21,815
Times Mirror Co. Class A 651,900 26,972
87,753
RESTAURANTS - 0.3%
McDonald's Corp. 560,100 25,975
TOTAL MEDIA & LEISURE 355,451
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - 9.6%
AGRICULTURE - 0.4%
Pioneer Hi-Bred International, Inc. 579,000 $ 31,121
BEVERAGES - 2.0%
Coca-Cola Co. (The) 1,416,400 66,394
PepsiCo, Inc. 3,030,200 95,830
162,224
FOODS - 1.9%
CPC International, Inc. 202,000 13,508
General Mills, Inc. 680,320 36,907
Kellogg Co. 322,300 24,092
Ralston Purina Co. 691,200 43,373
Sysco Corp. 1,059,100 30,714
Tyson Foods, Inc. 484,500 11,931
160,525
HOUSEHOLD PRODUCTS - 2.2%
Avon Products, Inc. 580,200 25,529
Clorox Co. 414,400 37,659
First Brands Corp. 736,300 17,579
Gillette Co. 588,800 37,462
Procter & Gamble Co. 691,700 61,821
180,050
TOBACCO - 3.1%
Philip Morris Companies, Inc. 2,059,400 215,465
RJR Nabisco Holdings Corp. 1,308,741 40,244
255,709
TOTAL NONDURABLES 789,629
PRECIOUS METALS - 0.3%
Newmont Mining Corp. 452,400 22,337
RETAIL & WHOLESALE - 6.4%
APPAREL STORES - 0.1%
Gymboree Corp. (a) 511,700 11,897
DRUG STORES - 1.1%
Eckerd Corp. (a) 1,592,300 35,429
General Nutrition Companies, Inc. (a) 1,179,160 16,803
Rite Aid Corp. 1,142,100 33,977
86,209
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 2.8%
Dillard Department Stores, Inc. Class A 736,900 $ 23,120
Dollar General Corp. 1,114,750 28,844
May Department Stores Co. (The) 527,700 23,681
Sears, Roebuck & Co. 1,597,400 65,493
Wal-Mart Stores, Inc. 3,581,400 85,954
227,092
RETAIL & WHOLESALE, MISCELLANEOUS - 2.4%
Circuit City Stores, Inc. 614,110 19,344
Home Depot, Inc. (The) 857,800 43,319
Lowe's Companies, Inc. 1,419,700 46,318
PETsMART, Inc. (a) 1,395,516 32,097
Toys "R" Us, Inc. 2,268,400 59,829
200,907
TOTAL RETAIL & WHOLESALE 526,105
SERVICES - 1.6%
ADVERTISING - 0.5%
Omnicom Group, Inc. 1,083,900 43,898
SERVICES - 1.1%
Block (H&R), Inc. 673,500 17,595
Manpower, Inc. 912,400 31,022
Service Corp. International 754,200 41,575
90,192
TOTAL SERVICES 134,090
TECHNOLOGY - 14.6%
COMMUNICATIONS EQUIPMENT - 1.6%
Cisco Systems, Inc. (a) 1,815,000 93,926
Network General Corp. (a) 756,600 13,335
3Com Corp. (a) 592,100 23,314
130,575
COMPUTER SERVICES & SOFTWARE - 5.4%
America Online, Inc. (a) 820,300 25,019
Ascend Communications, Inc. (a) 714,300 34,644
Automatic Data Processing, Inc. 954,990 37,841
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
CUC International, Inc. (a) 980,500 $ 34,072
Ceridian Corp. (a) 732,841 31,879
Computer Sciences Corp. (a) 667,460 45,387
DST Systems, Inc. (a) 653,300 18,619
Electronic Data Systems Corp. 1,616,100 85,451
First Data Corp. 484,200 37,586
Microsoft Corp. (a) 458,800 54,081
Oracle Systems Corp. (a) 959,600 37,545
Platinum Software Corp. (a) 14 -
442,124
COMPUTERS & OFFICE EQUIPMENT - 4.9%
Adaptec, Inc. (a) 507,400 21,057
Bay Networks, Inc. (a) 739,700 17,013
Compaq Computer Corp. (a) 1,366,900 74,838
Hewlett-Packard Co. 707,000 31,108
International Business Machines Corp. 1,133,000 122,222
Pitney Bowes, Inc. 1,236,000 59,946
Sun Microsystems, Inc. (a) 641,900 35,064
Xerox Corp. 782,100 39,398
400,646
ELECTRONICS - 2.2%
AMP, Inc. 502,400 19,405
Intel Corp. 1,085,430 81,543
Linear Technology Corp. 1,842,890 58,051
Maxim Integrated Products, Inc. (a) 769,500 21,931
Samsung Electronics Co. Ltd. (bonus issue 3/96) (a) 838 70
181,000
PHOTOGRAPHIC EQUIPMENT - 0.5%
Eastman Kodak Co. 507,400 37,865
Polaroid Corp. 24,300 1,027
38,892
TOTAL TECHNOLOGY 1,193,237
TRANSPORTATION - 0.2%
RAILROADS - 0.2%
CSX Corp. 408,000 19,686
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 5.9%
CELLULAR - 1.0%
AirTouch Communications, Inc. (a) 1,073,800 $ 29,530
36O Degrees Communications Co. (a) 1,392,900 32,211
Vodafone Group PLC sponsored ADR 506,200 18,096
79,837
TELEPHONE SERVICES - 4.9%
AT&T Corp. 1,676,160 87,370
Ameritech Corp. 1,598,200 88,700
Frontier Corp. 1,430,600 40,236
LCI International, Inc. (a) 586,900 17,754
MCI Communications Corp. 328,800 8,097
NYNEX Corp. 1,096,400 49,201
SBC Communications, Inc. 1,560,400 76,265
WorldCom, Inc. (a) 1,379,300 35,688
403,311
TOTAL UTILITIES 483,148
TOTAL COMMON STOCKS
(Cost $7,363,139) 7,507,197
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. (b) (Cost $6) 2,315 7
REPURCHASE AGREEMENTS - 8.4%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.65%, dated
7/31/96 due 8/1/96 $ 689,892 689,784
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $8,052,929) $ 8,196,988
LEGEND
1. Non-income producing
2. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Gulf Canada
Resources Ltd. 10/15/93 $ 6,000
INCOME TAX INFORMATION
At July 31, 1996, the aggregate cost of investment securities for income
tax purposes was $8,074,217,000. Net unrealized appreciation aggregated
$122,771,000 of which $437,253,000 related to appreciated investment
securities and $314,482,000 related to depreciated investment securities.
The fund hereby designates approximately $153,451,000 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, 1996
ASSETS
Investment in securities, at value (including repurchase $ 8,196,988
agreements of $689,784) (cost $8,052,929) -
See accompanying schedule
Receivable for investments sold 9,008
Receivable for fund shares sold 13,785
Dividends receivable 10,516
Other receivables 168
TOTAL ASSETS 8,230,465
LIABILITIES
Payable for investments purchased $ 26,530
Payable for fund shares redeemed 16,553
Accrued management fee 4,355
Other payables and accrued expenses 3,717
TOTAL LIABILITIES 51,155
NET ASSETS $ 8,179,310
Net Assets consist of:
Paid in capital $ 7,253,537
Undistributed net investment income 62,593
Accumulated undistributed net realized gain (loss) on 719,123
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 144,057
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 265,888 shares outstanding $ 8,179,310
NET ASSET VALUE and redemption price per share $30.76
($8,179,310 (divided by) 265,888 shares)
Maximum offering price per share (100/97.00 of $30.76) $31.71
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME $ 97,690
Dividends (including $774 received from affiliated
issuers)
Interest 61,983
TOTAL INCOME 159,673
EXPENSES
Management fee $ 47,371
Basic fee
Performance adjustment 4,936
Transfer agent fees 21,425
Accounting fees and expenses 791
Non-interested trustees' compensation 31
Custodian fees and expenses 518
Registration fees 1,256
Audit 64
Legal 44
Interest 6
Miscellaneous 16
Total expenses before reductions 76,458
Expense reductions (2,344) 74,114
NET INVESTMENT INCOME 85,559
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain of $6,172 948,010
on sales of investments in affiliated issuers)
Foreign currency transactions 11,622
Futures contracts 5,049 964,681
Change in net unrealized appreciation (depreciation) on:
Investment securities (898,753)
Assets and liabilities in foreign currencies (2,030) (900,783)
NET GAIN (LOSS) 63,898
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 149,457
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,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 85,559 $ 9,564
Net investment income
Net realized gain (loss) 964,681 348,645
Change in net unrealized appreciation (depreciation) (900,783) 936,474
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 149,457 1,294,683
FROM OPERATIONS
Distributions to shareholders (28,183) -
From net investment income
From net realized gain (542,584) (64,196)
TOTAL DISTRIBUTIONS (570,767) (64,196)
Share transactions 4,526,720 4,429,317
Net proceeds from sales of shares
Reinvestment of distributions 555,579 62,248
Cost of shares redeemed (2,903,085) (1,529,164)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,179,214 2,962,401
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,757,904 4,192,888
NET ASSETS
Beginning of period 6,421,406 2,228,518
End of period (including undistributed net investment $ 8,179,310 $ 6,421,406
income of $62,593 and $3,300, respectively)
OTHER INFORMATION
Shares
Sold 143,962 162,136
Issued in reinvestment of distributions 17,421 2,477
Redeemed (92,535) (56,233)
Net increase (decrease) 68,848 108,380
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JULY 31,
1996 1995 1994 C 1993 1992
SELECTED PER-SHARE DATA
Net asset value, $ 32.59 $ 25.14 $ 25.72 $ 22.02 $ 18.94
beginning of period
Income from Investment
Operations
Net investment income .34 .07 D .12 .10 .09
Net realized and unrealized .42 7.96 3.43 4.36 3.07
gain (loss)
Total from investment .76 8.03 3.55 4.46 3.16
operations
Less Distributions
From net investment income (.12) - (.01) (.14) (.08)
From net realized gain (2.47) (.58) (4.12) (.62) -
Total distributions (2.59) (.58) (4.13) (.76) (.08)
Net asset value, $ 30.76 $ 32.59 $ 25.14 $ 25.72 $ 22.02
end of period
TOTAL RETURN G, B 2.19% 32.64% 14.95% 20.86% 16.73%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 8,179 $ 6,421 $ 2,229 $ 788 $ 476
(in millions)
Ratio of expenses to average .98% 1.05% 1.27% 1.25% 1.27%
net assets
Ratio of expenses to average .95% 1.02% 1.22% 1.25% 1.27%
net assets after expense E E E
reductions
Ratio of net investment 1.10% .25% .21% .46% .55%
income to average net
assets
Portfolio turnover rate 206% 182% 271% 319% 71%
</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.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 6 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1996
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 financial statements have
been prepared in conformity with generally accepted accounting principles
which permit management to make certain estimates and assumptions at the
date of the financial statements. The following summarizes the significant
accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities 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 and foreign currency options, 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.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for litigation
proceeds, futures and options transactions, foreign currency transactions,
passive foreign investment companies (PFIC), partnerships and losses
deferred due to wash sales. The fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital 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. 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 fund, along
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 for U.S. Treasury
or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. Buying futures, writing
puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
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 $7,000 or 0% of
net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $15,654,905,000 and $14,461,280,000, respectively, of which U.S.
government and government agency obligations aggregated $1,125,744,000 and
$1,056,156,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $809,210,000 and $814,259,000 respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2500% to .5200% for the period. 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 .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 .67% 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 a 1% deferred sales charge upon redemption.
For the period, FDC received sales charges and deferred sales charges of
$9,154,000 and $18,000, respectively, on sales of shares of the fund.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .28%
of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $5,165,000 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
the loan was outstanding amounted to $11,120,000. The weighted average
interest rate was 5.9%.
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
$1,840,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a
portion of the fund's expenses. During the period, the fund's custodian and
transfer agent fees were reduced by $6,000 and $498,000 under these
arrangements.
7. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Accent Software International $ 1,624 $ 1,762 $ - $ -
American Business Information, Inc. 7,317 19,978 - -
Blue Range Resource Corp. Class A - 1,984 - -
CMAC Investments 138 17,403 93 -
Continuum Co., Inc. 9,365 18,977 - -
GMIS, Inc. 276 9,486 - -
Global Industries Ltd. - 3,436 - -
Medicus Systems Corp. - 403 10 -
Money Store, Inc. 8,586 12,990 120 -
North American Mortgage Co. 179 17,736 150 -
Ply-Gem Industries, Inc. - 14,045 36 -
Shared Medical Systems Corp. - 24,230 144 -
Titan Wheel International, Inc. 2,609 19,269 34 -
Trinzic Corp. - - - -
Webb (Del E.) Corp. 5,570 20,441 187 -
Wonderware Corp. 2,970 9,782 - -
TOTALS $ 38,634 $ 191,922 $ 774 $ -
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, 1996, 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, 1996 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,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 6, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity Blue Chip Growth Fund voted to pay on
September 9, 1996, to shareholders of record at the opening of business on
September 6, 1996, a distribution of $2.24 per share derived from capital
gains realized from sales of portfolio securities and a dividend of $.19
per share from net investment income.
A total of 1.18% 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 11% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 income tax returns.
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 *
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 *
ADVISORY BOARD
William O. McCoy
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)
OTC
PORTFOLIO
ANNUAL REPORT
JULY 31, 1996
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 24 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 28 Notes to the financial statements.
REPORT OF INDEPENDENT 33 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 34
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first seven
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in both the stock and bond markets so far
this year. In 1995, both stock and bond markets posted strong results,
while the year before, stocks posted below-average returns and bonds had
one of the worst years in history.
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. 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
OTC 6.43% 96.22% 281.07%
OTC (incl. 3% sales charge) 3.23% 90.34% 269.64%
NASDAQ(registered trademark) Composite Index 8.80% 127.23% 231.99%
Mid-Cap Funds Average 7.99% 91.01% 239.17%
</TABLE>
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one, five, or 10 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 - an unmanaged
index of the National Market System which includes over 5,000 stocks traded
only over-the-counter and not on an exchange. To measure how the fund's
performance stacked up against its peers, you can compare it to the mid-cap
funds average, which reflects the performance of 136 mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. 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 reflect
reinvestment of dividends and capital gains, if any, but do not reflect any
sales charges, brokerage commissions, or other costs of investing.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
OTC 6.43% 14.43% 14.31%
OTC (incl. 3% sales charge) 3.23% 13.74% 13.97%
NASDAQ Composite Index 8.80% 17.84% 12.75%
Mid-Cap Funds Average 7.99% 13.65% 12.60%
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. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking the arithmetic
average. This may produce a slightly different figure than that obtained by
averaging the cumulative total returns and annualizing the result.)
$10,000 OVER 10 YEARS
IMAHDR PRASUN SHR__CHT 19960731 19960822 164628 S00000000000001
OTC Portfolio NASDAQ
00312 F0091
1986/07/31 9700.00 10000.00
1986/08/31 10181.08 10322.00
1986/09/30 9140.49 9467.34
1986/10/31 9589.08 9752.31
1986/11/30 9442.59 9693.79
1986/12/31 9279.21 9454.36
1987/01/31 10422.91 10638.04
1987/02/28 11538.44 11543.34
1987/03/31 11510.27 11693.40
1987/04/30 11380.69 11373.00
1987/05/31 11482.10 11351.39
1987/06/30 11713.10 11585.23
1987/07/31 12276.50 11878.34
1987/08/31 12851.17 12439.00
1987/09/30 12772.29 12160.36
1987/10/31 8924.26 8862.47
1987/11/30 8383.40 8378.58
1987/12/31 9427.36 9086.57
1988/01/31 9762.21 9490.02
1988/02/29 10412.60 10117.30
1988/03/31 10650.86 10342.92
1988/04/30 10972.83 10483.58
1988/05/31 10876.24 10251.90
1988/06/30 11597.46 10938.77
1988/07/31 11558.82 10749.53
1988/08/31 11281.92 10463.60
1988/09/30 11713.37 10787.97
1988/10/31 11706.93 10655.28
1988/11/30 11327.00 10362.26
1988/12/31 11581.93 10653.43
1989/01/31 12328.72 11224.46
1989/02/28 12295.97 11195.27
1989/03/31 12833.14 11406.87
1989/04/30 13462.02 12005.73
1989/05/31 14064.70 12543.58
1989/06/30 14031.95 12252.57
1989/07/31 14647.73 12790.46
1989/08/31 15302.82 13243.24
1989/09/30 15390.19 13359.78
1989/10/31 14871.27 12888.18
1989/11/30 15007.83 12917.82
1989/12/31 15101.96 12898.45
1990/01/31 14029.67 11808.53
1990/02/28 14419.59 12109.65
1990/03/31 14966.98 12402.70
1990/04/30 14532.07 11979.77
1990/05/31 15484.38 13105.87
1990/06/30 15514.37 13217.27
1990/07/31 15311.91 12547.15
1990/08/31 13992.18 10931.08
1990/09/30 13222.13 9894.81
1990/10/31 12943.28 9490.11
1990/11/30 13841.79 10347.07
1990/12/31 14384.44 10789.93
1991/01/31 15517.19 11971.42
1991/02/28 16719.77 13111.10
1991/03/31 17658.56 13973.81
1991/04/30 17627.53 14060.45
1991/05/31 18488.73 14697.39
1991/06/30 17596.49 13837.59
1991/07/31 18837.87 14613.88
1991/08/31 19830.97 15318.27
1991/09/30 19656.70 15370.35
1991/10/31 20511.34 15856.05
1991/11/30 19541.65 15315.36
1991/12/31 21455.75 17157.80
1992/01/31 22382.20 18166.68
1992/02/29 22425.50 18571.80
1992/03/31 21706.84 17717.49
1992/04/30 21066.11 16998.16
1992/05/31 21369.16 17210.64
1992/06/30 20901.60 16589.34
1992/07/31 21343.18 17113.56
1992/08/31 20815.02 16608.71
1992/09/30 21457.47 17219.91
1992/10/31 22257.06 17884.60
1992/11/30 23828.04 19308.21
1992/12/31 24661.18 20041.92
1993/01/31 24824.63 20635.17
1993/02/28 23853.57 19896.43
1993/03/31 24680.41 20489.34
1993/04/30 23959.32 19655.42
1993/05/31 24603.50 20836.72
1993/06/30 24632.34 20957.57
1993/07/31 24901.55 20999.48
1993/08/31 25363.04 22156.55
1993/09/30 26060.09 22772.51
1993/10/31 26403.81 23284.89
1993/11/30 25705.96 22563.06
1993/12/31 26716.32 23253.49
1994/01/31 27435.69 23983.65
1994/02/28 27147.94 23765.39
1994/03/31 26063.35 22315.71
1994/04/30 25343.98 22047.92
1994/05/31 25211.17 22109.65
1994/06/30 24281.52 21251.80
1994/07/31 24812.75 21759.71
1994/08/31 26052.28 23091.41
1994/09/30 26118.69 23072.94
1994/10/31 26716.32 23495.17
1994/11/30 25842.01 22696.34
1994/12/31 25996.21 22768.96
1995/01/31 25940.35 22891.92
1995/02/28 27303.28 24084.58
1995/03/31 28219.35 24821.57
1995/04/30 29403.53 25658.06
1995/05/31 30241.40 26309.77
1995/06/30 32587.42 28430.34
1995/07/31 34732.36 30519.97
1995/08/31 35179.22 31121.22
1995/09/30 35686.92 31861.90
1995/10/31 35493.40 31657.98
1995/11/30 36130.87 32389.28
1995/12/31 35933.37 32194.95
1996/01/31 35850.43 32452.51
1996/02/29 37129.96 33708.42
1996/03/31 37201.05 33772.47
1996/04/30 39535.00 36528.30
1996/05/31 40980.39 38172.07
1996/06/30 39546.84 36397.07
1996/07/31 36964.10 33199.00
IML PRASUN SHR__CHT 19960731 19960822 164632 R00000000000106
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity OTC Portfolio on July 31, 1986 and the maximum 3% sales charge
was paid. As the chart shows, by July 31, 1996, the value of the investment
would have grown to $36,964 - a 269.64% increase on the initial investment.
For comparison, look at how the NASDAQ Composite Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $33,199 - a 231.99% 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
Although growing fears of lower
corporate earnings dampened
the stock market's momentum at
the end of the period, the U.S.
stock market posted solid gains
over the 12 months ended July 31,
1996. While several corporate
earnings disappointments made
for a volatile stock market in May,
June and July, the Standard &
Poor's 500 Index finished the 12
months with a return of 16.57% -
above its long-term historical
annual average of about 12%.
The stock market spent much of
the past year breaking price and
trading volume records as strong
corporate earnings reports, large
cash inflows into mutual funds
and widespread optimism
propelled equity share prices
higher. In addition, the period was
peppered with several
high-profile merger
announcements, especially in the
media, telecommunications and
technology sectors.
Smaller-company stocks posted
strong gains during the first few
months of 1996, and high-tech
firms involved in the networking
and software fields benefited
from strong earnings.
Semiconductor stocks, however,
suffered during the latter half of
the period as a result of
overcapacity. In March,
better-than-expected
employment figures spooked the
bond market, pushing long-term
interest rates over 7%. Because
smaller companies tend to be
more adversely affected by the
higher borrowing costs brought
on by higher rates, their stock
prices trended downward in the
spring. While larger, multinational
firms recorded positive gains,
their returns were hurt somewhat
by the strengthening dollar.
NOTE TO SHAREHOLDERS: On June 3, 1996, Charles Mangum became Portfolio
Manager of Fidelity OTC Portfolio.
Q. CHARLES, HOW DID THE FUND PERFORM?
A. For the 12 months ended July 31, 1996, the fund had a total return of
6.43%, compared to 8.80% for the NASDAQ Composite Index. According to
Lipper Analytical Services, the mid-cap funds average returned 7.99% for
the 12-month period ended July 31, 1996.
Q. HOW WOULD YOU EXPLAIN THE DIFFERENCE BETWEEN THE FUND'S PERFORMANCE AND
THE INDEX IN THE 12-MONTH PERIOD?
A. Well, for much of the past year, in my opinion the fund had been
positioned fairly conservatively, with a higher percentage of the fund's
investments in short-term instruments, for example. In the early part of
this year, when the over-the-counter market rallied quite strongly, the
fund's performance significantly lagged that of the index. But when the
overall stock market dropped late in the period, taking the OTC market with
it, the fund made a considerable comeback. By that time, I had started to
reposition the portfolio in what I considered to be a somewhat more
aggressive manner. So the OTC market's extreme volatility in June and July
worked both ways for the fund - it was hit less than the market in the drop
and, as OTC stocks recovered, many of the fund's positions performed very
well.
Q. LET'S DISCUSS HOW YOU'VE RESTRUCTURED THE FUND SINCE YOU TOOK OVER IN
JUNE.
A. Actually, the previous manager, Abby Johnson, had already begun to
structure the fund in what I would call a more aggressive position at the
end of her tenure. I accelerated that process when I began managing it at
the beginning of June, based on the fact that many share prices of the
stocks I liked in the OTC market were down anywhere from 20% to upwards of
50% over approximately a four-week period. It was during that time that I
was able to buy stocks I felt had good fundamentals, at prices that were
now much more reasonable than they had been.
Q. THE MAJOR SECTOR CHANGE WAS A SIZABLE INCREASE IN TECHNOLOGY STOCKS . .
.
A. That's right - but that's more a function of how I want to manage the
fund going forward. The way I see it, tech stocks represent about 50% of
the OTC market capitalization, and a handful of names, including Microsoft,
Oracle, Cisco and Sun Microsystems, by themselves are around 20% of the
whole market. So technology is too big an area not to be well-represented
in the fund, and it will likely continue to be a big theme in the
portfolio. I've spent a great deal of time looking at the technology
sector, with special attention to those companies I just mentioned.
Q. DOES THAT IMPLY THAT YOU'LL USE THE SECTOR WEIGHTINGS OF THE OTC MARKET
AS A TARGET FOR THE FUND?
A. Not really. I'd say that the sector weightings of the index, while not
irrelevant, won't be much more than a very loose target. My background is
in analysis of areas such as health care and finance, and I'm fortunate in
that those areas are also well represented in the OTC market. I concentrate
on finding good growth stocks regardless of sector.
Q. CAN YOU GIVE SOME EXAMPLES?
A. One of the additions to the top 10 holdings was Nellcor, for instance.
It's a medical company that specializes in respiratory therapy and products
and, even though its stock price was depressed, I viewed it as a leader in
its field and capable of solid earnings growth. Another key investment was
Scholastic Corp., best known for the Goosebumps series of books by R. L.
Stine. That's only a small part of its business, and I believe its other
lines of business, including book fairs and teachers' manuals, could help
it dominate several distribution channels in education. Finally, Washington
Mutual is a savings and loan that recently announced a merger with American
Savings Bank. That merger could help take what's already a well-run
institution and create synergies and cost-cutting opportunities; I thought
it was a very attractive buy at only around 10 times current earnings.
Q. WHAT ABOUT STOCKS THAT WERE DISAPPOINTMENTS OVER THE PERIOD?
A. There are always a few. In this case, I'd point to one. U.S. Robotics
was a poor performer for the fund. The stock performed well in the past,
and the fund owned it at the end of the period, but the company's business
slowed over the past six months, which hurt its share price.
Q. WHAT'S YOUR OUTLOOK?
A. I really don't spend time developing outlooks for the market. I focus on
what I can control, which is finding good companies that can grow over
time. The market's recent volatility has perhaps taken some of the froth
out of it, and many OTC stocks are priced quite a bit lower than they have
been. I think that could help me find some good values out there.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
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, 1996,
more than $1.2 billion
MANAGER: Steve Wymer,
since May 1995; assistant
manager, Fidelity OTC
Portfolio, January 1995-May
1995; manager, Fidelity
Select Chemicals Portfolio,
1993-1994; assistant, Fidelity
Magellan Fund, 1992-
1994; manager, Fidelity Select
Automotive Portfolio, 1990-
1993; joined Fidelity in 1989
(checkmark)
STEVE WYMER ON THE
NATURE OF FIDELITY DIVIDEND
GROWTH FUND:
"The name of the fund -
Dividend Growth - seems to
cause confusion among
investors. When people see
the word "dividend," it's
natural to equate that with
yields. But it's important to
remember that this isn't a
yield fund. Rather, it's a growth
fund which trains its sights on
companies showing good
potential to grow their
dividends. This can mean
either a company that can
increase an existing dividend
or one that plans to implement
a dividend policy in the future.
As a result, this fund won't
concentrate on utility stocks,
nor will it emphasize "concept
stocks" like start-up
biotechnology stocks or those
with an Internet focus that are
unlikely to pay a dividend.
The only way a company can
pay a cash dividend is from
cash on the balance sheet or
through future cash flow. In an
uncertain economy, I'm
looking for companies that are
in typically good business
environments or that have
self-help programs in order to
identify those with the best
dividend growth prospects."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Intel Corp. 4.0 3.6
Oracle Systems Corp. 3.3 1.4
Cisco Systems, Inc. 3.2 1.1
Microsoft Corp. 2.3 1.8
Dell Computer Corp. 1.5 0.4
Nellcor, Inc. 1.5 0.1
Scholastic Corp. 1.2 0.0
TCI Group Class A 1.1 0.8
Washington Mutual, Inc., Series D, 1.1 0.0
$6.00
3Com Corp. 1.0 0.4
TOP FIVE MARKET SECTORS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Technology 38.2 28.0
Health 10.7 10.1
Finance 10.0 11.2
Retail & Wholesale 8.4 4.3
Media & Leisure 6.0 4.3
ASSET ALLOCATION
AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 **
Row: 1, Col: 1, Value: 8.0
Row: 1, Col: 2, Value: 2.0
Row: 1, Col: 3, Value: 33.2
Row: 1, Col: 4, Value: 50.0
Stocks 81.1%
Bonds 2.9%
Short-term
investments 16.0%
FOREIGN
INVESTMENTS 5.3%
Stocks 93.2%
Bonds 0.6%
Short-term
investments 6.2%
FOREIGN
INVESTMENTS 2.6%
Row: 1, Col: 1, Value: 16.0
Row: 1, Col: 2, Value: 3.5
Row: 1, Col: 3, Value: 30.5
Row: 1, Col: 4, Value: 50.0
**
*
INVESTMENTS JULY 31, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 92.1%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.2%
Wyman-Gordon Co. (a) 331,400 $ 5,779
BASIC INDUSTRIES - 2.4%
CHEMICALS & PLASTICS - 0.5%
Fuller (H.B.) Co. 231,209 8,035
OM Group, Inc. 173,100 6,037
14,072
IRON & STEEL - 0.7%
TriMas Corp. 865,200 17,953
PAPER & FOREST PRODUCTS - 1.2%
American Pad & Paper Co. (a) 767,900 11,614
Fort Howard Corp. (a) 190,000 4,346
Pentair, Inc. 343,800 9,283
Willamette Industries, Inc. 100,000 5,875
31,118
TOTAL BASIC INDUSTRIES 63,143
CONGLOMERATES - 0.1%
Lancaster Colony Corp. 79,000 2,824
CONSTRUCTION & REAL ESTATE - 1.1%
BUILDING MATERIALS - 0.2%
RPM, Inc. 431,900 6,425
CONSTRUCTION - 0.2%
Redman Industries, Inc. (a) 277,600 5,760
ENGINEERING - 0.3%
MasTec, Inc. (a) 345,300 8,374
REAL ESTATE INVESTMENT TRUSTS - 0.4%
Equity Inns, Inc. 300,000 3,488
Felcor Suite Hotels, Inc. 91,600 2,565
RFS Hotel Investors, Inc. 205,000 3,280
9,333
TOTAL CONSTRUCTION & REAL ESTATE 29,892
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - 1.8%
AUTOS, TIRES, & ACCESSORIES - 1.0%
Intermet Corp. (a) 143,300 $ 1,836
O'Reilly Automotive, Inc. (a) 100,000 3,500
PACCAR, Inc. 187,900 8,549
Tower Automotive, Inc. (a) 125,000 3,063
Volvo AB Class B 361,300 7,835
Volvo AB Class B ADR 25,000 538
25,321
HOME FURNISHINGS - 0.1%
HON Industries, Inc. 100,000 3,000
TEXTILES & APPAREL - 0.7%
Justin Industries, Inc. 299,500 3,332
Westpoint Stevens, Inc. Class A (a) 623,000 14,718
18,050
TOTAL DURABLES 46,371
ENERGY - 2.1%
ENERGY SERVICES - 0.4%
Dreco Energy Services Ltd. Class A (a) 68,900 1,550
Global Industries Ltd. (a) 194,800 5,601
Lone Star Technologies, Inc. 194,700 2,823
9,974
OIL & GAS - 1.7%
Belco Oil & Gas Corp. (a) 103,000 2,961
Belden & Blake Corp. (a) 187,800 4,038
Benton Oil & Gas Co. (a) 250,000 4,938
Cairn Energy USA, Inc. (a) 265,900 2,626
Chesapeake Energy Corp. (a) 172,500 8,560
Flores & Rucks, Inc. (a) 320,200 11,047
Forcenergy Gas Exploration, Inc. (a) 540,900 10,412
44,582
TOTAL ENERGY 54,556
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - 8.9%
BANKS - 5.8%
BankAmerica Corp. 239,300 $ 19,084
BanPonce Corp. 488,622 11,544
Boatmen's Bancshares, Inc. 120,000 4,800
CCB Financial Corp. 52,800 2,732
Dauphin Deposit Corp. 99,900 2,797
Fifth Third Bancorp 220,450 11,408
First American Corp. 78,333 3,261
First Commerce Bancshares, Inc. 115,600 3,410
First Commerce Bancshares, Inc. Class B 445,900 6,577
First Commerce Corp. 104,700 3,638
First Security Corp. 187,500 4,781
First Tennessee National Corp. 180,000 5,310
Liberty Bancorp, Inc. 69,700 2,422
Marshall & Ilsley Corp. 164,400 4,316
Northern Trust Corp. 440,850 26,065
Peoples Heritage Financial Group, Inc. 370,000 7,308
Regions Financial Corp. 128,200 5,593
SouthTrust Corp. 150,000 4,163
UnionBanCal Corp. 81,700 3,881
U.S. Bancorp. 427,900 14,656
Zions Bancorp. 83,300 6,487
154,233
CREDIT & OTHER FINANCE - 0.2%
IMC Mortgage Co. (a) 100,000 2,400
Triad Guaranty, Inc. (a) 154,200 3,585
5,985
INSURANCE - 1.8%
American National Insurance Co. 16,000 1,028
Amerin Corp. (a) 39,400 877
Berkley (W.R.) Corp. 137,360 5,597
Cincinnati Financial Corp. 136,500 7,610
Delphi Financial Group, Inc. Class A (a) 102,600 2,783
Life USA Holding, Inc. (a) 506,500 3,989
Mercury General Corp. 118,600 5,070
Ohio Casualty Corp. 222,700 7,071
SAFECO Corp. 159,700 5,500
Trenwick Group, Inc. 108,300 5,280
US Facilities Corp. 94,000 1,539
46,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
SAVINGS & LOANS - 1.1%
Astoria Financial Corp. 156,200 $ 4,178
Charter One Financial Corp. 297,900 11,022
Collective Bancorp., Inc. 182,800 4,330
First Financial Corp. of Wisconsin 100,000 2,200
Long Island Bancorp., Inc. 180,000 5,096
Washington Federal, Inc. 152,000 3,230
30,056
TOTAL FINANCE 236,618
HEALTH - 10.3%
DRUGS & PHARMACEUTICALS - 2.9%
Alkermes, Inc. (a) 150,000 1,855
Amgen, Inc. (a) 358,400 19,577
Andrx Corp. (a) 67,000 887
Anesta Corp. 5,600 68
Biogen, Inc. (a) 129,800 7,933
COR Therapeutics, Inc. (a) 127,800 973
Cell Genesys, Inc. (a) 345,100 2,242
Copley Pharmaceutical, Inc. (a) 334,500 3,888
Genzyme Corp. (a) 220,000 5,472
Guilford Pharmaceuticals, Inc. (a) 221,600 4,791
Idexx Laboratories 150,000 5,812
Inhale Therapeutic Systems (a) 81,900 1,289
Magainin Pharmaceuticals, Inc. (a) 497,300 4,040
Nature's Sunshine Products, Inc. 165,000 3,629
Protein Design Labs, Inc. (a) 180,600 3,216
Sepracor, Inc. (a) 237,900 3,210
Sigma Aldrich Corp. 140,000 7,349
Watson Pharmaceuticals, Inc. (a) 30,000 1,169
77,400
MEDICAL EQUIPMENT & SUPPLIES - 3.4%
BEC Group, Inc. (a) 50,000 263
Biomet, Inc. (a) 1,245,800 19,154
Conmed Corp. (a) 369,900 6,381
Cygnus, Inc. (a) 214,800 3,034
Datascope Corp. (a) 385,450 6,649
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - CONTINUED
Nellcor, Inc. (a) 1,648,000 $ 38,934
St. Jude Medical, Inc. (a) 301,150 10,126
Stryker Corp. 220,000 5,407
89,948
MEDICAL FACILITIES MANAGEMENT - 4.0%
FHP International Corp. (a) 120,000 3,135
Integramed America, Inc. (a) 200,000 469
Lincare Holdings, Inc. (a) 632,240 24,657
Oxford Health Plans, Inc. (a) 547,100 18,875
PacifiCare Health Systems, Inc. 20,700 1,392
PacifiCare Health Systems, Inc. Class B 105,000 7,101
PhyMatrix Corp. (a) 417,300 9,024
Physician Corp. of America (a) 515,600 5,285
TheraTx, Inc. (a)(c) 1,502,700 25,734
Vencor, Inc. (a) 366,600 10,036
105,708
TOTAL HEALTH 273,056
HOLDING COMPANIES - 0.1%
Nolato AB Class B Free shares 261,700 2,143
INDUSTRIAL MACHINERY & EQUIPMENT - 2.1%
ELECTRICAL EQUIPMENT - 0.3%
California Microwave Corp. (a) 73,000 885
Glenayre Technologies, Inc. (a) 78,150 2,882
Omron Corp. 75,000 1,376
Roper Industries, Inc. 97,100 3,593
8,736
INDUSTRIAL MACHINERY & EQUIPMENT - 1.7%
BW/IP Holdings, Inc. Class A 677,200 11,428
Duriron Co., Inc. 390,000 8,970
Greenfield Industries, Inc. 240,200 6,936
MTS Systems Corp. 100,000 1,975
Park Ohio Industries, Inc. (a) 361,063 6,048
Stewart & Stevenson Services, Inc. 490,000 10,596
45,953
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.1%
WMX Technologies, Inc. 78,000 $ 2,311
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 57,000
MEDIA & LEISURE - 5.8%
BROADCASTING - 2.5%
American Telecasting, Inc. (a) 248,700 2,674
Comcast Corp. Class A special 24,200 342
Evergreen Media Corp. Class A (a) 155,000 6,781
Heartland Wireless Communications, Inc. (a) 357,500 7,865
PanAmSat Corp. (a) 268,900 7,126
People's Choice TV Corp. (a) 136,700 1,845
Sinclair Broadcast Group, Inc. Class A (a) 274,800 11,129
TCI Group Class A 2,035,900 29,012
66,774
ENTERTAINMENT - 0.3%
All American Communications, Inc. 100,000 925
Ameristar Casinos, Inc. (a) 148,000 1,110
Scientific Games Holdings Corp. 300,000 6,075
8,110
LEISURE DURABLES & TOYS - 0.1%
Arctco, Inc. 158,350 1,682
LODGING & GAMING - 0.7%
Anchor Gaming (a) 250,600 14,660
Doubletree Corp. (a) 11,900 390
Penn National Gaming, Inc. (a) 171,300 3,426
18,476
PUBLISHING - 1.2%
Scholastic Corp. (a) 493,800 32,220
RESTAURANTS - 1.0%
Applebee's International, Inc. 100,000 2,513
IHOP Corp. (a) 125,300 2,882
Lone Star Steakhouse Saloon (a) 486,800 15,213
Longhorn Steaks, Inc. (a) 162,600 2,520
Outback Steakhouse, Inc. (a) 151,800 3,909
27,037
TOTAL MEDIA & LEISURE 154,299
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - 1.1%
FOODS - 0.2%
Tyson Foods, Inc. 208,200 $ 5,127
HOUSEHOLD PRODUCTS - 0.9%
Alberto-Culver Co. Class A 350,000 12,819
Brady (W.H.) Co. Class A 217,000 4,720
Inbrand Corp. (a) 14,900 350
Safeskin Corp. 130,500 4,763
22,652
TOTAL NONDURABLES 27,779
PRECIOUS METALS - 0.3%
Stillwater Mining Co. (a) 134,900 2,900
Stillwater Mining Co. (a)(b) 200,000 4,300
7,200
RETAIL & WHOLESALE - 8.4%
APPAREL STORES - 0.8%
Gymboree Corp. (a) 372,550 8,662
Just for Feet, Inc. 218,100 8,560
Loehmanns, Inc. (a) 153,500 3,166
Ross Stores, Inc. 41,000 1,210
21,598
DRUG STORES - 0.2%
General Nutrition Companies, Inc. (a) 308,800 4,400
GENERAL MERCHANDISE STORES - 2.8%
Casey's General Stores, Inc. 130,000 2,194
Dollar Tree Stores (a) 508,500 14,747
Freds, Inc. Class A 300,000 2,888
Michaels Stores, Inc. (a) 458,500 4,986
Nordstrom, Inc. 190,000 7,885
Price/Costco, Inc. (a) 726,400 14,891
Proffitts, Inc. (a) 733,700 25,863
73,454
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 0.8%
Central Garden & Pet Co. 300,000 $ 6,300
Food Lion, Inc. Class B 115,000 970
Richfood Holdings, Inc. Class A 434,800 14,729
21,999
RETAIL & WHOLESALE, MISCELLANEOUS - 3.8%
Bed Bath & Beyond, Inc. (a) 201,200 4,426
Books-A-Million, Inc. (a) 85,600 556
CDW Computer Centers, Inc. (a) 85,000 4,686
Cameron Ashley, Inc. (a) 28,000 280
Corporate Express, Inc. (a) 177,000 6,615
Gadzooks, Inc. (a) 160,500 3,892
Gulf South Medical Supply, Inc. 80,000 1,400
Micro Warehouse, Inc. (a) 44,000 979
PETsMART, Inc. (a) 558,000 12,834
Sodak Gaming, Inc. (a) 199,200 7,719
Spiegel, Inc. Class A 76,200 705
Staples, Inc. (a) 829,000 13,782
Sunglass Hut International, Inc. (a) 416,400 4,945
U.S. Office Products Co. (a) 778,900 22,199
Viking Office Products, Inc. (a) 440,000 12,980
Wilmar Industries, Inc. (a) 92,500 1,653
99,651
TOTAL RETAIL & WHOLESALE 221,102
SERVICES - 1.0%
ADVERTISING - 0.3%
Interpublic Group of Companies, Inc. 183,300 8,088
Universal Outdoor Holdings, Inc. 21,000 441
8,529
SERVICES - 0.7%
Borg Warner Security Corp. (a) 50,000 438
Cintas Corp. 37,500 1,913
Employee Solutions, Inc. 83,000 1,432
HCIA, Inc. (a) 94,900 5,433
ICTS Holland Production BV 36,500 370
Medaphis Corp. (a) 150,000 5,569
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - CONTINUED
SERVICES - CONTINUED
Premier Technologies, Inc. (a) 105,200 $ 2,314
Sterling Healthcare Group, Inc. (a) 21,500 417
Zebra Technologies Corp. Class A (a) 35,000 608
18,494
TOTAL SERVICES 27,023
TECHNOLOGY - 38.2%
COMMUNICATIONS EQUIPMENT - 7.5%
ADC Telecommunications, Inc. (a) 118,500 5,007
Aspect Telecommunications Corp. (a) 195,600 9,438
Brite Voice Systems, Inc. (a) 270,600 4,228
Cisco Systems, Inc. (a) 1,642,800 85,015
DSC Communications Corp. (a) 762,100 22,863
Dialogic Corp. (a) 132,700 3,483
Dynatech Corp. (a) 110,100 3,661
InterVoice, Inc. (a) 220,000 3,190
Network General Corp. (a) 100,000 1,763
Tellabs, Inc. (a) 123,300 7,367
3Com Corp. (a) 694,600 27,350
U.S. Robotics Corp. (a) 450,000 24,188
197,553
COMPUTER SERVICES & SOFTWARE - 17.0%
Advent Software, Inc. (a) 90,500 2,149
American Business Information, Inc. (a) 387,500 5,280
American Management Systems, Inc. (a) 285,000 6,341
Ascend Communications, Inc. (a) 546,200 26,491
BDM International, Inc. (a) 80,200 4,190
BMC Software, Inc. (a) 265,000 16,960
Bisys Group, Inc. (The) (a) 98,575 3,007
Black Box Corp. (a) 172,100 4,238
Boole & Babbage, Inc. (a) 135,450 3,285
Broderbund Software, Inc. (a) 521,300 17,138
CSG Systems International, Inc. (a) 41,000 851
Casino Data Systems (a) 1,900 27
Citrix Systems, Inc. (a) 602,300 22,737
Compuware Corp. (a) 293,300 12,355
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
Data Broadcasting Corp. (a) 46,800 $ 357
ECI Telecom Ltd. 234,800 4,080
Electronic Arts, Inc. (a) 325,000 9,750
Electronics for Imaging, Inc. 100,000 5,825
Fiserv, Inc. (a) 372,300 12,472
HBO & Co. 200,000 12,250
Macromedia, Inc. (a) 593,300 9,567
Maxis, Inc. (a) 406,400 5,588
McAfee Associates, Inc. (a) 270,325 13,584
Microsoft Corp. (a) 503,900 59,397
Netscape Communications Corp. (a) 370,000 14,615
Oracle Systems Corp. (a) 2,246,825 87,907
PC Docs Group International, Inc. (a) 100,000 1,513
Parametric Technology Corp. (a) 305,060 12,698
Paychex, Inc. 151,200 6,917
PeopleSoft, Inc. (a) 99,200 6,702
Physician Support Systems, Inc. (a) 69,700 1,063
Quickresponse Services, Inc. (a) 100,000 2,800
Saville Systems Ireland PLC sponsored ADR (a) 801,900 20,749
Softkey International, Inc. (a) 278,700 5,156
Softdesk, Inc. (a) 121,700 730
SunGard Data Systems, Inc. (a) 364,200 14,887
Sybase, Inc. (a) 96,700 1,789
Synopsys, Inc. 32,400 1,207
Technology Solutions, Inc. (a) 311,250 7,003
Wind River Systems, Inc. (a) 150,250 5,071
448,726
COMPUTERS & OFFICE EQUIPMENT - 4.8%
Adaptec, Inc. (a) 383,800 15,928
Canon, Inc. 311,000 5,881
Cornerstone Imaging (a) 53,100 292
Dell Computer Corp. (a) 733,600 40,715
Encad, Inc. (a) 245,000 5,911
FileNet Corp. (a) 281,000 6,252
Gateway 2000, Inc. (a) 456,100 18,301
Sun Microsystems, Inc. (a) 5,100 279
Tech Data Corp. (a) 737,600 16,319
Trident International, Inc. (a) 32,500 561
Wang Laboratories, Inc. (a) 910,700 16,279
126,718
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.1%
ADE Corp. (a) 154,100 $ 1,425
Analogic Corp. 15,000 428
1,853
ELECTRONICS - 8.4%
Altera Corp. (a) 274,100 11,238
Cascade Communications Corp. (a) 130,000 7,995
DH Technology, Inc. (a) 308,100 7,279
DII Group, Inc. (a) 119,400 2,836
Intel Corp. 1,395,200 104,814
Linear Technology Corp. 839,600 26,447
Maxim Integrated Products, Inc. (a) 499,500 14,236
Molex, Inc. 458,937 13,539
Sanmina Corp. (a) 184,300 5,852
Xilinx, Inc. (a) 835,000 27,033
221,269
PHOTOGRAPHIC EQUIPMENT - 0.4%
Fuji Photo Film Co. Ltd. 383,000 11,437
TOTAL TECHNOLOGY 1,007,556
TRANSPORTATION - 4.4%
AIR TRANSPORTATION - 0.8%
Atlantic Southeast Airlines, Inc. 100,000 2,363
Northwest Airlines Corp. Class A (a) 498,600 18,324
20,687
RAILROADS - 0.6%
Wisconsin Central Transportation Corp. (a) 467,800 14,619
TRUCKING & FREIGHT - 3.0%
Air Express International Corp. 577,900 15,170
American Freightways Corp. (a) 250,000 2,594
Consolidated Freightways, Inc. 356,800 7,002
Covenant Transport, Inc. Class A (a) 159,100 2,983
Expeditors International of Washington, Inc. 228,000 6,555
Harper Group, Inc. 201,000 3,769
Heartland Express, Inc. (a) 100,000 2,600
Hunt (J.B.) Transport Services, Inc. 560,600 10,301
Knight Transportation, Inc. (a) 75,000 1,388
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - CONTINUED
Landair Services, Inc. (a) 219,100 $ 2,739
Landstar System, Inc. (a) 150,300 3,870
M.S. Carriers, Inc. (a) 324,500 6,815
Roadway Express, Inc. 180,600 2,641
USFreightways Corp. 249,300 4,410
Werner Enterprises, Inc. 112,200 2,847
Yellow Corp. (a) 350,500 4,469
80,153
TOTAL TRANSPORTATION 115,459
UTILITIES - 3.8%
CELLULAR - 1.6%
Arch Communications Group, Inc. (a) 654,500 9,408
Boston Communications Group, Inc. (a) 53,000 742
Nextel Communications, Inc. Class A (a) 460,000 6,958
Pagemart Wireless, Inc. Class A (a) 865,000 9,083
Palmer Wireless, Inc. (a) 203,900 3,543
36O Degrees Communications Co. (a) 456,600 10,559
Vanguard Cellular Systems, Inc. Class A (a) 128,800 2,335
42,628
ELECTRIC UTILITY - 0.4%
Veba AG Ord. 200,000 10,181
TELEPHONE SERVICES - 1.8%
Intermedia Communications of Florida, Inc. (a) 76,900 1,942
MCI Communications Corp. 509,600 12,549
MFS Communications, Inc. (a) 702,400 22,126
Transaction Network Services, Inc. (a) 105,900 1,509
WorldCom, Inc. (a) 380,774 9,853
47,979
TOTAL UTILITIES 100,788
TOTAL COMMON STOCKS
(Cost $2,158,916) 2,432,588
CONVERTIBLE PREFERRED STOCKS - 1.1%
SHARES VALUE (NOTE 1)
(000S)
FINANCE - 1.1%
SAVINGS & LOANS - 1.1%
Washington Mutual, Inc., Series D, $6.00
(Cost $24,860) 201,000 $ 28,241
CONVERTIBLE BONDS - 0.6%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
HEALTH - 0.4%
MEDICAL FACILITIES MANAGEMENT - 0.4%
US Diagnostic Labs, Inc. 9%, 3/31/03 (b) - $ 7,000 9,100
MEDIA & LEISURE - 0.2%
ENTERTAINMENT - 0.2%
All American Communications, Inc.
6 1/2%, 10/1/03 (a)(b) - 6,900 5,762
TOTAL CONVERTIBLE BONDS
(Cost $17,205) 14,862
REPURCHASE AGREEMENTS - 6.2%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.65%, dated
7/31/96 due 8/1/96 $ 164,012 163,986
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,364,967) $ 2,639,677
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 $19,162,000 or 0.7% of net
assets.
3. Affiliated company (see Note 6 of Notes to Financial Statements).
INCOME TAX INFORMATION
At July 31,1996, the aggregate cost of investment securities for income tax
purposes was $2,375,300,000. Net unrealized appreciation aggregated
$264,377,000, of which $418,303,000 related to appreciated investment
securities and $153,926,000 related to depreciated investment securities.
The fund hereby designates approximately $69,274,000 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, 1996
ASSETS
Investment in securities, at value (including repurchase $ 2,639,677
agreements of $163,986) (cost $2,364,967) -
See accompanying schedule
Cash 1,268
Receivable for investments sold 62,123
Receivable for fund shares sold 19,349
Dividends receivable 825
Interest receivable 353
Other receivables 1,032
TOTAL ASSETS 2,724,627
LIABILITIES
Payable for investments purchased $ 75,821
Payable for fund shares redeemed 11,449
Accrued management fee 1,156
Other payables and accrued expenses 1,058
TOTAL LIABILITIES 89,484
NET ASSETS $ 2,635,143
Net Assets consist of:
Paid in capital $ 2,061,278
Undistributed net investment income 8,871
Accumulated undistributed net realized gain (loss) on 290,283
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 274,711
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 84,466 shares outstanding $ 2,635,143
NET ASSET VALUE and redemption price per share $31.20
($2,635,143 (divided by) 84,466 shares)
Maximum offering price per share (100/97.00 of $31.20) $32.16
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME $ 12,890
Dividends (including $34 received from affiliated issuers)
Interest 17,505
TOTAL INCOME 30,395
EXPENSES
Management fee $ 16,143
Basic fee
Performance adjustment (3,099)
Transfer agent fees 6,067
Accounting fees and expenses 780
Non-interested trustees' compensation 12
Custodian fees and expenses 114
Registration fees 194
Audit 49
Legal 24
Total expenses before reductions 20,284
Expense reductions (259) 20,025
NET INVESTMENT INCOME 10,370
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of $1,345 381,159
on sale of investments in affiliated issuers)
Foreign currency transactions (167) 380,992
Change in net unrealized appreciation (depreciation) on:
Investment securities (255,945)
Assets and liabilities in foreign currencies 2 (255,943)
NET GAIN (LOSS) 125,049
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 135,419
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,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 10,370 $ 5,210
Net investment income
Net realized gain (loss) 380,992 60,211
Change in net unrealized appreciation (depreciation) (255,943) 493,273
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 135,419 558,694
FROM OPERATIONS
Distributions to shareholders (1,479) (5,090)
From net investment income
From net realized gain (130,433) (6,456)
TOTAL DISTRIBUTIONS (131,912) (11,546)
Share transactions 2,256,968 1,283,245
Net proceeds from sales of shares
Reinvestment of distributions 129,010 11,034
Cost of shares redeemed (1,864,420) (961,208)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 521,558 333,071
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 525,065 880,219
NET ASSETS
Beginning of period 2,110,078 1,229,859
End of period (including undistributed net investment $ 2,635,143 $ 2,110,078
income of $8,871 and $0, respectively)
OTHER INFORMATION
Shares
Sold 70,969 50,478
Issued in reinvestment of distributions 4,239 495
Redeemed (58,605) (37,963)
Net increase (decrease) 16,603 13,010
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JULY 31,
1996 1995 1994 C 1993 1992
SELECTED PER-SHARE DATA
Net asset value, beginning $ 31.09 $ 22.42 $ 25.90 $ 24.65 $ 24.28
of period
Income from Investment
Operations
Net investment income .13 .09 .12 .06 .08
Net realized and 1.80 8.79 (.08) 3.68 2.92
unrealized gain (loss)
Total from 1.93 8.88 .04 3.74 3.00
investment operations
Less Distributions
From net investment (.02) (.09) (.12) (.25) (.12)
income
From net realized gain (1.80) (.12) (3.40) (2.24) (2.51)
Total distributions (1.82) (.21) (3.52) (2.49) (2.63)
Net asset value, end $ 31.20 $ 31.09 $ 22.42 $ 25.90 $ 24.65
of period
TOTAL RETURN A, B 6.43% 39.98% (.36)% 16.67% 13.30%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,635 $ 2,110 $ 1,230 $ 1,327 $ 1,037
(in millions)
Ratio of expenses to .83% .82% .89% 1.08% 1.17%
average net assets
Ratio of expenses to .82% D .81% .88% 1.08% 1.17%
average net assets after D D
expense reductions
Ratio of net investment .42% .35% .48% .53% .59%
income to average
net assets
Portfolio turnover rate 133% 62% 222% 213% 245%
</TABLE>
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
G TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
H 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.
I FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 5 OF
NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1996
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 financial statements have been prepared
in conformity with generally accepted accounting principles which permit
management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities 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 and foreign currency options, 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
as the fund is informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for litigation
proceeds, foreign currency transactions and losses deferred due to wash
sales. The fund also utilized earnings and profits distributed to
shareholders on redemption of shares as a part of the dividends paid
deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital 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. 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.
2. OPERATING POLICIES - CONTINUED
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 for U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
FUTURES CONTRACTS AND OPTIONS. The fund may use futures and options
contracts to manage its exposure to the stock and bond markets and to
fluctuations in interest rates and currency values. Buying futures, writing
puts, and buying calls tend to increase the fund's exposure to the
underlying instrument. Selling futures, buying puts, and writing calls tend
to decrease the fund's exposure to the underlying instrument, or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparties do not perform under the contracts'
terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $3,371,920,000 and $2,927,742,000, respectively, of which U.S.
government and government agency obligations aggregated $109,469,000 and
$103,033,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2500% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. - CONTINUED
MANAGEMENT FEE - CONTINUED
implemented the above rates, as they resulted in the same or a lower
management fee. The annual individual fund fee rate is .35%. The basic fee
is subject to a performance adjustment (up to a maximum of (plus/minus)
.20%) based on the fund's investment performance as compared to the
appropriate index over a specified period of time. For the period, the
management fee was equivalent to an annual rate of .53% 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 $887,000 on sales of shares of the fund.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .25%
of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $257,000 for
the period.
5. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$130,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $8,000 and $121,000,
respectively, under these arrangements.
6. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Robinson Nugent, Inc. $ - $ 2,339 $ 34 $ -
Telor Ophthalmic Pharmaceuticals, Inc. - 918 - -
TheraTx, Inc. 7,229 - - 25,734
TOTALS $ 7,229 $ 3,257 $ 34 $ 25,734
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, 1996, 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, 1996, 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, 1996,
the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 6, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity OTC Portfolio voted to pay on September
9, 1996, to shareholders of record at the opening of business on September
6, 1996, a distribution of $2.77 per share derived from capital gains
realized from sales of portfolio securities and a dividend of $.08 per
share from net investment income.
A total of 1.16% 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 12% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 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)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)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
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
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
56 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
595 North Barker Road
Brookfield, WI
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
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 *
ADVISORY BOARD
William O. McCoy
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, 1996
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
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will begin eliminating duplicate
copies of most financial reports and prospectuses to most households, even
if they have more than one account in the fund. If additional copies of
financial reports, prospectuses or historical account information are
needed, please call 1-800-544-6666.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND EXPENSES,
CALL
1-800-544-8888 FOR A FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST
OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although stocks have managed to post solid returns through the first seven
months of 1996, signs of strength in the economy have led to inflation
fears, causing some uncertainty in both the stock and bond markets so far
this year. In 1995, both stock and bond markets posted strong results,
while the year before, stocks posted below-average returns and bonds had
one of the worst years in history.
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. 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). Effective October 20, 1995, the
fund's 3% sales charge was eliminated. If this sales charge had been taken
into account, total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Growth & Income 18.39% 107.60% 339.40%
S&P 500(registered trademark) 16.57% 89.62% 269.48%
Growth & Income Funds Average 13.09% 79.71% 207.87%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, one, five, or 10 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 return
to the performance of the Standard & Poor's 500 Index - a widely
recognized, unmanaged index of common stocks. To measure how the fund's
performance stacked up against its peers, you can compare it to the growth
& income funds average, which reflects the performance of 490 mutual funds
with similar objectives tracked by Lipper Analytical Services, Inc. over
the past 12 months. Both benchmarks reflect reinvestment of dividends and
capital gains, if any, but do not reflect any sales charges, brokerage
commissions, or other costs of investing.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1996 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Growth & Income 18.39% 15.73% 15.95%
S&P 500 16.57% 13.65% 13.94%
Growth & Income Funds Average 13.09% 12.33% 11.78%
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
IMAHDR PRASUN SHR__CHT 19960731 19960814 145431 S00000000000001
Growth & Income SP Standard & Poor 500
00027 SP001
1986/07/31 10000.00 10000.00
1986/08/31 10537.47 10742.00
1986/09/30 9863.74 9853.64
1986/10/31 10341.92 10422.19
1986/11/30 10372.31 10675.45
1986/12/31 10174.54 10403.23
1987/01/31 11403.42 11804.54
1987/02/28 11945.35 12270.82
1987/03/31 12304.09 12625.45
1987/04/30 12289.30 12513.08
1987/05/31 12335.36 12621.94
1987/06/30 12788.24 13259.35
1987/07/31 13497.28 13931.60
1987/08/31 13768.16 14451.25
1987/09/30 13659.81 14134.77
1987/10/31 10813.63 11090.14
1987/11/30 10235.67 10176.31
1987/12/31 10762.05 10950.73
1988/01/31 11436.82 11411.75
1988/02/29 12043.25 11943.54
1988/03/31 11784.61 11574.49
1988/04/30 11974.40 11702.96
1988/05/31 12129.69 11804.78
1988/06/30 12690.37 12346.62
1988/07/31 12681.66 12299.70
1988/08/31 12533.59 11881.51
1988/09/30 12987.51 12387.66
1988/10/31 13242.51 12732.04
1988/11/30 13049.06 12549.97
1988/12/31 13234.91 12769.60
1989/01/31 14063.76 13704.33
1989/02/28 13912.25 13363.09
1989/03/31 14342.19 13674.45
1989/04/30 14953.65 14384.16
1989/05/31 15655.02 14966.72
1989/06/30 15762.63 14881.41
1989/07/31 16823.14 16225.20
1989/08/31 17185.71 16543.21
1989/09/30 17093.43 16475.38
1989/10/31 16553.33 16093.16
1989/11/30 16828.12 16421.46
1989/12/31 17152.64 16815.57
1990/01/31 16253.55 15687.25
1990/02/28 16503.30 15889.61
1990/03/31 16793.17 16310.69
1990/04/30 16359.99 15902.92
1990/05/31 17568.86 17453.45
1990/06/30 17487.21 17334.77
1990/07/31 17365.35 17279.30
1990/08/31 15882.69 15717.25
1990/09/30 14966.86 14951.82
1990/10/31 14935.68 14887.53
1990/11/30 15673.63 15849.26
1990/12/31 15986.87 16291.46
1991/01/31 17446.91 17001.76
1991/02/28 18917.45 18217.39
1991/03/31 19959.50 18658.25
1991/04/30 20234.37 18703.03
1991/05/31 21397.26 19511.00
1991/06/30 19943.99 18617.40
1991/07/31 21165.92 19484.97
1991/08/31 21782.20 19946.76
1991/09/30 21590.07 19613.65
1991/10/31 21976.20 19876.47
1991/11/30 20828.85 19075.45
1991/12/31 22676.05 21257.68
1992/01/31 23218.33 20862.29
1992/02/29 23727.40 21133.50
1992/03/31 23240.04 20721.40
1992/04/30 23762.66 21330.61
1992/05/31 23851.62 21435.13
1992/06/30 23382.89 21115.74
1992/07/31 23863.75 21979.38
1992/08/31 23617.73 21528.80
1992/09/30 23859.64 21782.84
1992/10/31 24048.60 21859.08
1992/11/30 24791.85 22604.47
1992/12/31 25292.07 22882.51
1993/01/31 25997.84 23074.72
1993/02/28 26292.97 23388.54
1993/03/31 27257.98 23882.04
1993/04/30 27219.26 23304.09
1993/05/31 27787.13 23928.64
1993/06/30 28214.99 23998.03
1993/07/31 28422.64 23902.04
1993/08/31 29538.78 24807.93
1993/09/30 29699.58 24616.91
1993/10/31 30031.93 25126.48
1993/11/30 29353.92 24887.78
1993/12/31 30231.43 25188.92
1994/01/31 31374.30 26045.34
1994/02/28 30775.66 25339.51
1994/03/31 29421.81 24234.71
1994/04/30 30009.43 24544.92
1994/05/31 30105.09 24947.45
1994/06/30 29582.58 24336.24
1994/07/31 30433.68 25134.47
1994/08/31 31600.51 26164.98
1994/09/30 31233.62 25523.94
1994/10/31 31605.79 26098.23
1994/11/30 30432.02 25147.73
1994/12/31 30916.82 25520.67
1995/01/31 31283.31 26182.42
1995/02/28 32206.85 27202.75
1995/03/31 33220.40 28005.50
1995/04/30 34148.10 28830.27
1995/05/31 35119.97 29982.61
1995/06/30 35753.83 30679.11
1995/07/31 37114.20 31696.43
1995/08/31 37395.14 31775.99
1995/09/30 38898.77 33116.93
1995/10/31 38716.57 32998.70
1995/11/30 40538.53 34447.35
1995/12/31 41855.89 35110.80
1996/01/31 43248.50 36305.98
1996/02/29 43728.18 36642.53
1996/03/31 44100.20 36995.40
1996/04/30 44550.52 37540.71
1996/05/31 45404.58 38508.89
1996/06/30 45684.83 38655.61
1996/07/31 43939.71 36947.80
IMATRL PRASUN SHR__CHT 19960731 19960814 145436 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested
in Fidelity Growth & Income Portfolio on July 31, 1986. As the chart shows,
by July 31, 1996, the value of the investment would have grown to $43,940 -
a 339.40% increase on the initial investment. For comparison, look at how
the S&P 500 did over the same period. With dividends and capital gains, if
any, reinvested, the same $10,000 investment would have grown to $36,948 -
a 269.48% 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
Although growing fears of lower
corporate earnings dampened
the stock market's momentum at
the end of the period, the U.S.
stock market posted solid gains
over the 12 months ended July 31,
1996. While several corporate
earnings disappointments made
for a volatile stock market in May,
June and July, the Standard &
Poor's 500 Index finished the 12
months with a return of 16.57% -
above its long-term historical
annual average of about 12%.
The stock market spent much of
the past year breaking price and
trading volume records as strong
corporate earnings reports, large
cash inflows into mutual funds
and widespread optimism
propelled equity share prices
higher. In addition, the period
was peppered with several
high-profile merger
announcements, especially in the
media, telecommunications and
technology sectors.
Smaller-company stocks posted
strong gains during the first few
months of 1996, and high-tech
firms involved in the networking
and software fields benefited
from strong earnings.
Semiconductor stocks, however,
suffered during the latter half of the
period as a result of overcapacity.
In March, better-than-expected
employment figures spooked the
bond market, pushing long-term
interest rates over 7%. Because
smaller companies tend to be
more adversely affected by the
higher borrowing costs brought
on by higher rates, their stock
prices trended downward in the
spring. While larger, multinational
firms recorded positive gains,
their returns were hurt somewhat
by the strengthening dollar.
An interview with Steven Kaye, Portfolio Manager of Fidelity Growth &
Income Portfolio
Q. HOW HAS THE FUND PERFORMED, STEVE?
A. It has done well over the past 12 months. During that period, the fund
posted a total return of 18.39%, while the growth & income funds average
tracked by Lipper Analytical Services returned 13.09%. For the 12 months
ended July 31, 1996, the Standard & Poor's 500 Index had a total return of
16.57%.
Q. WHAT HELPED THE FUND DO SO WELL COMPARED TO THE LIPPER AVERAGE AND THE
S&P 500?
A. While the fund's investments in certain sectors helped performance, I
believe the fund did so well due to individual stock selection. I don't
spend a lot of time trying to position the fund to take advantage of
economic or sector-oriented trends. Rather, I'm a bottom-up stock picker,
choosing stocks of companies with solid business prospects selling at
prices that are inexpensive relative to their historical range. During the
period I found such companies across a number of sectors. If I believe a
company's management is doing a good job, I tend to buy its stock and hold
on to it for a long time. Shareholders will notice that the fund's top 10
investments at the end of the period contain seven of the stocks that made
up that group six months ago, and that sector weightings have been steady
as well. That's because I try to buy stocks with a multiple-year time
horizon. I don't make a lot of changes if the business prospects of the
fund's holdings remain positive. I sell a stock if business prospects
change or if I find its valuation has become high relative to historical
levels.
Q. EVEN THOUGH YOU PICK INVESTMENTS STOCK-BY-STOCK, THERE MUST HAVE BEEN
SOME SECTORS THAT PERFORMED WELL, IN GENERAL AND FOR THE FUND.
A. Certainly. Aerospace and defense was one. This is a sector that has
experienced a great deal of consolidation recently. Mergers and
acquisitions have reduced competition and created opportunities for cost
savings. The fund benefited when a stock it owned, Loral, was purchased by
Lockheed Martin, another of the fund's investments. The fund also owns
Northrop Grumman, General Dynamics, Raytheon, Litton Industries and
McDonnell Douglas. These companies generally have been able to generate
strong free cash flow that has enabled them to buy back stock or acquire
other companies. Two other factors have made stocks in the sector
attractive. First, they have been inexpensive for the most part. Second, it
appears that we're at or near a bottom in government-related defense
expenditures. Any increase in this spending should help these companies
quite a bit.
Q. HOW ABOUT CONSUMER NONDURABLE STOCKS? THEY'VE DONE FAIRLY WELL OVER THE
PAST 12 MONTHS, HAVEN'T THEY?
A. Yes, they have, because investors were attracted to the steady earnings
growth they tend to provide regardless of the economic backdrop. There has
been a fair amount of uncertainty over the direction of the economy during
the past 12 months, so this sector has attracted a fair amount of interest.
The fund has had less invested in nondurables than the S&P 500, but two of
its better performers and largest investments at the end of the period came
from this sector. Philip Morris and PepsiCo delivered strong earnings
growth and solid dividends, and they have both bought back stock.
Q. LET'S TALK ABOUT TWO MORE OF THE FUND'S TOP FIVE SECTORS, ENERGY AND
HEALTH . . .
A. Energy stocks have done very well in 1996. That's because natural gas
prices went up due to a cold winter and oil prices have risen more than
expected around the world, so demand for drilling activity has increased.
In addition, the oil field service industry has seen a fair amount of
consolidation over the past few years. As a result of decreased
competition, the remaining companies tend to make more money when demand
increases. Among the stocks that helped the fund were Royal Dutch
Petroleum, Schlumberger, Baker Hughes and Dresser. In the health sector,
pharmaceutical stocks such as Bristol-Myers Squibb, American Home Products,
Pfizer and Lilly did well, mainly for the same reason consumer nondurables
did - solid earnings growth in an uncertain economic environment. However,
health maintenance organization (HMO) stocks such as United Health Care
struggled because medical costs grew faster than price increases. As a
result, profit margins were squeezed and earnings fell short of
expectations.
Q. WERE THERE ANY OTHER AREAS THAT PROVED TO BE DISAPPOINTING?
A. Fortunately, those stocks that performed poorly tended to be very small
positions in the fund. Among those were Browning-Ferris Industries and WMX
Technologies. These pollution control companies posted worse-than-expected
earnings because of a collapse in recycled product prices.
Q. INTEREST RATES HAVE RISEN SINCE THE BEGINNING OF THE YEAR. THAT INCREASE
MUST HAVE HAD A NEGATIVE EFFECT ON THE FUND'S INVESTMENTS IN THE FINANCE
SECTOR.
A. It's true that rising interest rates generally have a negative effect on
these stocks. Nevertheless, many of the fund's finance stocks, including
its large stakes in Federal National Mortgage Association - Fannie Mae -
and American Express, performed fairly well. I believe that's because these
companies have continued to experience positive earnings growth, and
because they generally have been immune from the issues related to
deteriorating credit quality problems that have hurt some companies in the
sector.
Q. RETAIL AND WHOLESALE STOCKS HAVE INCREASED AS A PERCENTAGE OF THE FUND
WHILE UTILITY STOCKS HAVE DECREASED OVER THE PAST SIX MONTHS. WHAT WERE THE
STORIES BEHIND THOSE MOVES?
A. Retail was attractive for some time because valuations in the sector had
been beaten down to historically low levels, largely because of
overcapacity - too many stores and too much square footage. Fortunately, my
investments in this area posted solid results due to increases in sales
over the first six months of 1996. Consumers started to spend more on
durable items than they had previously. Stocks rebounded from their
depressed levels to reflect more of their fair value. Wal-Mart, May
Department Stores, Federated Department Stores, The Gap, The Limited, TJ
Maxx (TJX Companies) and Carson Pirie Scott were among the stocks that did
well, although I've cut back on some of these positions to take advantage
of their share price increases. Grocery store chains such as Safeway and
Kroger also helped. In the utilities sector, I made a conscious decision
not to add to local telephone companies such as SBC Communications and
Ameritech, which were among the fund's largest investments six months ago.
I was concerned about the competitive outlook for these stocks because of
the new telecommunications law that passed early in the year, and their
stock prices had reached rich - or expensive - levels relative to
historical levels.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. It's always difficult to predict the direction of the economy, and I
don't intend to do so. Meanwhile, the stock market has been quite volatile
over the past few months. I think that's healthy, because valuations in the
market appear to be expensive to me. I'll probably gravitate toward more
defensive names - companies with histories of steady earnings growth, or
those that are considered recession-proof - because I think profit margins
and valuations are above normal. Any economic slowdown would affect both
corporate earnings and stock valuations. That's why you might see more of
the fund invested in consumer nondurables, health care or in a stock such
as Fannie Mae that does well in a recession because people tend to continue
paying their mortgages.
FUND FACTS
GOAL: seeks a high total
return through a combination
of high current income and
capital appreciation
START DATE: December 30, 1985
SIZE: as of July 31, 1996,
more than $19.2 billion
MANAGER: Steven Kaye,
since 1993; also 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 INVESTING AND
STOCK MARKET VOLATILITY:
"We've seen some volatility in
the stock market over the past
few months, with the Dow
Jones Industrial Average
occasionally dropping sharply
and unable to develop much
of a consistent move upward.
Some declines we've seen in
the NASDAQ index have
been what I would call
breathtaking. At times like
these, it's important for
investors in equity mutual
funds to focus on the fact that
over the long term the market
has gone up. Almost no one is
a good enough investor to
time the market, getting in at
the low and out at the peak.
As a result, an investor should
aim to maintain consistency in
staying in the market. It's
important to ride out the tough
periods, to have the resolve to
hang in there and not lose
confidence. Unless investors
have a short-term investment
horizon, they're probably
better off staying invested in
the stock market and
enduring whatever downturns
they may confront. History
has shown that, over time,
investors have benefited from
investing in stocks - and
stock mutual funds - more
than any other class of
assets."
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Philip Morris Companies, Inc. 3.9 4.2
General Electric Co. 3.1 3.1
Royal Dutch Petroleum Co. ADR 2.0 0.6
Federal National Mortgage Association 1.8 2.3
British Petroleum PLC ADR 1.7 1.6
American Express Co. 1.7 1.9
Electronic Data Systems Corp. 1.4 1.0
(formerly General Motors Corp. Class
E)
PepsiCo, Inc. 1.4 1.4
Lockheed Martin Corp. 1.2 1.1
Bristol-Myers Squibb Co. 1.2 0.7
TOP FIVE MARKET SECTORS AS OF JULY 31, 1996
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Health 15.3 15.4
Finance 11.0 11.5
Nondurables 10.6 12.0
Energy 7.4 5.8
Retail & Wholesale 6.9 5.5
ASSET ALLOCATION
AS OF JULY 31, 1996 * AS OF JANUARY 31, 1996 **
Row: 1, Col: 1, Value: 8.6
Row: 1, Col: 2, Value: 1.8
Row: 1, Col: 3, Value: 1.3
Row: 1, Col: 4, Value: 40.0
Row: 1, Col: 5, Value: 48.3
Stocks 88.7%
Bonds 0.4%
Convertibles 0.6%
Short-term
investments 10.3%
FOREIGN
INVESTMENTS 5.9%
Stocks 90.2%
Bonds 0.4%
Convertibles 0.8%
Short-term
investments 8.6%
FOREIGN
INVESTMENTS 7.7%
Row: 1, Col: 1, Value: 10.3
Row: 1, Col: 2, Value: 1.6
Row: 1, Col: 3, Value: 1.4
Row: 1, Col: 4, Value: 46.7
Row: 1, Col: 5, Value: 40.0
*
**
INVESTMENTS JULY 31, 1996
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 90.2%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 4.4%
AEROSPACE & DEFENSE - 2.9%
British Aerospace PLC 2,456,939 $ 35,499
Flightsafety International, Inc. 578,300 26,602
Lockheed Martin Corp. 2,819,305 233,650
McDonnell Douglas Corp. 2,444,200 109,378
Northrop Grumman Corp. 1,724,900 118,587
Rockwell International Corp. 640,700 33,637
557,353
DEFENSE ELECTRONICS - 0.8%
Litton Industries, Inc. (a) 2,155,100 92,669
Raytheon Co. 1,251,400 60,693
153,362
SHIP BUILDING & REPAIR - 0.7%
General Dynamics Corp. 2,184,600 139,814
TOTAL AEROSPACE & DEFENSE 850,529
BASIC INDUSTRIES - 5.1%
CHEMICALS & PLASTICS - 4.1%
Air Products & Chemicals, Inc. 862,100 46,015
Carlisle Plastics, Inc. Class A (a)(c) 1,041,100 7,288
Cytec Industries, Inc. (a) 900,000 27,000
Dow Chemical Co. 251,600 18,713
du Pont (E.I.) de Nemours & Co. 1,154,600 93,234
Ethyl Corp. 2,988,900 26,900
Ferro Corp. (c) 1,583,600 42,559
Grace (W.R.) & Co. 1,027,200 65,484
Great Lakes Chemical Corp. 1,421,000 81,885
Hercules, Inc. 530,400 26,586
IMC Fertilizer Group, Inc. 1,250,300 49,387
Monsanto Co. 300,000 9,375
NL Industries, Inc. 501,000 5,073
Praxair, Inc. 3,388,900 130,048
Raychem Corp. 568,900 37,619
Schulman (A.), Inc. 1,275,500 28,699
Union Carbide Corp. 2,065,600 86,755
782,620
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
IRON & STEEL - 0.1%
Nucor Corp. 334,900 $ 15,698
METALS & MINING - 0.1%
Aluminum Co. of America 263,600 15,289
PACKAGING & CONTAINERS - 0.8%
Corning, Inc. 1,752,800 64,635
Crown Cork & Seal Co., Inc. 936,200 41,661
Tupperware Corp. 1,337,600 57,182
163,478
PAPER & FOREST PRODUCTS - 0.0%
James River Corp. of Virginia 178,900 4,517
TOTAL BASIC INDUSTRIES 981,602
CONGLOMERATES - 2.6%
AlliedSignal, Inc. 1,602,000 94,118
American Standard Companies, Inc. (a) 1,318,500 42,357
Dial Corp. (The) 513,300 15,014
Tyco International Ltd. 5,137,348 210,630
United Technologies Corp. 480,200 54,083
Whitman Corp. 4,089,200 91,496
507,698
CONSTRUCTION & REAL ESTATE - 1.9%
BUILDING MATERIALS - 0.3%
Sherwin-Williams Co. 1,300,200 58,834
REAL ESTATE - 0.1%
Rouse Co. (The) 871,200 21,780
REAL ESTATE INVESTMENT TRUSTS - 1.5%
Bay Apartment Communities, Inc. 411,900 10,452
Beacon Properties Corp. 997,700 26,190
CBL & Associates Properties, Inc. (c) 1,756,200 37,978
Cali Realty Corp. 333,900 7,721
Carr Realty Corp. 185,100 4,442
Crescent Real Estate Equities, Inc. 323,000 12,032
Duke Realty Investors, Inc. 350,500 10,427
Equity Residential Properties Trust (SBI) 1,903,685 64,249
Highwoods Properties, Inc. 480,500 13,274
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Irvine Apartment Communities, Inc. 191,400 $ 4,019
Liberty Property Trust (SBI) 628,200 12,485
Macerich Co. 647,600 13,519
Manufactured Home Communities, Inc. 526,100 9,601
Public Storage, Inc. 1,685,500 36,028
Speiker Properties, Inc. 421,500 12,013
Urban Shopping Centers, Inc. 644,900 14,833
289,263
TOTAL CONSTRUCTION & REAL ESTATE 369,877
DURABLES - 3.7%
AUTOS, TIRES, & ACCESSORIES - 1.5%
Chrysler Corp. 648,600 18,404
Eaton Corp. 726,400 40,497
Ford Motor Co. 150,900 4,904
General Motors Corp. 2,289,438 111,610
Scania AB:
Class A 293,500 7,856
Class B 893,500 23,916
Volvo AB Class B 3,800,000 82,409
289,596
CONSUMER DURABLES - 0.7%
Minnesota Mining & Manufacturing Co. 1,953,300 126,965
Swedish Match Co. 2,900,000 8,576
135,541
CONSUMER ELECTRONICS - 0.5%
Matsushita Electric Industrial Co. Ltd. 500,000 8,706
Newell Co. 1,842,800 59,200
Whirlpool Corp. 607,600 29,924
97,830
TEXTILES & APPAREL - 1.0%
Fruit of the Loom, Inc. Class A (a)(c) 4,429,300 111,840
Intimate Brands, Inc. Class A 888,300 18,210
Unifi, Inc. 2,070,600 57,200
187,250
TOTAL DURABLES 710,217
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 7.4%
ENERGY SERVICES - 1.5%
Baker Hughes, Inc. 835,100 $ 24,531
Dresser Industries, Inc. 1,000,300 27,008
Schlumberger Ltd. 2,085,700 166,856
Western Atlas, Inc. (a) 1,189,400 64,525
282,920
OIL & GAS - 5.9%
Amerada Hess Corp. 962,100 46,782
Amoco Corp. 468,200 31,311
Anadarko Petroleum Corp. 73,900 3,778
Atlantic Richfield Co. 100,000 11,600
British Petroleum PLC:
ADR 3,018,941 331,705
Ord. 4,090,460 37,044
Burlington Resources, Inc. 426,000 18,212
Chevron Corp. 650,400 37,642
Kerr-McGee Corp. 489,900 27,924
Mobil Corp. 485,800 53,620
Occidental Petroleum Corp. 2,319,400 51,897
Royal Dutch Petroleum Co. ADR 2,515,200 379,481
Total SA:
Class B 140,000 10,060
sponsored ADR 1,022,477 36,554
USX-Marathon Group 836,000 17,138
Unocal Corp. 1,258,932 41,073
1,135,821
TOTAL ENERGY 1,418,741
FINANCE - 10.7%
BANKS - 1.4%
Banc One Corp. 113,140 3,917
Bank of New York Co., Inc. 1,758,800 90,578
Citicorp 1,220,000 99,888
Fleet Financial Group, Inc. 1,509,599 61,139
National City Corp. 100,000 3,463
Norwest Corp. 439,400 15,599
274,584
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 2.4%
American Express Co. 7,469,630 $ 326,796
Associates First Capital Corp. (a) 207,000 7,944
Beneficial Corp. 870,600 47,012
First Chicago NBD Corp. 343,600 13,229
Household International, Inc. 815,582 60,761
455,742
FEDERAL SPONSORED CREDIT - 3.5%
Federal Home Loan Mortgage Corporation 1,530,800 128,970
Federal National Mortgage Association 10,984,000 348,742
Student Loan Marketing Association 2,712,800 198,034
675,746
INSURANCE - 3.1%
Allmerica Financial Corp. 1,042,800 30,893
Allstate Corp. 2,373,010 106,192
General Re Corp. 767,300 112,601
ITT Hartford Group, Inc. 3,663,500 193,708
MBIA, Inc. 1,195,100 90,379
PMI Group, Inc. 312,300 14,834
Travelers, Inc. (The) 864,499 36,525
UNUM Corp. 115,700 7,058
592,190
SECURITIES INDUSTRY - 0.3%
Lehman Brothers Holdings, Inc. 1,966,520 45,475
Nomura Securities Co. Ltd. 409,000 7,160
52,635
TOTAL FINANCE 2,050,897
HEALTH - 15.0%
DRUGS & PHARMACEUTICALS - 8.8%
Allergan, Inc. 2,918,000 118,909
American Home Products Corp. 3,265,000 185,289
Astra AB:
Class A Free shares 1,450,000 61,022
Class B Free shares 148,720 6,146
Bristol-Myers Squibb Co. 2,690,400 233,056
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
COR Therapeutics, Inc. (a) 517,000 $ 3,942
Genentech, Inc. special (a) 2,144,800 112,870
Lilly (Eli) & Co. 2,878,866 161,216
Merck & Co., Inc. 1,400,000 89,950
Pharmacia & Upjohn, Inc. 4,068,350 167,819
Pfizer, Inc. 2,215,400 154,801
Schering-Plough Corp. 2,073,800 114,318
SmithKline Beecham PLC ADR 2,786,100 149,753
Warner-Lambert Co. 2,300,160 125,359
1,684,450
MEDICAL EQUIPMENT & SUPPLIES - 4.8%
Bard (C.R.), Inc. 2,027,300 61,833
Bausch & Lomb, Inc. (c) 3,124,200 110,909
Baxter International, Inc. 3,342,100 139,115
Beckman Instruments, Inc. 669,300 24,095
Becton, Dickinson & Co. 643,800 48,044
Biomet, Inc. (a) 2,793,700 42,953
Boston Scientific Corp. (a) 335,895 16,039
Guidant Corp. 498,825 25,315
Johnson & Johnson 2,430,600 116,061
McKesson Corp. 338,900 14,742
Medtronic, Inc. 711,200 33,693
Nellcor, Inc. (a) 645,300 15,245
Pall Corp. 4,281,000 103,279
St. Jude Medical, Inc. (a) 3,429,850 115,329
Stryker Corp. 2,354,000 57,857
924,509
MEDICAL FACILITIES MANAGEMENT - 1.4%
Columbia/HCA Healthcare Corp. 711,177 36,447
FHP International Corp. (a) 742,500 19,398
Health Systems International, Inc. (a) 439,900 8,688
Tenet Healthcare Corp. (a) 5,738,200 111,178
United HealthCare Corp. 2,777,100 93,727
269,438
TOTAL HEALTH 2,878,397
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HOLDING COMPANIES - 0.2%
U.S. Industries, Inc. (a) 2,040,760 $ 45,917
INDUSTRIAL MACHINERY & EQUIPMENT - 5.2%
ELECTRICAL EQUIPMENT - 4.3%
Alcatel Alsthom Compagnie Generale d'Electricite SA 713,576 58,417
American Superconductor Corp. (a) 304,750 3,543
Duracell International, Inc. 575,000 25,947
Emerson Electric Co. 842,600 71,094
General Electric Co. 7,229,000 595,489
Loral Space & Communications Ltd. (a) 79,900 1,129
Oak Industries, Inc. (a)(c) 1,119,700 32,191
Omron Corp. 239,000 4,385
Scientific-Atlanta, Inc. 541,000 7,236
Sensormatic Electronics Corp. 1,696,200 25,867
825,298
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
Caterpillar, Inc. 4,800 316
Cooper Industries, Inc. 920,776 36,256
Stanley Works 427,100 12,172
48,744
POLLUTION CONTROL - 0.6%
Browning-Ferris Industries, Inc. 728,600 16,303
WMX Technologies, Inc. 3,022,700 89,547
105,850
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 979,892
MEDIA & LEISURE - 3.3%
BROADCASTING - 0.5%
Comcast Corp. Class A special 1,831,300 25,867
Home Shopping Network, Inc. (a) 1,249,000 12,646
Infinity Broadcasting Corp. Class A 697,084 19,170
Jacor Communications, Inc. Class A (a) 805,000 24,553
TCI Group Class A 900,000 12,825
95,061
ENTERTAINMENT - 0.1%
Disney (Walt) Co. 320,300 17,817
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 1.5%
Aztar Corp. (a) 1,379,900 $ 13,626
Hilton Hotels Corp. 245,600 25,051
ITT Corp. 3,537,400 200,747
Mirage Resorts, Inc. (a) 2,136,400 48,069
Trump Hotels & Casino Resorts, Inc. (a) 131,800 3,460
290,953
PUBLISHING - 0.9%
Dun & Bradstreet Corp. 1,774,800 102,051
Times Mirror Co. Class A 1,895,400 78,422
180,473
RESTAURANTS - 0.3%
Brinker International, Inc. (a) 782,600 10,272
Darden Restaurants, Inc. 4,422,700 34,829
Starbucks Corp. (a) 615,900 16,013
61,114
TOTAL MEDIA & LEISURE 645,418
NONDURABLES - 10.5%
AGRICULTURE - 0.1%
Pioneer Hi-Bred International, Inc. 363,100 19,517
BEVERAGES - 1.9%
Anheuser-Busch Companies, Inc. 1,320,000 98,670
PepsiCo, Inc. 8,444,000 267,042
365,712
FOODS - 2.0%
General Mills, Inc. 1,128,100 61,199
Kellogg Co. 878,000 65,631
Nestle SA (Reg.) 20,000 22,826
Quaker Oats Co. 332,100 10,627
RalCorp Holdings, Inc. (a) 661,766 14,311
Ralston Purina Group 1,413,507 88,697
Sysco Corp. 2,692,900 78,094
Tyson Foods, Inc. 1,035,200 25,492
Universal Foods Corp. 482,500 14,415
381,292
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - 1.7%
Avon Products, Inc. 811,400 $ 35,702
Premark International, Inc. 1,780,900 32,056
Procter & Gamble Co. 1,125,000 100,547
Rubbermaid, Inc. 2,548,100 73,258
Tambrands, Inc. 1,092,100 44,503
Unilever NV ADR 308,000 43,813
329,879
TOBACCO - 4.8%
Philip Morris Companies, Inc. 7,221,200 755,517
RJR Nabisco Holdings Corp. 2,679,546 82,396
UST, Inc. 2,479,300 82,437
920,350
TOTAL NONDURABLES 2,016,750
PRECIOUS METALS - 0.2%
Newmont Mining Corp. 469,500 23,182
Santa Fe Pacific Gold Corp. 761,640 10,186
33,368
RETAIL & WHOLESALE - 6.8%
APPAREL STORES - 1.0%
Baby Superstore, Inc. (a) 350,700 4,559
Gap, Inc. 156,000 4,641
Limited, Inc. (The) 3,511,000 67,587
Melville Corp. 1,478,800 57,858
Payless ShoeSource, Inc. (a) 1,113,668 36,055
TJX Companies, Inc. 829,200 24,980
195,680
DRUG STORES - 1.0%
Revco (D.S.), Inc. (a) 2,415,093 54,943
Rite Aid Corp. 1,845,400 54,901
Walgreen Co. 2,351,500 74,660
184,504
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GENERAL MERCHANDISE STORES - 2.5%
Carson Pirie Scott & Co. (a)(c) 1,644,874 $ 36,598
Dayton Hudson Corp. 589,600 17,835
Federated Department Stores, Inc. (a) 1,778,430 53,798
May Department Stores Co. (The) 1,044,700 46,881
Price/Costco, Inc. (a) 2,694,600 55,239
Sears, Roebuck & Co. 1,160,500 47,581
Wal-Mart Stores, Inc. 9,607,700 230,585
488,517
GROCERY STORES - 0.6%
Ahold NV 200,000 10,160
Kroger Co. (The) (a) 1,259,326 47,540
Safeway, Inc. (a) 1,820,200 65,527
123,227
RETAIL & WHOLESALE, MISCELLANEOUS - 1.7%
Home Depot, Inc., (The) 4,131,700 208,651
Tandy Corp. 688,400 29,085
Toys "R" Us, Inc. 3,036,900 80,098
317,834
TOTAL RETAIL & WHOLESALE 1,309,762
SERVICES - 1.5%
PRINTING - 0.3%
Deluxe Corp. 265,900 9,805
Valassis Communications, Inc. (a)(c) 2,372,400 42,407
52,212
SERVICES - 1.2%
ADT Ltd. (a) 3,520,500 66,449
Block (H & R), Inc. 1,987,900 51,934
Jostens, Inc. (c) 2,878,700 55,055
Loewen Group, Inc. 962,500 25,798
Service Corp. International 543,600 29,966
229,202
TOTAL SERVICES 281,414
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 6.1%
COMMUNICATIONS EQUIPMENT - 0.5%
Cisco Systems, Inc. (a) 1,634,000 $ 84,560
General Instrument Corp. (a) 588,700 14,791
99,351
COMPUTER SERVICES & SOFTWARE - 3.0%
Automatic Data Processing, Inc. 1,975,100 78,263
CUC International, Inc. (a) 949,200 32,984
Ceridian Corp. (a) 1,700,600 73,976
DST Systems, Inc. (a) 1,136,300 32,385
Electronic Data Systems Corp. 5,145,600 272,074
First Data Corp. 800,000 62,100
Information Resources, Inc. (a) 1,317,778 15,978
567,760
COMPUTERS & OFFICE EQUIPMENT - 1.5%
Canon, Inc. 409,000 7,734
Diebold, Inc. 163,450 8,949
International Business Machines Corp. 1,028,000 110,896
Pitney Bowes, Inc. 2,703,900 131,139
Silicon Graphics, Inc. (a) 1,224,300 28,771
Wang Laboratories, Inc. (a) 237,900 4,252
291,741
ELECTRONIC INSTRUMENTS - 0.3%
Perkin-Elmer Corp. 1,061,200 55,448
Tektronix, Inc. 144,300 5,519
60,967
ELECTRONICS - 0.3%
AMP, Inc. 528,100 20,398
Intel Corp. 550,000 41,319
61,717
PHOTOGRAPHIC EQUIPMENT - 0.5%
Imation Corp. 187,830 4,273
Polaroid Corp. 2,132,000 90,077
94,350
TOTAL TECHNOLOGY 1,175,886
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 0.2%
AMR Corp. 168,400 $ 13,282
Southwest Airlines Co. 1,016,200 25,151
38,433
RAILROADS - 1.1%
Burlington Northern Santa Fe Corp. 1,207,519 95,243
CSX Corp. 1,225,800 59,145
Union Pacific Corp. 699,300 47,902
202,290
TOTAL TRANSPORTATION 240,723
UTILITIES - 4.3%
CELLULAR - 0.2%
AirTouch Communications, Inc. (a) 295,800 8,134
360 Degrees Communications Co. (a) 1,300,000 30,063
38,197
ELECTRIC UTILITY - 0.5%
Allegheny Power System, Inc. 257,800 7,541
American Electric Power Co., Inc. 180,800 7,503
Duke Power Co. 100,000 4,787
Entergy Corp. 1,774,300 45,245
Texas Utilities Co. 167,400 7,031
Veba AG Ord. 600,000 30,543
102,650
GAS - 0.1%
Consolidated Natural Gas Co. 234,200 11,798
TELEPHONE SERVICES - 3.5%
AT&T Corp. 503,000 26,218
Ameritech Corp. 2,890,100 160,401
BCE, Inc. 306,000 12,219
Bell Atlantic Corp. 920,400 54,419
BellSouth Corp. 679,300 27,851
Frontier Corp. 1,067,400 30,021
GTE Corp. 1,181,100 48,720
NYNEX Corp. 2,222,300 99,726
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Pacific Telesis Group 500,000 $ 16,813
SBC Communications, Inc. 3,464,700 169,336
WorldCom, Inc. (a) 820,200 21,223
666,947
TOTAL UTILITIES 819,592
TOTAL COMMON STOCKS
(Cost $14,120,322) 17,316,680
CONVERTIBLE PREFERRED STOCKS - 0.2%
BASIC INDUSTRIES - 0.0%
PAPER & FOREST PRODUCTS - 0.0%
International Paper $2.625 (d) 150,000 6,675
FINANCE - 0.0%
INSURANCE - 0.0%
Allstate Corp. exchangeable $2.30 90,000 3,836
NONDURABLES - 0.1%
TOBACCO - 0.1%
RJR Nabisco Holdings Corp. depositary shares
representing 1/10 pfd., Series C 1,825,500 11,181
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.1%
TJX Companies, Inc., Series E, $7.00 72,000 11,880
GENERAL MERCHANDISE STORES - 0.0%
K mart Financing I $3.875 130,800 6,360
TOTAL RETAIL & WHOLESALE 18,240
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Wang Labs, Inc. $3.25 (d) 69,700 3,067
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $45,524) 42,999
CORPORATE BONDS - 1.0%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
CONVERTIBLE BONDS - 0.6%
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Liberty Property exchangeable 8%, 7/1/01 B1 $ 1,591 $ 1,595
FINANCE - 0.2%
BANKS - 0.2%
Bank of New York Co., Inc. 7 1/2%, 8/15/01 A2 14,872 39,225
HEALTH - 0.2%
DRUGS & PHARMACEUTICALS - 0.2%
Roche Holdings, Inc. liquid yield option notes
0%, 4/20/10 (d) - 72,400 30,227
MEDIA & LEISURE - 0.0%
BROADCASTING - 0.0%
Home Shopping Network, Inc.
5 7/8%, 3/1/06 (d) B- 4,321 4,364
Jacor Communications, Inc.
liquid yield option notes 0%, 6/12/11 B3 3,848 1,785
6,149
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Food Lion, Inc. 5%, 6/1/03 (d) A3 6,700 7,955
TECHNOLOGY - 0.2%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Unisys Corp. 8 1/4%, 3/15/06 B3 10,470 11,308
ELECTRONICS - 0.1%
National Semiconductor Corp.
6 1/2%, 10/1/02 (d) Ba2 23,600 20,296
TOTAL TECHNOLOGY 31,604
TOTAL CONVERTIBLE BONDS 116,755
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
NONCONVERTIBLE BONDS - 0.4%
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Westpoint Stevens, Inc. 8 3/4%, 12/15/01 Ba3 $ 16,910 $ 16,741
FINANCE - 0.1%
ASSET-BACKED SECURITIES - 0.1%
Airplanes Pass Thru Trust Class D
10 7/8%, 3/15/19 Ba2 14,530 15,148
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT - 0.1%
Tenet Healthcare Corp. 10 1/8%, 3/1/05 Ba3 23,000 24,495
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Citicasters, Inc. 9 3/4%, 2/15/04 B2 6,250 6,407
SCI Television, Inc. secured 11%, 6/30/05 B2 7,250 7,748
14,155
TOTAL NONCONVERTIBLE BONDS 70,539
TOTAL CORPORATE BONDS
(Cost $168,043) 187,294
U.S. TREASURY OBLIGATIONS - 0.0%
8 1/8%, 8/15/19
(Cost $10,259) Aaa 10,000 11,142
REPURCHASE AGREEMENTS - 8.6%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.65%, dated
7/31/96 due 8/1/96 $ 1,647,526 1,647,267
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $15,991,415) $ 19,205,382
LEGEND
1. Non-income producing
2. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
3. Affiliated company (see Note 7 of Notes to Financial Statements).
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 $72,584,000 or 0.4% of net
assets.
INCOME TAX INFORMATION
At July 31, 1996, the aggregate cost of investment securities for income
tax purposes was $16,000,638,000. Net unrealized appre- ciation aggregated
$3,204,744,000, of which $3,561,754,000 related to appreciated invest- ment
securities and $357,010,000 related to depreciated investment securities.
The fund hereby designates approximately $59,736,000 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, 1996
ASSETS
Investment in securities, at value (including repurchase $ 19,205,382
agreements of $1,647,267) (cost $15,991,415) -
See accompanying schedule
Cash 56
Receivable for investments sold 107,777
Receivable for fund shares sold 46,788
Dividends receivable 24,319
Interest receivable 3,661
Other receivables 786
TOTAL ASSETS 19,388,769
LIABILITIES
Payable for investments purchased $ 123,567
Payable for fund shares redeemed 20,266
Accrued management fee 8,089
Other payables and accrued expenses 7,501
Collateral on securities loaned, at value 23,700
TOTAL LIABILITIES 183,123
NET ASSETS $ 19,205,646
Net Assets consist of:
Paid in capital $ 15,195,572
Undistributed net investment income 46,747
Accumulated undistributed net realized gain (loss) on 749,332
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 3,213,995
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 680,978 shares outstanding $ 19,205,646
NET ASSET VALUE, offering price and redemption price per $28.20
share ($19,205,646 (divided by) 680,978 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME $ 319,767
Dividends (including $3,720 received from affiliated
issuers)
Interest (including income on securities loaned of $343) 85,298
TOTAL INCOME 405,065
EXPENSES
Management fee $ 80,483
Transfer agent fees 34,944
Accounting fees and expenses 822
Non-interested trustees' compensation 82
Custodian fees and expenses 424
Registration fees 2,230
Audit 155
Legal 96
Miscellaneous 88
Total expenses before reductions 119,324
Expense reductions (2,460) 116,864
NET INVESTMENT INCOME 288,201
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain of $2,495 931,663
on sales of investments in affiliated issuers)
Foreign currency transactions 4,891 936,554
Change in net unrealized appreciation (depreciation) on:
Investment securities 1,118,178
Assets and liabilities in foreign currencies 86 1,118,264
NET GAIN (LOSS) 2,054,818
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 2,343,019
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,
1996 1995
INCREASE (DECREASE) IN NET ASSETS
Operations $ 288,201 $ 220,509
Net investment income
Net realized gain (loss) 936,554 462,592
Change in net unrealized appreciation (depreciation) 1,118,264 1,412,882
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,343,019 2,095,983
FROM OPERATIONS
Distributions to shareholders (271,415) (175,942)
From net investment income
From net realized gain (453,173) (508,140)
TOTAL DISTRIBUTIONS (724,588) (684,082)
Share transactions 8,197,294 3,118,020
Net proceeds from sales of shares
Reinvestment of distributions 707,541 667,970
Cost of shares redeemed (3,423,684) (1,849,027)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 5,481,151 1,936,963
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 7,099,582 3,348,864
NET ASSETS
Beginning of period 12,106,064 8,757,200
End of period (including undistributed net investment $ 19,205,646 $ 12,106,064
income of $46,747 and $27,390, respectively)
OTHER INFORMATION
Shares
Sold 295,617 136,992
Issued in reinvestment of distributions 27,008 30,753
Redeemed (123,924) (80,408)
Net increase (decrease) 198,701 87,337
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED JULY 31,
1996 1995 1994 C 1993 1992
SELECTED PER-SHARE DATA
Net asset value, $ 25.10 $ 22.17 $ 21.90 $ 21.34 $ 19.92
beginning of period
Income from Investment
Operations
Net investment income .49 .43 .45 .53 .50
Net realized and unrealized 3.99 4.14 1.07 3.02 1.94
gain (loss)
Total from investment 4.48 4.57 1.52 3.55 2.44
operations
Less Distributions
From net investment income (.48) (.40) (.48) (.59) (.38)
From net realized gain (.90) (1.24) (.77) (2.40) (.64)
Total distributions (1.38) (1.64) (1.25) (2.99) (1.02)
Net asset value, end of period $ 28.20 $ 25.10 $ 22.17 $ 21.90 $ 21.34
TOTAL RETURN A, B 18.39% 21.95% 7.08% 19.10% 12.75%
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period $ 19,206 $ 12,106 $ 8,757 $ 6,646 $ 4,199
(in millions)
Ratio of expenses to average .75% .78% .83% .83% .86%
net assets
Ratio of expenses to average .74% .77% .82% .83% .86%
net assets after expense D D D
reductions
Ratio of net investment income 1.82% 2.21% 2.09% 2.67% 2.49%
to average net assets
Portfolio turnover rate 41% 67% 92% 87% 221%
</TABLE>
J 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).
K TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE (SEE NOTE 4 OF
NOTES TO FINANCIAL STATEMENTS).
L 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.
M FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1996
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 financial
statements have been prepared in conformity with generally accepted
accounting principles which permit management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities 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.
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 litigation
proceeds, foreign currency transactions, market discount, 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 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 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
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
mature in 60 days or less from the date of purchase for U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $10,195,992,000 and $6,014,491,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2500% to .5200% for the period. 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 .51%
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 $980,000 on sales of shares of the fund. Effective October 20,
1995, the fund's 3% sales charge was eliminated.
TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is
the fund's transfer, dividend disbursing and shareholder servicing agent.
FSC receives account fees and asset-based fees that vary according to
account size and type of account. FSC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements. For the
period, the transfer agent fees were equivalent to an annual rate of .22%
of average net assets.
ACCOUNTING 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
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 $4,326,000 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, the value of the
securities loaned and the value of collateral amounted to $23,124,000 and
$23,700,000, respectively.
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
$1,434,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian and
transfer agent whereby interest earned on uninvested cash balances was used
to offset a portion of the fund's expenses. During the period, the fund's
custodian and transfer agent fees were reduced by $5,000 and $1,021,000,
respectively, under these arrangements.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
DOLLAR AMOUNTS IN THOUSANDS PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Allergan, Inc. $ 14,910 $ 16,352 $ 823 $ -
Aztar Corp. 8,442 12,216 - -
Bausch & Lomb, Inc. 1,001 - 812 110,909
CBL & Associates Properties, Inc. 11,333 - 738 37,978
Carlisle Plastics, Inc. Class A - - - 7,288
Carson Pirie & Scott & Co. 1,792 - - 36,598
Ferro Corp. - 47 856 42,559
Fruit of the Loom, Inc. Class A 24,427 - - 111,840
Information Resources, Inc. 8,220 9,895 - -
Jostens, Inc. 14,249 - 491 55,055
Oak Industries, Inc. 4,661 - - 32,191
RalCorp Holdings, Inc. 2,548 6,921 - -
Valassis Communications, Inc. 2,382 - - 42,407
TOTALS $ 93,965 $ 45,431 $ 3,720 $ 476,825
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity Growth & Income Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Securities Fund: Fidelity Growth & Income Portfolio, including the
schedule of portfolio investments, as of July 31, 1996, 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, 1996 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, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 6, 1996
DISTRIBUTIONS
The Board of Trustees of Fidelity Growth & Income Portfolio voted to pay on
September 9, 1996, to shareholders of record at the opening of business on
September 6, 1996, a distribution of $1.00 per share derived from capital
gains realized from sales of portfolio securities and a dividend of $.12
per share from net investment income.
A total of 2.11% 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 39% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate shareholders.
The fund will notify shareholders in January 1997 of these percentages for
use in preparing 1996 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)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)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 WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and send
you written confirmation upon completion of your request.
(LETTER_GRAPHIC)(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
100 Crosby Parkway - KP2C
Covington, KY 41015-4399
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 193
Boston, MA 02210-0193
(LETTER_GRAPHIC)(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
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
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Co.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank, N.A.
New York, NY
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity Fund
Global Balanced Fund
Growth & Income Portfolio
Market Index Fund
Puritan Fund
Real Estate Investment Portfolio
Utilities 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
