FIDELITY
OTC
PORTFOLIO
ANNUAL REPORT
JULY 31, 1998
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the fund's
investments over the past six months.
INVESTMENTS 10 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 23 Notes to the financial statements.
REPORT OF INDEPENDENT 28 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 29
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 THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
So far, 1998 has been a year of considerable volatility in the U.S.
stock and bond markets. In the first quarter, the U.S. stock market
soared as inflation and interest rates remained stable, while the
economy maintained strong growth. By summer, however, investors began
to exercise caution relative to the troublesome Asian economic climate
and reports of concerns about corporate earnings domestically. Market
volatility and low interest rates were also the main stories in the
bond market, with many investors moving assets to highly rated U.S.
Treasuries.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity OTC 11.87% 134.86% 405.96%
Fidelity OTC (incl. 3.00% sales charge) 8.51% 127.81% 390.78%
NASDAQ 17.96% 176.46% 440.12%
Mid-Cap Funds Average 7.71% 107.76% 320.81%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
NASDAQ Composite Index - 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 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past one year average
represents a peer group of 294 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity OTC 11.87% 18.62% 17.60%
Fidelity OTC (incl. 3.00% sales charge) 8.51% 17.90% 17.24%
NASDAQ 17.96% 22.55% 18.37%
Mid-Cap Funds Average 7.71% 15.51% 15.15%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
OTC Portfolio FID NASDAQ w/Wilshire Div
00093 F0091
1988/07/31 9700.00 10000.00
1988/08/31 9467.63 9734.00
1988/09/30 9829.69 10035.35
1988/10/31 9824.29 9912.41
1988/11/30 9505.46 9640.06
1988/12/31 9719.39 9910.88
1989/01/31 10346.09 10442.10
1989/02/28 10318.61 10414.59
1989/03/31 10769.39 10611.19
1989/04/30 11297.14 11168.21
1989/05/31 11802.90 11668.77
1989/06/30 11775.42 11398.55
1989/07/31 12292.17 11898.47
1989/08/31 12841.91 12320.26
1989/09/30 12915.24 12429.19
1989/10/31 12479.76 11989.85
1989/11/30 12594.36 12016.86
1989/12/31 12673.35 11998.47
1990/01/31 11773.51 10984.81
1990/02/28 12100.72 11265.17
1990/03/31 12560.08 11537.79
1990/04/30 12195.11 11143.93
1990/05/31 12994.28 12191.63
1990/06/30 13019.45 12295.58
1990/07/31 12849.54 11671.65
1990/08/31 11742.04 10168.42
1990/09/30 11095.83 9204.88
1990/10/31 10861.82 8828.41
1990/11/30 11615.84 9625.96
1990/12/31 12071.22 10037.56
1991/01/31 13021.81 11136.51
1991/02/28 14031.00 12196.39
1991/03/31 14818.82 12999.08
1991/04/30 14792.78 13079.65
1991/05/31 15515.49 13672.09
1991/06/30 14766.73 12871.86
1991/07/31 15808.48 13593.69
1991/08/31 16641.87 14249.33
1991/09/30 16495.63 14297.33
1991/10/31 17212.83 14749.81
1991/11/30 16399.08 14246.93
1991/12/31 18005.36 15960.47
1992/01/31 18782.83 16898.32
1992/02/29 18819.16 17275.72
1992/03/31 18216.08 16481.80
1992/04/30 17678.39 15813.09
1992/05/31 17932.70 16010.52
1992/06/30 17540.33 15432.98
1992/07/31 17910.90 15921.09
1992/08/31 17467.67 15451.98
1992/09/30 18006.81 16021.03
1992/10/31 18677.82 16639.20
1992/11/30 19996.16 17963.76
1992/12/31 20695.32 18647.24
1993/01/31 20832.48 19198.30
1993/02/28 20017.58 18510.28
1993/03/31 20711.46 19061.67
1993/04/30 20106.33 18286.04
1993/05/31 20646.91 19385.06
1993/06/30 20671.12 19497.55
1993/07/31 20897.03 19536.54
1993/08/31 21284.31 20612.44
1993/09/30 21869.27 21184.61
1993/10/31 22157.71 21661.43
1993/11/30 21572.08 20989.85
1993/12/31 22419.96 21632.29
1994/01/31 23023.65 22310.96
1994/02/28 22782.17 22108.51
1994/03/31 21872.00 20760.14
1994/04/30 21268.31 20511.15
1994/05/31 21156.86 20568.57
1994/06/30 20376.72 19770.39
1994/07/31 20822.52 20243.78
1994/08/31 21862.71 21482.28
1994/09/30 21918.44 21465.69
1994/10/31 22419.96 21857.53
1994/11/30 21686.25 21114.79
1994/12/31 21815.65 21182.81
1995/01/31 21768.78 21296.24
1995/02/28 22912.53 22405.15
1995/03/31 23681.28 23090.62
1995/04/30 24675.03 23869.87
1995/05/31 25378.16 24475.32
1995/06/30 27346.91 26447.85
1995/07/31 29146.91 28391.37
1995/08/31 29521.91 28951.42
1995/09/30 29947.96 29640.57
1995/10/31 29785.57 29452.14
1995/11/30 30320.52 30131.27
1995/12/31 30154.78 29951.85
1996/01/31 30085.18 30191.03
1996/02/29 31158.95 31358.84
1996/03/31 31218.60 31417.99
1996/04/30 33177.22 33980.56
1996/05/31 34390.17 35511.16
1996/06/30 33187.16 33858.25
1996/07/31 31019.75 30889.41
1996/08/31 32849.12 32645.25
1996/09/30 35153.29 35103.35
1996/10/31 35011.76 34964.87
1996/11/30 37504.82 37016.40
1996/12/31 37312.02 36987.79
1997/01/31 38806.32 39548.61
1997/02/28 36912.78 37533.88
1997/03/31 34106.67 35045.39
1997/04/30 35486.91 36180.86
1997/05/31 38669.44 40200.55
1997/06/30 39707.47 41414.98
1997/07/31 43870.99 45789.23
1997/08/31 43186.58 45618.73
1997/09/30 46097.57 48460.78
1997/10/31 42286.40 45829.67
1997/11/30 42145.68 46040.49
1997/12/31 41010.97 45187.96
1998/01/31 41930.50 46616.12
1998/02/28 47423.15 50985.92
1998/03/31 48624.66 52880.26
1998/04/30 49151.86 53841.06
1998/05/31 45620.87 51279.19
1998/06/30 48685.96 54637.57
1998/07/31 49078.30 54011.52
IMATRL PRASUN SHR__CHT 19980731 19980811 155753 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity OTC Portfolio on July 31, 1988 and the current 3%
sales charge was paid. As the chart shows, by July 31, 1998, the value
of the investment would have grown to $49,078 - a 390.78% increase on
the initial investment. For comparison, look at how the NASDAQ did
over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 would have grown to $54,012 - a 440.12%
increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
For the most part, the past 12 months
have been witness to solid gains
and record-setting stock market
performance in the U.S. Despite
that, the final few weeks of the
period ending July 31, 1998, left
many investors asking "What have
you done for me lately?" For the
12-month period, the Standard &
Poor's 500 Index - a measure of
the U.S. stock market - produced
a return of 19.29%. But whether
one of the longest running bull
markets in recent history is now
an endangered species remains
to be seen. There have been some
extraordinary highs and lows in
the equity market over the past
12 months. In late October, the
Dow Jones Industrial Average fell
550-plus points in one trading
session. That, however, was quickly
overcome by the first quarter of
1998 as investors in stocks were
rewarded with strong gains and
an upward trend in stock prices.
But despite low interest rates, a
strong economy and tame inflation
domestically, investor uncertainty
over corporate earnings reports
and the Asian market upheaval
began to have a tangible effect on
our markets at home. After hitting
a record of 9337.97 on July 17,
1998, the Dow Jones Industrial
Average racked up losses of over
400 points the week of July 20th.
Still, the 12-month S&P return of
19.29% is nearly twice that of
the stock market's historical
annual performance.
An interview with Robert Bertelson, Portfolio Manager of Fidelity OTC
Portfolio
Q. BOB, HOW DID THE FUND PERFORM?
A. For the 12 months that ended July 31, 1998, the fund returned
11.87%, while the NASDAQ Composite Index returned 17.96% and the
mid-cap funds average tracked by Lipper Analytical Services returned
7.71%.
Q. WHY DID THE FUND BEAT ITS PEERS OVER THE PERIOD, YET TRAIL THE
NASDAQ INDEX?
A. During the course of the period, market breadth was very poor. That
is, gains in major indexes like the NASDAQ were a result of the
stellar performance of only a very few stocks. For the most part,
these were large-capitalization stocks that provided significant
liquidity - they were easily tradable because they had a good number
of shares outstanding. This characteristic was attractive to investors
given the collapse in the Far East that started to affect U.S. markets
in October 1997. The fund's focus on the NASDAQ leads it to invest in
large-, mid- and small-caps. Mid-cap funds, however, had a different
focus, with little or no exposure to the large-cap market leaders that
drove the NASDAQ. Hence, mid-cap funds suffered relative to OTC
Portfolio. Relative to NASDAQ, the fund was hurt due to investments in
economically sensitive technology stocks that suffered a severe
correction in the fourth quarter of 1997.
Q. BUT THERE WERE OTHER PROBLEMS WITH THE TECHNOLOGY SECTOR, TOO . .
.
A. Yes, there were. Many major personal computer (PC) companies have
been reorganizing how they do business, trying to emulate the cost
structure of Dell Computer. This company sells directly to the public
instead of through distributors or retailers, assembling its PCs only
after an order has been placed. As PC manufacturers have transitioned
to this set-up, they have markedly reduced their inventories. This
caused problems for companies that furnish PC components. However,
toward the end of the period, these component companies appeared to be
working through this inventory correction.
Q. LET'S LOOK AT SOME OF THE FUND'S OTHER SECTOR WEIGHTINGS . . .
A. Finance was the best-performing sector of the NASDAQ in 1997, but
valuations were high there as we entered 1998. In addition, financial
services companies typically do well when short-term interest rates
are low and long-term rates are high. During the past six months,
short- and long-term interest rates were at about the same level, so
these companies' prospects were less attractive. Increases in the
utilities sector - mainly telecommunications - and in media and
leisure were designed to take advantage of increased demand by both
business and consumers for access to an increasingly broad range of
information and communications services.
Q. WHICH STOCKS PROVIDED STRONG PERFORMANCE? WHICH ONES DISAPPOINTED?
A. Microsoft - the fund's largest holding at about 9% of investments -
did very well as investors gravitated toward its predictable growth
and strong management. Also in the technology sector, EMC and Cisco,
leaders in data storage and networking, respectively, benefited from
the near-dominance of their industries. Investors were attracted to
the turnarounds achieved by cable companies, such as fund holding
Tele-Communications, Inc. (TCI), which were sparked by an ability to
deliver a variety of services over cable networks. TCI also was buoyed
because AT&T announced its intention to purchase the company. On the
negative side, Quantum, a manufacturer of disc drives for PCs, was
caught in the downdraft of the inventory correction and by the
problems in Asia. Oracle, a database and computer applications firm,
suffered from a poorly executed reorganization of its sales force that
caused it to fall short of an earnings forecast late in 1997.
Q. WHAT'S YOUR OUTLOOK?
A. Asia remains an open issue. It's unclear whether the new Japanese
leadership will be willing or able to restimulate that economy. Unless
it does, Asia is likely to remain a region that faces economic
challenges. The longer the Asian problems continue, the greater the
potential for that part of the world to drag down the rest of the
world with it. On the other hand, the U.S. economy remains strong,
consumer confidence is high, and unemployment and interest rates are
low. If Asia stabilizes and overall global economic growth rekindles,
interest rates may rebound from low levels, which could cause a
correction for many stock prices. Because of this uncertain backdrop,
I'm trying to structure the fund to maintain a level of liquidity that
would insulate it from potential difficulties, as well as allow me to
take advantage of emerging opportunities.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
BOB BERTELSON ON VOLATILITY:
"Most investors tend to dislike
volatility. My feeling is that if
investors have a longer-term
investment horizon, they should
welcome volatility, not fear it. If
we've done our work correctly at
Fidelity, we can take advantage of
volatility in individual stocks; we
know the companies well enough
to take advantage of moments to
buy more shares or pare back when
their stock prices spike upward or
downward even though company
fundamentals haven't changed.
Remember, the OTC market
consists of rapidly growing
companies that attract momentum
investors. These are investors who
focus on the acceleration of a
company's earnings or stock price
performance, and they can be very
sensitive to comparatively small or
short-term changes in a company's
fundamental outlook. OTC
companies often have lower liquidity
- - or fewer shares outstanding -
than the companies on the New York
Stock Exchange, so large
transactions can cause dramatic
shifts in price. Consequently,
momentum investors can push stock
prices up and down very rapidly on
the NASDAQ based on short-term
news events. Because of this
volatility, I advise investors not to get
too excited when these stocks are up
or down sharply in any six-month
period. Investors in the OTC market
need to have a longer-term time
frame. Most importantly, I believe
these rapidly growing
capital-appreciation stocks have the
potential to create wealth for
investors over the long term. In
short, diving right into volatile
situations instead of shrinking from
them provides an opportunity for our
organization to add value and make
money for investors."
FUND FACTS
GOAL: long-term capital growth
by investing mainly in equity
securities traded on the
over-the-counter market
FUND NUMBER: 093
TRADING SYMBOL: FOCPX
START DATE: December 31, 1984
SIZE: as of July 31, 1998,
more than $4.4 billion
MANAGER: Robert Bertelson,
since 1997; manager, Fidelity
Convertible Securities Fund,
1996-1997; Fidelity Select
Industrial Equipment Portfolio,
1994-1996; Fidelity Select
Energy Portfolio, 1992-
1994; joined Fidelity in 1991
(checkmark)
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Microsoft Corp. 8.8 8.2
Intel Corp. 8.0 4.9
WorldCom, Inc. 4.8 4.4
Oracle Corp. 2.9 0.0
EMC Corp. 2.5 2.4
MCI Communications Corp. 2.4 0.0
Tele-Communications, Inc. (TCI Group) Series A 1.9 0.7
Cisco Systems, Inc. 1.6 3.9
Ascend Communications, Inc. 1.5 0.6
Tele-Communications, Inc. 1.5 0.8
(TCI Ventures Group) Series A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE MARKET SECTORS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
TECHNOLOGY 51.8 54.9
UTILITIES 9.8 6.6
FINANCE 9.6 11.1
MEDIA & LEISURE 8.9 5.4
HEALTH 7.6 3.1
</TABLE>
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1998 * AS OF JANUARY 31, 1998 **
ROW: 1, COL: 1, VALUE: 96.59999999999999
ROW: 1, COL: 2, VALUE: 1.5
ROW: 1, COL: 3, VALUE: 1.9
STOCKS 95.4%
BONDS 0.0%
SHORT-TERM
INVESTMENTS 4.6%
FOREIGN
INVESTMENTS 3.7%
STOCKS 97.6%
BONDS 0.5%
SHORT-TERM
INVESTMENTS 1.9%
FOREIGN
INVESTMENTS 1.7%
ROW: 1, COL: 1, VALUE: 95.40000000000001
ROW: 1, COL: 2, VALUE: 0.0
ROW: 1, COL: 3, VALUE: 4.6
*
**
INVESTMENTS JULY 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 97.0%
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.5%
Hanna (M.A.) Co. 100,000 $ 1,481
Ivex Packaging Corp. 400,000 8,600
MacDermid, Inc. 300,000 10,444
20,525
CONSTRUCTION & REAL ESTATE - 0.4%
REAL ESTATE - 0.4%
Stewart Enterprises, Inc. Class A 729,300 16,569
DURABLES - 0.7%
CONSUMER ELECTRONICS - 0.2%
Gemstar International Group Ltd. (a) 281,900 10,501
TEXTILES & APPAREL - 0.5%
Nautica Enterprises, Inc. (a) 500,000 12,891
Westpoint Stevens, Inc. Class A (a) 200,000 7,175
20,066
TOTAL DURABLES 30,567
ENERGY - 0.2%
OIL & GAS - 0.2%
Vastar Resources, Inc. 172,000 7,353
FINANCE - 9.6%
BANKS - 3.6%
Compass Bancshares, Inc. 200,000 8,300
First Security Corp. 394,375 8,664
Marshall & Ilsley Corp. 704,400 39,578
North Fork Bancorp, Inc. 714,000 17,404
Northern Trust Corp. 172,500 12,700
Peoples Heritage Financial Group, Inc. 1,379,000 31,200
Zions Bancorp 883,200 43,277
161,123
CREDIT & OTHER FINANCE - 1.5%
First Alliance Corp. (a) 324,500 2,393
FIRSTPLUS Financial Group, Inc. (a) 1,563,300 60,969
Triad Guaranty, Inc. (a) 202,000 6,616
69,978
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - 0.2%
Paula Financial 194,500 $ 3,404
Penn Treaty American Corp. (a) 149,700 4,229
Philadelphia Consolidated Holding Corp. (a) 90,000 1,699
9,332
SAVINGS & LOANS - 4.3%
Astoria Financial Corp. 358,000 17,945
Bank United Corp. Class A 500,000 22,313
Bay View Capital Corp. 502,821 13,922
Charter One Financial, Inc. 885,658 28,839
Dime Bancorp, Inc. 649,000 19,308
Golden State Bancorp, Inc. 839,540 23,140
Golden State Bancorp, Inc. warrants 1/1/01 (a) 839,540 3,988
Sovereign Bancorp, Inc. 600,000 9,619
St. Paul Bancorp, Inc. 300,000 6,750
Washington Federal, Inc. 403,920 10,502
Washington Mutual, Inc. 755,409 30,169
Webster Financial Corp. 235,600 7,142
193,637
TOTAL FINANCE 434,070
HEALTH - 7.1%
DRUGS & PHARMACEUTICALS - 3.0%
Amgen, Inc. (a) 500,000 36,719
Anesta Corp. (a) 50,000 650
Aviron (a) 450,000 13,444
Biogen, Inc. (a) 300,000 16,688
Cytyc Corp. (a) 619,000 9,130
Elan Corp. PLC ADR (a) 200,000 14,400
Martek Biosciences (a) 15,000 169
Rexall Sundown, Inc. (a) 562,000 16,965
Sangstat Medical Corp. (a) 150,000 3,525
Sepracor, Inc. (a) 317,200 17,129
ViroPharma, Inc. (a) 396,600 7,932
136,751
MEDICAL EQUIPMENT & SUPPLIES - 2.4%
Arterial Vascular Engineering, Inc. (a) 100,000 3,950
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - CONTINUED
Biomet, Inc. 389,400 $ 12,169
Boston Scientific Corp. (a) 200,000 15,325
PSS World Medical, Inc. (a) 1,000,000 15,531
Sofamor/Danek Group, Inc. (a) 300,000 25,538
Steris Corp. (a) 600,000 36,600
109,113
MEDICAL FACILITIES MANAGEMENT - 1.7%
Lincare Holdings, Inc. (a) 600,000 23,850
Pacificare Health Sytems, Inc. Class B (a) 700,000 50,225
74,075
TOTAL HEALTH 319,939
INDUSTRIAL MACHINERY & EQUIPMENT - 0.9%
ELECTRICAL EQUIPMENT - 0.7%
General Instrument Corp. (a) 400,000 10,850
Loral Space & Communications Ltd. (a) 480,200 13,296
Vicor Corp. (a) 600,000 7,800
31,946
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
Veeco Instruments, Inc. (a) 325,000 8,613
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 40,559
MEDIA & LEISURE - 8.9%
BROADCASTING - 5.1%
Chancellor Media Corp. (a) 646,200 31,179
Comcast Corp. Class A special 965,000 43,817
Hearst-Argyle Television, Inc. (a) 50,000 1,719
Metromedia Fiber Network, Inc. Class A 213,900 12,005
PanAmSat Corp. (a) 285,900 14,098
Sinclair Broadcast Group, Inc. Class A (a) 800,000 20,950
TCA Cable TV, Inc. 400,000 23,025
Tele-Communications, Inc. (TCI Group) Series A (a) 2,004,148 83,673
230,466
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 2.2%
Tele-Communications, Inc.:
(Liberty Media Group) Series A (a) 815,000 $ 32,142
(TCI Ventures Group) Series A (a) 3,341,604 65,788
97,930
LODGING & GAMING - 0.6%
Promus Hotel Corp. (a) 700,000 26,338
RESTAURANTS - 1.0%
Applebee's International, Inc. 200,000 4,450
Landry's Seafood Restaurants, Inc. (a) 400,000 4,800
Outback Steakhouse, Inc. (a) 1,000,000 36,094
45,344
TOTAL MEDIA & LEISURE 400,078
RETAIL & WHOLESALE - 3.6%
APPAREL STORES - 0.3%
Ross Stores, Inc. 316,400 13,309
APPLIANCE STORES - 0.3%
Cellstar Corp. (a) 950,000 13,300
GENERAL MERCHANDISE STORES - 1.1%
Costco Companies, Inc. (a) 346,400 19,658
Dollar Tree Stores, Inc. (a) 129,750 5,887
Michaels Stores, Inc. (a) 600,000 19,650
Stein Mart, Inc. (a) 484,400 5,116
50,311
RETAIL & WHOLESALE, MISCELLANEOUS - 1.9%
Action Performance Companies, Inc. (a) 400,000 12,000
Bed Bath & Beyond, Inc. (a) 300,000 12,938
Staples, Inc. (a) 1,894,650 62,287
87,225
TOTAL RETAIL & WHOLESALE 164,145
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - 2.2%
ADVERTISING - 0.9%
Lamar Advertising Co. Class A (a) 201,000 $ 7,651
Outdoor Systems, Inc. (a) 1,323,575 33,751
41,402
LEASING & RENTAL - 0.5%
Hollywood Entertainment Corp. (a) 1,161,500 20,544
SERVICES - 0.8%
On Assignment, Inc. (a) 178,100 6,389
Robert Half International, Inc. (a) 600,000 31,950
38,339
TOTAL SERVICES 100,285
TECHNOLOGY - 51.8%
COMMUNICATIONS EQUIPMENT - 6.0%
Advanced Fibre Communications, Inc. (a) 100,000 1,994
Ascend Communications, Inc. (a) 1,490,000 66,258
Aspect Telecommunications Corp. (a) 1,652,500 52,725
Ciena Corp. (a) 422,200 31,269
Cisco Systems, Inc. (a) 767,600 73,498
Davox Corp. (a) 500,000 6,250
Level One Communications, Inc. (a) 1,002,800 22,312
Natural Microsystems Corp. (a) 330,000 4,166
Pairgain Technologies, Inc. (a) 765,300 10,332
268,804
COMPUTER SERVICES & SOFTWARE - 20.2%
Aspect Development, Inc. (a) 100,000 6,100
At Home Corp. Series A 450,000 18,956
Axent Technolgies, Inc. (a) 800,000 19,300
Bea Systems, Inc. (a) 157,600 3,093
BMC Software, Inc. 754,400 37,201
Check Point Software Technologies Ltd. (a) 600,000 14,100
Clarify, Inc. (a) 300,000 3,825
Com21, Inc. (a) 102,000 2,486
Compuware Corp. (a) 1,080,900 58,166
Electronics for Imaging, Inc. (a) 628,000 9,970
Fiserv, Inc. (a) 595,950 26,296
Geotel Communications Corp. (a) 315,000 14,018
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
Industri-Matematik International Corp. (a) 781,600 $ 8,305
International Telecom Data Systems, Inc. 150,000 4,416
J.D. Edwards & Co. 200,000 7,475
Manugistics Group, Inc. (a) 495,500 10,777
Mercury Interactive Corp. (a) 287,500 11,895
Microsoft Corp. (a) 3,592,100 394,896
Oracle Corp. (a) 4,961,800 131,488
PeopleSoft, Inc. (a) 599,800 22,605
QRS Corp. (a) 100,000 3,150
Saville System PLC sponsored ADR (a) 128,600 3,247
Security Dynamics Technologies, Inc. (a) 900,000 11,813
Siebel Systems, Inc. (a) 1,523,400 41,322
SunGard Data Systems, Inc. (a) 866,100 30,855
System Software Associates, Inc. (a) 835,600 4,491
Technology Solutions, Inc. (a) 200,000 5,094
Wind River Systems, Inc. (a) 136,300 5,094
910,434
COMPUTERS & OFFICE EQUIPMENT - 8.0%
Apple Computer, Inc. (a) 300,000 10,388
Comverse Technology, Inc. (a) 662,500 33,829
Dell Computer Corp. (a) 474,800 51,560
EMC Corp. (a) 2,300,000 112,700
Gateway 2000, Inc. (a) 1,100,000 59,400
Micron Electronics, Inc. (a) 600,000 8,325
Quantum Corp. (a) 3,701,700 64,780
Tech Data Corp. (a) 405,400 17,027
358,009
ELECTRONIC INSTRUMENTS - 1.3%
Credence Systems Corp. (a) 687,600 11,990
KLA-Tencor Corp. (a) 677,650 20,245
Novellus Systems, Inc. (a) 267,000 10,480
Smart Modular Technologies, Inc. (a) 927,700 17,742
60,457
ELECTRONICS - 16.3%
Actel Corp. (a) 500,000 5,125
Altera Corp. (a) 1,227,800 44,776
Applied Micro Circuits Corp. 544,300 12,349
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Brightpoint, Inc. (a) 1,020,200 $ 14,538
EFTC Corp. (a) 700,000 6,213
Etec Systems, Inc. (a) 361,600 12,204
Galileo Technology Ltd. (c) 1,203,200 13,010
Intel Corp. 4,246,600 358,572
Lattice Semiconductor Corp. (a)(c) 1,206,200 36,638
Linear Technology Corp. 55,800 3,338
Maxim Integrated Products, Inc. (a) 182,800 5,850
Micrel, Inc. (a) 335,700 10,071
Microchip Technology, Inc. (a) 2,134,800 65,445
Neomagic Corp. (a) 500,000 7,969
PMC-Sierra, Inc. (a) 848,300 34,674
Sanmina Corp. (a) 308,600 14,080
Vitesse Semiconductor Corp. (a) 1,076,900 35,403
Xilinx, Inc. (a) 1,400,000 52,500
732,755
TOTAL TECHNOLOGY 2,330,459
TRANSPORTATION - 1.9%
AIR TRANSPORTATION - 1.2%
ASA Holdings, Inc. 250,000 10,625
Comair Holdings, Inc. 990,000 31,247
Midwest Express Holdings, Inc. (a) 441,750 13,915
55,787
TRUCKING & FREIGHT - 0.7%
Expeditors International of Washington, Inc. 532,300 21,225
Swift Transportation Co., Inc. (a) 281,550 5,420
Yellow Corp. (a) 324,100 5,186
31,831
TOTAL TRANSPORTATION 87,618
UTILITIES - 9.2%
CELLULAR - 0.2%
SkyTel Communications, Inc. (a) 400,000 7,800
TELEPHONE SERVICES - 9.0%
e.spire Communications, Inc. (a) 100,000 2,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
IXC Communications, Inc. 255,000 $ 11,539
MCI Communications Corp. 1,700,000 110,075
McLeodUSA, Inc. Class A (a) 338,000 12,633
NEXTLINK Communications, Inc. Class A 86,500 3,211
Qwest Communications International, Inc. (a) 884,750 35,722
Tel-Save Holdings, Inc. (a) 584,100 7,301
WinStar Communications, Inc. (a) 300,000 9,900
WorldCom, Inc. (a) 4,069,134 215,155
407,536
TOTAL UTILITIES 415,336
TOTAL COMMON STOCKS 4,367,503
(Cost $3,395,515)
</TABLE>
CONVERTIBLE PREFERRED STOCKS - 0.6%
UTILITIES - 0.6%
TELEPHONE SERVICES - 0.6%
IXC Communications, Inc. $7.25 pay-in-kind (a)(d) 139,493 27,829
(Cost $15,086)
CONVERTIBLE BONDS - 0.5%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (000S)
HEALTH - 0.5%
DRUGS & PHARMACEUTICALS - 0.5%
Sepracor, Inc. 6.25% 2/15/05 (d) - $ 14,500 19,793
(Cost $16,998)
CASH EQUIVALENTS - 1.9%
SHARES
Taxable Central Cash Fund (b) 86,707,750 86,708
(Cost $86,708)
TOTAL INVESTMENT IN SECURITIES - 100% $ 4,501,833
(Cost $3,514,307)
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.62%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(c) Affiliated company (see Note 7 of Notes to Financial Statements).
(d) 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 $47,622,000 or 1.1% of net assets.
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $3,536,340,000. Net unrealized appreciation
aggregated $965,493,000, of which $1,260,354,000 related to
appreciated investment securities and $294,861,000 related to
depreciated investment securities.
The fund hereby designates approximately $238,906,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JULY 31, 1998
ASSETS
Investment in securities, at value (cost $3,514,307) - $ 4,501,833
See accompanying schedule
Receivable for investments sold 52,787
Receivable for fund shares sold 19,061
Dividends receivable 419
Interest receivable 817
Other receivables 1,292
TOTAL ASSETS 4,576,209
LIABILITIES
Payable for investments purchased $ 49,487
Payable for fund shares redeemed 30,701
Accrued management fee 1,929
Other payables and accrued expenses 1,104
TOTAL LIABILITIES 83,221
NET ASSETS $ 4,492,988
Net Assets consist of:
Paid in capital $ 3,124,828
Accumulated undistributed net realized gain (loss) on 380,632
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on investments 987,528
and assets and liabilities in foreign currencies
NET ASSETS, for 112,242 shares outstanding $ 4,492,988
NET ASSET VALUE and redemption price per share $40.03
($4,492,988 (divided by) 112,242 shares)
Maximum offering price per share (100/97.00 of $40.03) $41.27
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1998
INVESTMENT INCOME $ 9,691
Dividends
Interest 8,139
TOTAL INCOME 17,830
EXPENSES
Management fee $ 27,016
Basic fee
Performance adjustment (5,851)
Transfer agent fees 9,499
Accounting fees and expenses 811
Non-interested trustees' compensation 22
Custodian fees and expenses 86
Registration fees 312
Audit 64
Legal 32
Interest 1
Miscellaneous 17
Total expenses before reductions 32,009
Expense reductions (492) 31,517
NET INVESTMENT INCOME (LOSS) (13,687)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of $5,630 564,679
on sales of investments in affiliated issuers)
Foreign currency transactions (3) 564,676
Change in net unrealized appreciation (depreciation) on (90,852)
investment securities
NET GAIN (LOSS) 473,824
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 460,137
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
Operations $ (13,687) $ (5,131)
Net investment income (loss)
Net realized gain (loss) 564,676 345,268
Change in net unrealized appreciation (depreciation) (90,852) 803,669
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 460,137 1,143,806
FROM OPERATIONS
Distributions to shareholders - (6,873)
From net investment income
From net realized gain (272,886) (391,420)
TOTAL DISTRIBUTIONS (272,886) (398,293)
Share transactions 3,562,844 3,023,887
Net proceeds from sales of shares
Reinvestment of distributions 267,122 390,322
Cost of shares redeemed (3,547,368) (2,771,726)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 282,598 642,483
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 469,849 1,387,996
NET ASSETS
Beginning of period 4,023,139 2,635,143
End of period (including accumulated net investment loss $ 4,492,988 $ 4,023,139
of $0 and $4, respectively)
OTHER INFORMATION
Shares
Sold 94,593 91,580
Issued in reinvestment of distributions 7,806 12,633
Redeemed (94,757) (84,079)
Net increase (decrease) 7,642 20,134
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning $ 38.46 $ 31.20 $ 31.09 $ 22.42 $ 25.90
of period
Income from Investment
Operations
Net investment income (loss) (.12) C (.05) C .13 .09 .12
Net realized and 4.21 11.71 1.80 8.79 (.08)
unrealized gain (loss)
Total from investment 4.09 11.66 1.93 8.88 .04
operations
Less Distributions
From net investment income - (.08) (.02) (.09) (.12)
From net realized gain (2.52) (4.32) (1.80) (.12) (3.40)
Total distributions (2.52) (4.40) (1.82) (.21) (3.52)
Net asset value, end $ 40.03 $ 38.46 $ 31.20 $ 31.09 $ 22.42
of period
TOTAL RETURN A, B 11.87% 41.43% 6.43% 39.98% (.36)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,493 $ 4,023 $ 2,635 $ 2,110 $ 1,230
(in millions)
Ratio of expenses to average .76% .85% .83% .82% .89%
net assets
Ratio of expenses to average .75% D .84% D .82% D .81% D .88% D
net assets after expense
reductions
Ratio of net investment income (.32)% (.15)% .42% .35% .48%
(loss) to average net assets
Portfolio turnover rate 125% 147% 133% 62% 222%
Average commission rate E $ .0345 $ .0314
</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 NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES
(SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS).
E FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity OTC Portfolio (the fund) is a fund of Fidelity Securities
Fund (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities (including restricted
securities) for which exchange quotations are not readily available
(and in certain cases debt securities which trade on an exchange) are
valued primarily using dealer-supplied valuations or at their fair
value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which quotations are not readily available are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income is accrued as earned. Investment
income is recorded net of foreign taxes withheld where recovery of
such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Under the Plan, deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of a
cross-section of Fidelity funds, including shares of the fund.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, net operating losses and losses
deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part
of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements 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
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
the principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in U.S. Treasury securities
and repurchase agreements for these securities. Income distributions
from the Cash Fund are declared daily and paid monthly from net
interest income. Income distributions earned by the fund are recorded
as interest income in the accompanying financial statements.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $5,155,253,000 and $5,082,292,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly basic fee that is calculated on the basis of a group fee rate
plus a fixed individual fund fee rate applied to the average net
assets of the fund. The group fee rate is the weighted average of a
series of rates and is based on the monthly average net assets of all
the mutual funds advised by FMR. The rates ranged from .2500% to
.5200% for the period. The annual individual fund fee rate is .35%. In
the event that these rates were lower than the contractual rates in
effect during the period, FMR voluntarily implemented the above rates,
as they resulted in the same or a lower management fee. The basic fee
is subject to a performance adjustment (up to a maximum of
(plus/minus).20% of the fund's average net assets over the performance
period) based on the fund's investment performance as compared to the
appropriate index over a specified period of time. For the period, the
management fee was equivalent to an annual
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
rate of .50% 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 $594,000 on sales of shares of the fund all of which
was retained by FDC.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .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.
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 $147,000 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 $5,498,000. The weighted average interest rate was 5.85%.
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 $235,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $9,000and $248,000, respectively, under these arrangements.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of
at least 5% of the voting securities. Transactions during the period
with companies which are or were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
PURCHASE SALES DIVIDEND VALUE
AFFILIATE COST COST INCOME
Credence Systems Corp. $ 11,364 $ 20,264 $ - $ -
Etec Systems, Inc. - 4,168 - -
Galileo Technology Ltd. 60 - - 13,010
Gymboree Corp. 3,094 8,456 - -
Lattice Semiconductor Corp. 6,980 8,085 - 36,638
TOTALS $ 21,498 $ 40,973 $ - $ 49,648
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity OTC Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity OTC Fund (a fund of Fidelity Securities Fund) at July 31,
1998, the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements
and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fidelity OTC Fund 's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at
July 31, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
Boston, Massachusetts
September 9, 1998
DISTRIBUTIONS
The Board of Trustees of Fidelity OTC Portfolio voted to pay to
shareholders of record at the opening of business on record date, the
following distributions derived from capital gains realized from sales
of portfolio securities, and dividends derived from net investment
income:
PAY DATE 9/08/97 12/29/97 9/08/98
RECORD DATE 9/05/97 12/26/97 9/04/98
DIVIDENDS $ - $ - $-
SHORT-TERM
CAPITAL GAINS $ .21 $ .90 $ .81
LONG-TERM
CAPITAL GAINS $ .86 $ .55 $1.57
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 78.44% 56.41%
20% rate 21.56% 43.59%
A total of 8.01% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund will notify shareholders in January 1999 of the applicable
percentages for use in preparing 1998 income tax returns.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
toll-free number to access account balances, positions, quotes and
trading. It's easy to navigate the service, and on your first call,
the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY
MARKET FUNDS WILL BE ABLE TO
MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND
IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Las Colinas Blvd.
Irving, TX 75309-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Abigail Johnson, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
OTC-ANN-0998 60532
1.536191.101
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Contrafund II
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Export and Multinational Fund
Fidelity Fifty SM
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(registered trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Selector
Small Cap Stock Fund
Stock Selector
TechnoQuant SM Growth Fund
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY
DIVIDEND GROWTH
FUND
ANNUAL REPORT
JULY 31, 1998
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the fund's
investments over the past six months.
INVESTMENTS 10 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 22 Notes to the financial statements.
REPORT OF INDEPENDENT 27 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 28
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
So far, 1998 has been a year of considerable volatility in the U.S.
stock and bond markets. In the first quarter, the U.S. stock market
soared as inflation and interest rates remained stable, while the
economy maintained strong growth. By summer, however, investors began
to exercise caution relative to the troublesome Asian economic climate
and reports of concerns about corporate earnings domestically. Market
volatility and low interest rates were also the main stories in the
bond market, with many investors moving assets to highly rated U.S.
Treasuries.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Dividend Growth 23.81% 224.96% 250.96%
S&P 500 (registered trademark) 19.29% 180.53% 189.19%
Growth Funds Average 13.15% 136.52% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or since
the fund started on April 27, 1993. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of
your investment would be $1,050. You can compare the fund's returns to
the performance of the Standard & Poor's 500 Index - a 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 mutual
funds with similar objectives tracked by Lipper Analytical Services,
Inc. The past one year average represents a peer group of 908 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Fidelity Dividend Growth 23.81% 26.58% 26.94%
S&P 500 19.29% 22.91% 22.36%
Growth Funds Average 13.15% 18.42% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER LIFE OF FUND
Dividend Growth S&P 500
00330 SP001
1993/04/27 10000.00 10000.00
1993/04/30 10150.00 10051.03
1993/05/31 10480.00 10320.39
1993/06/30 10700.00 10350.32
1993/07/31 10800.00 10308.92
1993/08/31 11550.00 10699.63
1993/09/30 11820.00 10617.24
1993/10/31 12080.00 10837.02
1993/11/30 11680.00 10734.07
1993/12/31 12171.52 10863.95
1994/01/31 12493.15 11233.32
1994/02/28 12302.18 10928.90
1994/03/31 11715.49 10452.40
1994/04/30 11786.37 10586.19
1994/05/31 11604.11 10759.80
1994/06/30 11310.46 10496.19
1994/07/31 11826.87 10840.46
1994/08/31 12616.68 11284.92
1994/09/30 12485.05 11008.44
1994/10/31 13041.96 11256.13
1994/11/30 12474.92 10846.18
1994/12/31 12691.18 11007.03
1995/01/31 12732.22 11292.45
1995/02/28 13142.60 11732.51
1995/03/31 13768.44 12078.74
1995/04/30 14404.54 12434.46
1995/05/31 14907.26 12931.46
1995/06/30 15728.03 13231.86
1995/07/31 16456.47 13670.63
1995/08/31 16528.28 13704.94
1995/09/30 16956.49 14283.29
1995/10/31 16359.88 14232.30
1995/11/30 17176.30 14857.10
1995/12/31 17454.52 15143.25
1996/01/31 17928.35 15658.72
1996/02/29 18479.31 15803.88
1996/03/31 18964.16 15956.07
1996/04/30 19845.70 16191.26
1996/05/31 20484.81 16608.83
1996/06/30 19933.85 16672.11
1996/07/31 18997.21 15935.54
1996/08/31 19614.29 16271.62
1996/09/30 20604.68 17187.39
1996/10/31 21100.90 17661.42
1996/11/30 22533.19 18996.44
1996/12/31 22715.29 18620.12
1997/01/31 23405.00 19783.51
1997/02/28 23472.84 19938.61
1997/03/31 22443.92 19119.33
1997/04/30 23631.13 20260.76
1997/05/31 24987.95 21494.23
1997/06/30 26141.23 22457.17
1997/07/31 28346.05 24244.09
1997/08/31 27091.00 22885.94
1997/09/30 28589.46 24139.40
1997/10/31 27906.19 23333.14
1997/11/30 28757.28 24413.23
1997/12/31 29052.83 24832.41
1998/01/31 29926.78 25107.06
1998/02/28 32286.47 26917.78
1998/03/31 33784.68 28296.24
1998/04/30 34321.54 28580.90
1998/05/31 34021.90 28089.59
1998/06/30 35183.01 29230.59
1998/07/31 35095.62 28919.28
IMATRL PRASUN SHR__CHT 19980731 19980811 152025 R00000000000067
$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, 1998, the value of the
investment would have grown to $35,096 - a 250.96% increase on the
initial investment. For comparison, look at how the Standard & Poor's
500 Index did over the same period. With dividends and capital gains,
if any, reinvested, the same $10,000 would have grown to $28,919 - a
189.19% 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
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
For the most part, the past 12
months have been witness to solid
gains and record-setting stock
market performance in the U.S.
Despite that, the final few weeks
of the period ending July 31, 1998,
left many investors asking "What
have you done for me lately?" For
the 12-month period, the Standard
& Poor's 500 Index - a measure
of the U.S. stock market -
produced a return of 19.29%. But
whether one of the longest
running bull markets in recent
history is now an endangered
species remains to be seen.
There have been some
extraordinary highs and lows in
the equity market over the past 12
months. In late October, the Dow
Jones Industrial Average fell
550-plus points in one trading
session. That, however, was
quickly overcome by the first
quarter of 1998 as investors in
stocks were rewarded with strong
gains and an upward trend in
stock prices. But despite low
interest rates, a strong economy
and tame inflation domestically,
investor uncertainty over
corporate earnings reports and
the Asian market upheaval
began to have a tangible effect on
our markets at home. After hitting
a record of 9337.97 on July 17,
1998, the Dow Jones Industrial
Average racked up losses of over
400 points the week of July
20th. Still, the 12-month S&P
return of 19.29% is nearly twice
that of the stock market's historical
annual performance.
An interview with Charles Mangum, Portfolio Manager of Fidelity
Dividend Growth Fund
Q. HOW DID THE FUND PERFORM, CHARLES?
A. Very well. For the 12 months that ended July 31, 1998, the fund
produced a return of 23.81%. This topped the growth funds average,
which returned 13.15% during the same period, according to Lipper
Analytical Services. The fund also beat the Standard & Poor's 500
Index, which returned 19.29%.
Q. WHAT FACTORS HELPED THE FUND?
A. The fund's emphasis on what I call "stable growth" areas - namely
the health, retail and consumer nondurable sectors - boosted
performance. In particular, the fund's concentration on health stocks
- - which accounted for around 20% of the portfolio - was very
beneficial. While many sectors experienced earnings difficulties
during the period, the health sector - for the most part - was able to
maintain a degree of earnings momentum.
Q. FINANCE STOCKS ALSO REPRESENTED A CONSIDERABLE CHUNK OF THE
PORTFOLIO, AT AROUND 19% AT THE END OF THE PERIOD. HOW DID THESE
STOCKS PERFORM?
A. It's been a mixed bag, mostly because the climate for financial
stocks has been so challenging. Concern over the depressed economies
of Southeast Asia played a role, as did the abundance of merger
activity we've seen within the group and the accompanying questions
concerning how smoothly the involved companies can integrate
themselves. The huge Travelers/Citicorp merger, for instance, will be
watched quite closely. In terms of portfolio holdings, Citicorp was a
positive contributor, while First International Bancorp was somewhat
flat.
Q. YOU BUMPED UP THE FUND'S ENERGY-RELATED INVESTMENTS DURING THE
PERIOD. WHY?
A. I added to the fund's oil-related positions - particularly during
the last three months of the period - as the price of oil dropped. Oil
typically hovers in the $18 per barrel price range, but a slowdown in
demand from Asia - among other factors - sent the price down to around
$12. Because I felt that oil prices would rise again, I bolstered the
fund's positions in French oil company Total, as well as British
Petroleum.
Q. OVER THE LAST SIX MONTHS, YOU REDUCED THE FUND'S TECHNOLOGY
EXPOSURE FROM AROUND 14% TO JUST UNDER 10%. WHY?
A. Throughout the period, the performance of the technology sector was
greatly influenced by both developments in Southeast Asia and investor
perceptions. I had bulked up the fund's technology stake during the
fourth quarter of 1997, when the problems in Southeast Asia presented
some interesting buying opportunities. In the first quarter of 1998,
many technology stocks reverted to their high valuations of 1997, and
there was this general assumption that Southeast Asia might not be as
big a problem as originally thought. However, as we entered the spring
of 1998, the depressed economies of Southeast Asia had again caused
concern and demand for technology products and services faded. As a
result, I cut back the fund's exposure to certain technology-related
investments, including Linear Technology, Texas Instruments and Dell.
Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHICH DIDN'T?
A. American Home Products, the fund's largest position at the end of
the period, performed well. The company, which makes the popular pain
reliever Advil, benefited from strong product introductions and steady
earnings. Retailers Wal-Mart and Proffitts also fared well.
Disappointments, on the other hand, included technology companies
Oracle and Molex, both of which were hurt by the problems in Asia.
Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
A. In terms of the portfolio itself, I don't anticipate any major
changes. Similar to the opportunity I found with oil stocks toward the
end of the period, I'll be looking to make opportunistic investments.
I may consider some economically sensitive stocks that have been
beaten down, as well as some high-quality names that have had
difficult performance stretches. My approach has always been to look
for stocks that offer an attractive combination of valuation and
earnings growth.
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.
CHARLES MANGUM OFFERS HIS
PHILOSOPHY ON ASSESSING
PHARMACEUTICAL STOCKS:
"Pharmaceutical stocks have
enjoyed a nice run over the last
few years for a variety of reasons.
One that immediately comes to
mind is the never-ending pipeline
of successful products. When I
visit drug companies, I get
bombarded with details on new
product introductions. When I get
back to my office, that's when I
start to sort through which
products may or may not have a
chance of helping the company.
"My first step is to look at the
situation from a competitive
standpoint. I try to get a feel for
the marketplace for that
particular drug, as well as what the
company's competitors are doing.
If the company has a strong
product for a particular market
niche, that's a favorable situation.
I also try to make a judgment on
the company's sales force, and try
to pinpoint what types of products
the sales force has had success
with in the past. I've found that it's
easier to sell a product that gives
users symptomatic relief, i.e. it
relieves pain or reduces blood
pressure. On the other hand, it's
much tougher to sell a drug, for
example, that can help prevent
osteoporosis. The effects of such a
product will most likely take a long
time to materialize. Lastly, I try to
gauge what the market perception
is for the product versus my
analysis."
FUND FACTS
GOAL: to increase the value of
the fund's shares by investing
mainly in equity securities of
companies that have the
potential to increase their
current dividend or begin
paying a dividend
FUND NUMBER: 330
TRADING SYMBOL: FDGFX
START DATE: April 27, 1993
SIZE: as of July 31, 1998,
more than $7.3 billion
MANAGER: Charles Mangum,
since 1997; manager, Fidelity
OTC Portfolio, 1996-1997;
Fidelity Convertible Securities
Fund, 1995-1996; Fidelity
Select Health Care Portfolio,
1992-1995; joined Fidelity
in 1990
(checkmark)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
American Home Products Corp. 4.8 5.5
Johnson & Johnson 4.6 2.7
General Electric Co. 3.5 3.1
Microsoft Corp. 2.9 2.1
Fannie Mae 2.3 0.7
Schering-Plough Corp. 2.2 5.5
Citicorp 2.2 3.3
Wal-Mart Stores, Inc. 2.2 2.4
Norwest Corp. 2.0 0.5
Philip Morris Companies, Inc. 1.9 1.4
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE MARKET SECTORS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS IN
INVESTMENTS THESE MARKET SECTORS 6
MONTHS AGO
Health 20.2 20.3
Finance 19.1 16.3
Technology 9.5 13.7
Energy 8.4 5.8
Utilities 7.1 5.6
</TABLE>
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1998 * AS OF JANUARY 31, 1998 **
ROW: 1, COL: 1, VALUE: 96.8
ROW: 1, COL: 2, VALUE: 0.0
ROW: 1, COL: 3, VALUE: 3.2
STOCKS 93.2%
CONVERTIBLE
SECURITIES 1.9%
SHORT-TERM
INVESTMENTS 4.9%
FOREIGN
INVESTMENTS 4.2%
STOCKS 96.5%
CONVERTIBLE
SECURITIES 0.0%
SHORT-TERM
INVESTMENTS 3.5%
FOREIGN
INVESTMENTS 3.7%
ROW: 1, COL: 1, VALUE: 93.2
ROW: 1, COL: 2, VALUE: 1.9
ROW: 1, COL: 3, VALUE: 4.9
*
**
INVESTMENTS JULY 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 96.5%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 4.6%
AEROSPACE & DEFENSE - 2.1%
AlliedSignal, Inc. 1,722,100 $ 74,911
Cordant Technologies, Inc. 882,700 37,846
Lockheed Martin Corp. 150,000 14,953
Sundstrand Corp. 511,100 26,737
154,447
DEFENSE ELECTRONICS - 0.9%
Raytheon Co. Class A 1,195,300 64,770
SHIP BUILDING & REPAIR - 1.6%
General Dynamics Corp. 2,450,000 116,528
TOTAL AEROSPACE & DEFENSE 335,745
BASIC INDUSTRIES - 2.5%
CHEMICALS & PLASTICS - 0.9%
IMC Global, Inc. 1,846,400 47,199
Sealed Air Corp. (a) 565,800 22,632
69,831
METALS & MINING - 0.9%
Aluminum Co. of America 983,700 68,183
PACKAGING & CONTAINERS - 0.7%
Owens Illinois, Inc. (a) 1,106,800 48,838
TOTAL BASIC INDUSTRIES 186,852
CONSTRUCTION & REAL ESTATE - 2.2%
BUILDING MATERIALS - 0.9%
Masco Corp. 2,258,400 64,506
REAL ESTATE - 0.1%
Stewart Enterprises, Inc. Class A 233,300 5,300
REAL ESTATE INVESTMENT TRUSTS - 1.2%
Alexandria Real Estate Equities, Inc. 312,000 9,087
Bedford Property Investors, Inc. 277,500 5,186
Glenborough Realty Trust, Inc. 771,200 18,991
Public Storage, Inc. 284,800 7,547
Simon Debartolo Group, Inc. 300,000 9,338
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Starwood Lodging Trust combined certificate (SBI) 860,000 $ 35,314
Tanger Factory Outlet Centers, Inc. 214,700 6,159
91,622
TOTAL CONSTRUCTION & REAL ESTATE 161,428
DURABLES - 0.8%
AUTOS, TIRES, & ACCESSORIES - 0.4%
AutoZone, Inc. (a) 792,300 27,136
CONSUMER ELECTRONICS - 0.4%
Black & Decker Corp. 575,000 32,703
TOTAL DURABLES 59,839
ENERGY - 8.4%
OIL & GAS - 8.4%
Amoco Corp. 840,000 35,070
British Petroleum Co. PLC ADR 914,889 73,420
Coastal Corp. (The) 1,039,800 34,053
Cooper Cameron Corp. (a) 1,639,700 57,492
Exxon Corp. 810,000 56,801
Phillips Petroleum Co. 1,931,000 85,326
Royal Dutch Petroleum Co. 400,000 20,400
Santa Fe Energy Resources, Inc. 3,167,300 27,912
Texaco, Inc. 1,010,000 61,421
Total SA sponsored ADR 2,339,000 133,762
USX-Marathon Group 980,000 33,443
619,100
FINANCE - 19.1%
BANKS - 6.8%
BankAmerica Corp. 1,166,000 104,649
Citicorp 963,300 163,761
Comerica, Inc. 1,084,700 73,082
North Fork Bancorp, Inc. 432,000 10,530
Norwest Corp. 4,046,100 145,407
497,429
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 1.5%
American Express Co. 108,392 $ 11,964
Associates First Capital Corp. 1,252,137 97,275
109,239
FEDERAL SPONSORED CREDIT - 2.3%
Fannie Mae 2,781,100 172,428
INSURANCE - 6.7%
AFLAC, Inc. 1,961,600 67,430
Allmerica Financial Corp. 638,100 42,673
Allstate Corp. 282,400 11,984
AMBAC, Inc. 744,200 43,350
American International Group, Inc. 292,500 44,113
Aon Corp. 471,400 32,055
Hartford Financial Services Group, Inc. 709,600 36,944
Lincoln National Corp. 293,600 28,112
Marsh & McLennan Companies, Inc. 225,000 13,739
MBIA, Inc. 5,600 377
MGIC Investment Corp. 74,200 3,979
Protective Life Corp. 532,000 20,582
SunAmerica, Inc. 135,000 8,294
Torchmark Corp. 1,152,600 50,498
Travelers Property Casualty Corp. Class A 1,253,600 54,218
UNUM Corp. 568,400 29,948
488,296
SAVINGS & LOANS - 1.3%
Charter One Financial, Inc. 1,680,050 54,707
Washington Mutual, Inc. 1,087,600 43,436
98,143
SECURITIES INDUSTRY - 0.5%
Merrill Lynch & Co., Inc. 190,000 18,525
Morgan Stanley, Dean Witter, Discover and Co. 212,700 18,518
37,043
TOTAL FINANCE 1,402,578
HEALTH - 20.2%
DRUGS & PHARMACEUTICALS - 10.8%
American Home Products Corp. 6,890,600 354,863
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Amgen, Inc. (a) 839,900 $ 61,680
Bristol-Myers Squibb Co. 740,900 84,416
Merck & Co., Inc. 1,036,700 127,838
Schering-Plough Corp. 1,706,100 165,065
793,862
MEDICAL EQUIPMENT & SUPPLIES - 7.4%
Cardinal Health, Inc. 790,200 75,909
Guidant Corp. 130,000 9,661
Johnson & Johnson 4,382,700 338,564
McKesson Corp. 896,900 72,313
Sofamor/Danek Group, Inc. (a) 398,100 33,888
Stryker Corp. 308,800 13,414
543,749
MEDICAL FACILITIES MANAGEMENT - 2.0%
Columbia/HCA Healthcare Corp. 3,499,000 99,722
Foundation Health Systems, Inc. Class A (a) 171,900 3,545
HEALTHSOUTH Corp. (a) 1,588,500 39,911
143,178
TOTAL HEALTH 1,480,789
INDUSTRIAL MACHINERY & EQUIPMENT - 6.3%
ELECTRICAL EQUIPMENT - 5.4%
Emerson Electric Co. 490,000 29,124
General Electric Co. 2,844,400 254,040
Honeywell, Inc. 923,900 77,434
Philips Electronics NV 442,100 36,114
396,712
INDUSTRIAL MACHINERY & EQUIPMENT - 0.9%
Cooper Industries, Inc. 900,000 47,194
Illinois Tool Works, Inc. 265,100 14,862
62,056
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 458,768
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - 1.4%
BROADCASTING - 1.3%
Clear Channel Communications, Inc. (a) 840,400 $ 47,220
Time Warner, Inc. 499,200 44,959
92,179
PUBLISHING - 0.1%
Times Mirror Co. Class A 160,000 9,610
TOTAL MEDIA & LEISURE 101,789
NONDURABLES - 5.8%
BEVERAGES - 0.1%
Coca-Cola Co. (The) 100,000 8,069
FOODS - 1.0%
Hershey Foods Corp. 371,300 23,438
Quaker Oats Co. 643,100 34,004
Sara Lee Corp. 333,800 16,732
74,174
HOUSEHOLD PRODUCTS - 2.8%
Alberto-Culver Co. Class A (c) 3,417,500 77,748
Clorox Co. 744,800 76,342
Gillette Co. 955,200 50,029
204,119
TOBACCO - 1.9%
Philip Morris Companies, Inc. 3,173,800 139,052
TOTAL NONDURABLES 425,414
RETAIL & WHOLESALE - 6.0%
APPAREL STORES - 0.4%
Gap, Inc. 340,150 20,281
Saks Holdings, Inc. (a) 343,900 8,834
29,115
DRUG STORES - 0.9%
CVS Corp. 1,577,200 64,665
GENERAL MERCHANDISE STORES - 3.8%
Proffitts, Inc. (a) 3,834,100 120,774
Wal-Mart Stores, Inc. 2,584,200 163,128
283,902
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 0.4%
Meyer (Fred), Inc. (a) 625,800 $ 27,574
RETAIL & WHOLESALE, MISCELLANEOUS - 0.5%
Home Depot, Inc. 820,000 34,338
TOTAL RETAIL & WHOLESALE 439,594
SERVICES - 1.6%
ADVERTISING - 1.3%
Omnicom Group, Inc. 1,805,800 94,805
SERVICES - 0.3%
Borg Warner Security Corp. (a) 379,600 7,284
Robert Half International, Inc. (a) 242,100 12,892
20,176
TOTAL SERVICES 114,981
TECHNOLOGY - 9.5%
COMMUNICATIONS EQUIPMENT - 0.7%
Cisco Systems, Inc. (a) 220,000 21,065
Lucent Technologies, Inc. 345,600 31,946
53,011
COMPUTER SERVICES & SOFTWARE - 3.7%
Microsoft Corp. (a) 1,962,100 215,708
Oracle Corp. (a) 1,320,000 34,980
Shared Medical Systems Corp. 302,000 20,498
271,186
COMPUTERS & OFFICE EQUIPMENT - 1.6%
Dell Computer Corp. (a) 338,600 36,770
Pitney-Bowes, Inc. 730,800 36,905
Quantum Corp. (a) 526,100 9,207
Xerox Corp. 357,400 37,728
120,610
ELECTRONIC INSTRUMENTS - 0.1%
DBT Online, Inc. (a) 195,000 4,314
ELECTRONICS - 3.4%
Intel Corp. 1,399,900 118,204
Linear Technology Corp. 100,000 5,981
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Molex, Inc. 3,243,975 $ 85,357
Texas Instruments, Inc. 701,300 41,596
251,138
TOTAL TECHNOLOGY 700,259
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.1%
Virgin Express Holdings PLC sponsored ADR 486,500 5,990
RAILROADS - 0.9%
Burlington Northern Santa Fe Corp. 305,400 31,437
CSX Corp. 259,300 10,485
Norfolk Southern Corp. 905,400 27,049
68,971
TOTAL TRANSPORTATION 74,961
UTILITIES - 7.1%
ELECTRIC UTILITY - 1.0%
Duke Energy Corp. 499,900 28,557
LG&E Energy Corp. 951,223 23,186
PG&E Corp. 787,000 23,954
75,697
GAS - 0.0%
ONEOK, Inc. 31,171 1,064
TELEPHONE SERVICES - 6.1%
AT&T Corp. 1,507,600 91,398
BellSouth Corp. 1,240,000 84,708
GTE Corp. 1,112,900 60,514
MCI Communications Corp. 1,580,000 102,305
SBC Communications, Inc. 2,581,212 105,507
444,432
TOTAL UTILITIES 521,193
TOTAL COMMON STOCKS 7,083,290
(Cost $5,903,737)
</TABLE>
INTERFUND LOAN - 0.3%
VALUE (NOTE 1)
(000S)
With Fidelity Select Retailing Portfolio, $ 23,837
at 5.81%, due 8/03/98
(Cost $23,837)
CASH EQUIVALENTS - 3.2%
SHARES
Taxable Central Cash Fund (b) 234,906,791 234,907
(Cost $234,907)
TOTAL INVESTMENT IN SECURITIES - 100% $ 7,342,034
(Cost $6,162,481)
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.62%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(c) Affiliated company (see Note 7 of Notes to Financial Statements).
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $6,187,546,000. Net unrealized appreciation
aggregated $1,154,488,000, of which $1,287,458,000 related to
appreciated investment securities and $132,970,000 related to
depreciated investment securities.
The fund hereby designates approximately $150,121,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1998
ASSETS
Investment in securities, at value (cost $6,162,481) - $ 7,342,034
See accompanying schedule
Cash 1,533
Receivable for investments sold 77,681
Receivable for fund shares sold 33,720
Dividends receivable 8,354
Interest receivable 1,449
Other receivables 40
TOTAL ASSETS 7,464,811
LIABILITIES
Payable for investments purchased $ 64,393
Payable for fund shares redeemed 23,694
Accrued management fee 3,719
Other payables and accrued expenses 1,773
TOTAL LIABILITIES 93,579
NET ASSETS $ 7,371,232
Net Assets consist of:
Paid in capital $ 5,589,796
Undistributed net investment income 25,375
Accumulated undistributed net realized gain (loss) on 576,508
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on investments 1,179,553
NET ASSETS, for 262,196 shares outstanding $ 7,371,232
NET ASSET VALUE, offering price and redemption price $28.11
per share ($7,371,232 (divided by) 262,196 shares)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1998
INVESTMENT INCOME $ 67,067
Dividends (including $685 received from affiliated issuers)
Interest 12,994
TOTAL INCOME 80,061
EXPENSES
Management fee $ 31,366
Basic fee
Performance adjustment 3,114
Transfer agent fees 10,835
Accounting fees and expenses 812
Non-interested trustees' compensation 19
Custodian fees and expenses 117
Registration fees 931
Audit 53
Legal 21
Miscellaneous 19
Total expenses before reductions 47,287
Expense reductions (1,455) 45,832
NET INVESTMENT INCOME 34,229
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of $11,706 743,606
on sales of investments in affiliated issuers)
Foreign currency transactions 359 743,965
Change in net unrealized appreciation (depreciation) on 341,085
investment securities
NET GAIN (LOSS) 1,085,050
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 1,119,279
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
Operations $ 34,229 $ 26,445
Net investment income
Net realized gain (loss) 743,965 268,769
Change in net unrealized appreciation (depreciation) 341,085 795,165
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,119,279 1,090,379
FROM OPERATIONS
Distributions to shareholders (26,753) (8,329)
From net investment income
From net realized gain (391,699) (28,170)
TOTAL DISTRIBUTIONS (418,452) (36,499)
Share transactions 4,628,616 3,929,111
Net proceeds from sales of shares
Reinvestment of distributions 412,992 36,073
Cost of shares redeemed (2,738,785) (1,871,351)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,302,823 2,093,833
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,003,650 3,147,713
NET ASSETS
Beginning of period 4,367,582 1,219,869
End of period (including undistributed net investment $ 7,371,232 $ 4,367,582
income of $25,375 and $20,704, respectively)
OTHER INFORMATION
Shares
Sold 177,628 192,987
Issued in reinvestment of distributions 17,960 2,034
Redeemed (107,573) (91,579)
Net increase (decrease) 88,015 103,442
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, beginning $ 25.07 $ 17.24 $ 16.04 $ 11.68 $ 10.80
of period
Income from Investment
Operations
Net investment income .17 B .20 B .11 .05 .02
Net realized and unrealized 5.21 8.09 2.25 4.47 1.01
gain (loss)
Total from investment 5.38 8.29 2.36 4.52 1.03
operations
Less Distributions
From net investment income (.15) (.09) (.09) (.01) (.01)
From net realized gain (2.19) (.37) (1.07) (.15) -
In excess of net realized gain - - - - (.14)
Total distributions (2.34) (.46) (1.16) (.16) (.15)
Net asset value, end of period $ 28.11 $ 25.07 $ 17.24 $ 16.04 $ 11.68
TOTAL RETURN A 23.81% 49.21% 15.44% 39.14% 9.51%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,371 $ 4,368 $ 1,220 $ 465 $ 72
(in millions)
Ratio of expenses to average .89% .95% 1.02% 1.21% 1.43%
net assets
Ratio of expenses to average .86% C .92% C .99% C 1.19% C 1.40% C
net assets after expense
reductions
Ratio of net investment income .64% .99% .86% .78% .13%
to average net assets
Portfolio turnover rate 109% 141% 129% 162% 291%
Average commission rate D $ .0437 $ .0419
</TABLE>
F THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
G NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
H 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).
I FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1998
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 an open-end management investment company organized as
a Massachusetts business trust. The financial statements have been
prepared in conformity with generally accepted accounting principles
which require management to make certain estimates and assumptions at
the date of the financial statements. The following summarizes the
significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities (including restricted
securities) for which exchange quotations are not readily available
(and in certain cases debt securities which trade on an exchange) are
valued primarily using dealer-supplied valuations or at their fair
value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which quotations are not readily available are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts , disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
date. Non-cash dividends included in dividend income, if any, are
recorded at the fair market value of the securities received. Interest
income, which includes accretion of original issue discount, is
accrued as earned. Investment income is recorded net of foreign taxes
withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, foreign currency transactions,
non-taxable dividends and losses deferred due to wash sales. The fund
also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount
of the repurchase agreement (including accrued interest). FMR, the
fund's investment adviser, is responsible for determining that the
value of the underlying securities remains in accordance with the
market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in U.S. Treasury securities
and repurchase agreements for these securities. Income distributions
from the Cash Fund are declared daily and paid monthly from net
interest income. Income distributions earned by the fund are recorded
as interest income in the accompanying financial statements.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $7,360,480,000 and $5,552,703,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly basic fee that is calculated on the basis of a group fee rate
plus a fixed individual fund fee rate applied to the average net
assets of the fund. The group fee rate is the weighted average of a
series of rates and is based on the monthly average net assets of all
the mutual funds advised by FMR. The rates ranged from .2500% to
.5200% for the period. The annual individual fund fee rate is .30%. In
the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
event that these rates were lower than the contractual rates in effect
during the period, FMR voluntarily implemented the above rates, as
they resulted in the same or a lower management fee. The basic fee is
subject to a performance adjustment (up to a maximum of
(plus/minus).20% of the fund's average net assets over the performance
period) based on the fund's investment performance as compared to the
appropriate index over a specified period of time. For the period, the
management fee was equivalent to an annual rate of .65% of average net
assets after the performance adjustment.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .20% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $1,502,000 for the
period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender.
The maximum loan and the average daily loan balances during the period
for which loans were outstanding amounted to $24,920,000 and
$23,805,000, respectively. The weighted average interest rate was
5.80%. Interest earned from the interfund lending program amounted to
$12,000 and is included in interest income on the Statement of
Operations.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses. For the period, the fund's expenses
were reduced by $1,332,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $3,000 and $120,000, 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
Alberto-Culver Co. Class A $ 49,002 $ - $ 598 $ 77,748
American Pad & Paper Co. 2,743 13,631 - -Integramed America, Inc.
- - - -Primex Technologies, Inc. - 749 87 -
TOTALS $ 51,745 $ 14,380 $ 685 $ 77,748
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity Dividend Growth Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Dividend Growth Fund (a fund of Fidelity Securities Fund) at
July 31, 1998, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Dividend Growth Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at
July 31, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
Boston, Massachusetts
September 9, 1998
DISTRIBUTIONS
The Board of Trustees of Fidelity Dividend Growth Fund voted to pay to
shareholders of record at the opening of business on record date, the
following distributions derived from capital gains realized from sales
of portfolio securities, and dividends derived from net investment
income:
PAY DATE 9/08/97 12/29/97 9/08/98
RECORD DATE 9/05/97 12/26/97 9/04/98
DIVIDENDS $.10 $.05 $.08
SHORT-TERM
CAPITAL GAINS $.83 $.68 $1.36
LONG-TERM
CAPITAL GAINS $.48 $.20 $.55
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 56.76% 49.78%
20% rate 43.24% 50.22%
A total of 0.38% 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 15.72% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund will notify shareholders in January 1999 of the applicable
percentages for use in preparing 1998 income tax returns.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
toll-free number to access account balances, positions, quotes and
trading. It's easy to navigate the service, and on your first call,
the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY
MARKET FUNDS WILL BE ABLE TO
MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND
IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree
Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
Fidelity Brokerage Services, Inc.
100 Summer St., Boston, MA 02110 Member NYSE/SIPC
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Abigail P. Johnson, Vice President
Charles A. Mangum, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
DGF-ANN-0998 60539
1.536090.101
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Contrafund II
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Export and Multinational Fund
Fidelity Fifty SM
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(registered trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Selector
Small Cap Stock Fund
Stock Selector
TechnoQuant SM Growth Fund
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY
GROWTH & INCOME
PORTFOLIO
ANNUAL REPORT
JULY 31, 1998
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the fund's
investments over the past six months.
INVESTMENTS 10 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS 23 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 27 Notes to the financial statements.
REPORT OF INDEPENDENT 31 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 32
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
So far, 1998 has been a year of considerable volatility in the U.S.
stock and bond markets. In the first quarter, the U.S. stock market
soared as inflation and interest rates remained stable, while the
economy maintained strong growth. By summer, however, investors began
to exercise caution relative to the troublesome Asian economic climate
and reports of concerns about corporate earnings domestically. Market
volatility and low interest rates were also the main stories in the
bond market, with many investors moving assets to highly rated U.S.
Treasuries.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Growth & Income 19.06% 165.33% 494.68%
S&P 500 (registered trademark) 19.29% 180.53% 445.15%
Growth & Income Funds Average 11.37% 133.26% 322.99%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Standard & Poor's 500 Index - a 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 and income funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past one
year average represents a peer group of 689 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Growth & Income 19.06% 21.55% 19.52%
S&P 500 19.29% 22.91% 18.48%
Growth & Income Funds Average 11.37% 18.33% 15.34%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Growth & Income S&P 500
00027 SP001
1988/07/31 10000.00 10000.00
1988/08/31 9883.24 9660.00
1988/09/30 10241.17 10071.52
1988/10/31 10442.25 10351.50
1988/11/30 10289.71 10203.48
1988/12/31 10436.26 10382.04
1989/01/31 11089.84 11142.00
1989/02/28 10970.37 10864.57
1989/03/31 11309.40 11117.71
1989/04/30 11791.55 11694.72
1989/05/31 12344.61 12168.36
1989/06/30 12429.47 12099.00
1989/07/31 13265.73 13191.54
1989/08/31 13551.63 13450.09
1989/09/30 13478.86 13394.95
1989/10/31 13052.97 13084.18
1989/11/30 13269.65 13351.10
1989/12/31 13525.55 13671.53
1990/01/31 12816.58 12754.17
1990/02/28 13013.51 12918.70
1990/03/31 13242.09 13261.04
1990/04/30 12900.52 12929.52
1990/05/31 13853.76 14190.14
1990/06/30 13789.37 14093.65
1990/07/31 13693.28 14048.55
1990/08/31 12524.15 12778.56
1990/09/30 11801.97 12156.25
1990/10/31 11777.39 12103.97
1990/11/30 12359.29 12885.89
1990/12/31 12606.29 13245.41
1991/01/31 13757.59 13822.91
1991/02/28 14917.17 14811.25
1991/03/31 15738.87 15169.68
1991/04/30 15955.62 15206.08
1991/05/31 16872.61 15862.99
1991/06/30 15726.64 15136.46
1991/07/31 16690.18 15841.82
1991/08/31 17176.14 16217.27
1991/09/30 17024.65 15946.44
1991/10/31 17329.12 16160.13
1991/11/30 16424.39 15508.87
1991/12/31 17880.98 17283.09
1992/01/31 18308.59 16961.62
1992/02/29 18710.02 17182.12
1992/03/31 18325.71 16847.07
1992/04/30 18737.82 17342.38
1992/05/31 18807.96 17427.35
1992/06/30 18438.36 17167.69
1992/07/31 18817.53 17869.85
1992/08/31 18623.53 17503.51
1992/09/30 18814.29 17710.06
1992/10/31 18963.29 17772.04
1992/11/30 19549.38 18378.07
1992/12/31 19943.82 18604.12
1993/01/31 20500.34 18760.39
1993/02/28 20733.07 19015.53
1993/03/31 21494.01 19416.76
1993/04/30 21463.48 18946.88
1993/05/31 21911.28 19454.65
1993/06/30 22248.66 19511.07
1993/07/31 22412.40 19433.03
1993/08/31 23292.52 20169.54
1993/09/30 23419.31 20014.23
1993/10/31 23681.39 20428.53
1993/11/30 23146.75 20234.46
1993/12/31 23838.71 20479.29
1994/01/31 24739.90 21175.59
1994/02/28 24267.85 20601.73
1994/03/31 23200.29 19703.49
1994/04/30 23663.65 19955.70
1994/05/31 23739.08 20282.97
1994/06/30 23327.06 19786.04
1994/07/31 23998.18 20435.02
1994/08/31 24918.28 21272.86
1994/09/30 24628.97 20751.67
1994/10/31 24922.44 21218.59
1994/11/30 23996.88 20445.80
1994/12/31 24379.16 20749.02
1995/01/31 24668.15 21287.04
1995/02/28 25396.41 22116.59
1995/03/31 26195.63 22769.25
1995/04/30 26927.15 23439.81
1995/05/31 27693.52 24376.70
1995/06/30 28193.34 24942.97
1995/07/31 29266.04 25770.08
1995/08/31 29487.58 25834.76
1995/09/30 30673.25 26924.99
1995/10/31 30529.58 26828.87
1995/11/30 31966.27 28006.65
1995/12/31 33005.06 28546.06
1996/01/31 34103.19 29517.77
1996/02/29 34481.44 29791.40
1996/03/31 34774.79 30078.29
1996/04/30 35129.89 30521.64
1996/05/31 35803.34 31308.80
1996/06/30 36024.33 31428.08
1996/07/31 34648.23 30039.59
1996/08/31 35188.84 30673.13
1996/09/30 37046.28 32399.41
1996/10/31 37634.31 33292.98
1996/11/30 40012.02 35809.60
1996/12/31 39614.12 35100.21
1997/01/31 41302.85 37293.27
1997/02/28 41766.93 37585.65
1997/03/31 40059.47 36041.26
1997/04/30 42193.05 38192.92
1997/05/31 44468.86 40518.11
1997/06/30 46770.32 42333.32
1997/07/31 49948.88 45701.78
1997/08/31 47237.37 43141.57
1997/09/30 49773.27 45504.43
1997/10/31 48447.23 43984.58
1997/11/30 50362.62 46020.63
1997/12/31 51567.20 46810.80
1998/01/31 52365.75 47328.53
1998/02/28 55614.08 50741.86
1998/03/31 58108.70 53340.35
1998/04/30 58203.65 53876.96
1998/05/31 57525.44 52950.81
1998/06/30 59848.55 55101.68
1998/07/31 59467.79 54514.84
IMATRL PRASUN SHR__CHT 19980731 19980811 140422 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Growth & Income Portfolio on July 31, 1988. As
the chart shows, by July 31, 1998, the value of the investment would
have grown to $59,468 - a 494.68% increase on the initial investment.
For comparison, look at how the Standard & Poor's 500 Index did over
the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 would have grown to $54,515 - a 445.15% 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
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
For the most part, the past 12 months
have been witness to solid gains
and record-setting stock market
performance in the U.S. Despite
that, the final few weeks of the
period ending July 31, 1998, left
many investors asking "What have
you done for me lately?" For the
12-month period, the Standard &
Poor's 500 Index - a measure of
the U.S. stock market - produced
a return of 19.29%. But whether
one of the longest running bull
markets in recent history is now
an endangered species remains
to be seen. There have been some
extraordinary highs and lows in
the equity market over the past
12 months. In late October, the
Dow Jones Industrial Average fell
550-plus points in one trading
session. That, however, was quickly
overcome by the first quarter of
1998 as investors in stocks were
rewarded with strong gains and
an upward trend in stock prices.
But despite low interest rates, a
strong economy and tame inflation
domestically, investor uncertainty
over corporate earnings reports
and the Asian market upheaval
began to have a tangible effect on
our markets at home. After hitting
a record of 9337.97 on July 17,
1998, the Dow Jones Industrial
Average racked up losses of over
400 points the week of July 20th.
Still, the 12-month S&P return of
19.29% is nearly twice that of
the stock market's historical
annual performance.
An interview with Steven Kaye, Portfolio Manager of Fidelity Growth &
Income Portfolio
Q. HOW DID THE FUND PERFORM, STEVE?
A. For the 12 months that ended July 31, 1998, the fund produced a
return of 19.06%. This topped the growth and income funds average,
which returned 11.37% during the same period, according to Lipper
Analytical Services. While the fund outperformed its peers, it still
slightly lagged the Standard & Poor's 500 Index, which returned 19.29%
over the same 12-month period.
Q. WHAT FACTORS HELPED SHAPE THE FUND'S PERFORMANCE?
A. On the plus side, several of the fund's top 20 positions performed
well. Since I placed a lot of confidence in the fund's top holdings -
the largest 20 positions represented around 33% of the portfolio at
the end of the period - the individual performance of these stocks was
a major performance factor. Pharmaceutical stocks performed well in
general, and the fund received good results from several of its
holdings, including Bristol-Myers Squibb, Pfizer, Warner-Lambert and
Merck. Other positive contributors were diversified manufacturing
stocks General Electric - the fund's largest individual stake - and
Tyco International, as well as retailers Wal-Mart and Home Depot. In
terms of negatives, the sluggish performance of the aerospace and
defense sector hurt the fund's investments in Lockheed Martin and
Northrop Grumman.
Q. PHARMACEUTICAL STOCKS HAVE BEEN A STAPLE OF THE FUND'S PORTFOLIO
FOR SOME TIME NOW. HOW HAVE THESE COMPANIES CONTINUED TO CHURN OUT
IMPRESSIVE RETURNS?
A. At the end of the period, health stocks accounted for over 17% of
the portfolio, and pharmaceuticals comprised close to 11% of that
total. Drug companies in general have benefited from a blitz of
successful product introductions and subsequent revenue gains.
Warner-Lambert, for instance, introduced two new drugs in 1997 - one
aimed at reducing cholesterol and the other to help treat diabetes -
that have garnered quite a bit of market share. Another health-related
area that produced good results for the fund was retail drug-store
stocks, most notably CVS and Walgreen's.
Q. THE FUND ALSO CONTINUED TO HAVE CONSIDERABLE EXPOSURE TO THE
FINANCE SECTOR . . .
A. Finance stocks have had a nice run over the last few years, with
many finance companies benefiting from consolidation, low interest
rates and a solid economy. Many of the fund's finance holdings are
what I like to refer to as "organic growers," meaning companies that
have been able to improve their business prospects from within rather
than through merger and acquisition activity. I'd point to the fund's
positions in American Express, Fannie Mae and Associates First as
being examples of this strategy.
Q. THE FUND'S FOREIGN HOLDINGS - SUCH AS DUTCH HOUSEHOLD PRODUCTS
COMPANY UNILEVER AND FRENCH COMMUNICATIONS COMPANY ALCATEL - ACCOUNTED
FOR AROUND 5% OF THE PORTFOLIO AT THE END OF THE PERIOD. HOW DID THESE
STOCKS PERFORM?
A. Pretty well, for the most part. European markets have offered
relatively nice gains for the past couple of years, anchored by strong
economies and a favorable consumer environment. Along the way, the
fund realized strong contributions from Unilever and Alcatel, as well
as U.K.-based pharmaceutical company SmithKline Beecham. Of course,
international investments carry more risk than domestic investments.
Going forward, European markets may be hard-pressed to duplicate their
returns of recent years.
Q. EFFECTIVE APRIL 3, 1998, THE FUND WAS CLOSED TO NEW INVESTORS. WHY
WAS THIS MOVE MADE AND HOW WILL IT BENEFIT CURRENT SHAREHOLDERS?
A. Our primary objective was to stabilize the fund's cash flows. By
closing the fund, we felt we'd be able to prevent strong future cash
flows from becoming a concern. I should add that existing shareholders
can continue to purchase shares of the fund.
Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
A. While the valuations of many stocks have soared without the benefit
of a concrete earnings foundation (SEE CALLOUT BOX ON PAGE 8), we did
begin to see a slight correction towards the end of the period.
Overall, I think the next few months will be fairly choppy. There are
situations to monitor both domestically - where unemployment in the
U.S. is at record low levels and corporate earnings are under pressure
- - and internationally, where investors will continue to monitor events
in areas such as Southeast Asia and Japan. In terms of the portfolio
itself, I think it's well-positioned for a choppy environment. At this
point, I don't foresee any major changes.
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.
STEVE KAYE ON CORPORATE
EARNINGS AND STOCK PRICES:
"Traditional wisdom holds that
a company's earnings power is
directly related to the direction
of its stock price: Companies that
show strong, consistent earnings
growth are historically rewarded
by the market. But this past year
has been sort of an anomaly.
"Beginning in late 1997 - amid
the Asian debacle - we've seen
lots of pressure applied to
corporate earnings. In general,
earnings have been disappointing
since then. But what surprised
many veteran market followers -
including myself - during this
period was the fact that the stocks
of many companies continued to
rise despite flat earnings results.
Part of the reason stock prices
have climbed can be traced to the
economic situation in the U.S.
While companies were
challenged to meet their earnings
numbers, an environment of low
interest rates certainly helped.
"But there were opportunities
out there. As a manager, my goal
is to find attractively priced growth
stocks. Investors may look at the
portfolio and ask, `Why is Microsoft
part of a growth and income fund?'
The answer is that Microsoft had
some difficulties with the Justice
Department and I felt that the
stock became cheap enough to
warrant my attention. In this case,
I bought a company that has been
able to sustain its earnings growth
at a reasonable valuation."
FUND FACTS
GOAL: seeks a high total return
through a combination of
current income and capital
appreciation
FUND NUMBER: 027
TRADING SYMBOL: FGRIX
START DATE: December 30, 1985
SIZE: as of July 31, 1998,
more than $44.3 billion
MANAGER: Steven Kaye, since
1993; manager, Fidelity Blue
Chip Growth Fund, 1990-1992;
Fidelity Select Energy Services,
Biotechnology and Health Care
Portfolios, 1986-1990; joined
Fidelity in 1985
(checkmark)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
General Electric Co. 3.4 3.2
Merck & Co., Inc. 2.5 2.4
Citicorp 2.2 1.6
American Express Co. 2.1 1.9
Philip Morris Companies, Inc. 2.1 2.5
Microsoft Corp. 2.0 1.3
Fannie Mae 1.8 2.1
Bristol-Myers Squibb Co. 1.7 2.1
Tyco International Ltd. 1.7 1.6
Wal-Mart Stores, Inc. 1.7 1.3
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE MARKET SECTORS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
HEALTH 17.6 17.9
FINANCE 16.5 14.9
TECHNOLOGY 10.5 9.7
NONDURABLES 9.6 9.5
UTILITIES 7.0 5.2
</TABLE>
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1998 * AS OF JANUARY 31, 1998 **
ROW: 1, COL: 1, VALUE: 93.90000000000001
ROW: 1, COL: 2, VALUE: 1.7
ROW: 1, COL: 3, VALUE: 4.4
STOCKS 93.2%
BONDS 1.1%
SHORT-TERM
INVESTMENTS 5.7%
FOREIGN
INVESTMENTS 7.0%
STOCKS 94.9%
BONDS 0.7%
SHORT-TERM
INVESTMENTS 4.4%
FOREIGN
INVESTMENTS 5.6%
ROW: 1, COL: 1, VALUE: 92.2
ROW: 1, COL: 2, VALUE: 2.1
ROW: 1, COL: 3, VALUE: 5.7
*
**
INVESTMENTS JULY 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 94.5%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 4.1%
AEROSPACE & DEFENSE - 2.0%
AlliedSignal, Inc. 5,389,900 $ 234,461
Boeing Co. 783,820 30,422
British Aerospace PLC 11,073,680 84,434
Gulfstream Aerospace Corp. (a) 3,310,300 151,446
Lockheed Martin Corp. 2,167,105 216,033
Textron, Inc. 2,066,000 152,626
United Technologies Corp. 403,600 38,670
908,092
DEFENSE ELECTRONICS - 1.6%
Litton Industries, Inc. (a)(d) 3,347,900 191,877
Northrop Grumman Corp. 1,863,700 151,076
Raytheon Co.:
Class A 2,261,518 122,546
Class B 4,096,500 226,588
692,087
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 4,854,900 230,911
TOTAL AEROSPACE & DEFENSE 1,831,090
BASIC INDUSTRIES - 1.2%
CHEMICALS & PLASTICS - 1.1%
Air Products & Chemicals, Inc. 490,600 17,171
Cytec Industries, Inc. (a) 491,600 15,823
du Pont (E.I.) de Nemours & Co. 1,594,700 98,871
Ferro Corp. 811,600 18,667
IMC Global, Inc. 2,654,300 67,851
Monsanto Co. 2,827,400 160,102
Raychem Corp. 665,900 20,726
Sealed Air Corp. (a) 740,402 29,616
Union Carbide Corp. 779,800 37,430
466,257
IRON & STEEL - 0.0%
Nucor Corp. 391,900 17,048
METALS & MINING - 0.1%
Aluminum Co. of America 507,000 35,141
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 396,300 $ 13,375
TOTAL BASIC INDUSTRIES 531,821
CONSTRUCTION & REAL ESTATE - 3.6%
ENGINEERING - 1.3%
Fluor Corp. 379,100 15,946
IMS Health, Inc. 8,302,400 521,495
Nielsen Media Research, Inc. 8,302,400 34,247
571,688
REAL ESTATE - 0.1%
Rouse Co. (The) 1,076,900 31,432
REAL ESTATE INVESTMENT TRUSTS - 2.2%
Avalon Bay Communities, Inc. 411,900 14,777
Boston Properties, Inc. 1,370,600 44,288
CBL & Associates Properties, Inc. (d) 2,157,100 52,444
Crescent Real Estate Equities, Inc. 1,859,900 54,635
Duke Realty Investments, Inc. 827,506 17,740
Equity Office Properties Trust 5,433,590 135,161
Equity Residential Properties Trust (SBI) 2,848,085 119,620
Highwoods Properties, Inc. 375,700 11,623
Irvine Apartments Communities, Inc. 121,200 3,424
Macerich Co. 647,600 17,688
Mack-Cali Realty Corp. 875,900 27,208
Manufactured Home Communities, Inc. 921,400 22,747
Merry Land & Investment Co., Inc. 966,000 21,131
Public Storage, Inc. 3,023,700 80,128
Simon Debartolo Group, Inc. 538,900 16,773
Starwood Hotels & Resorts 7,977,643 327,582
Urban Shopping Centers, Inc. 666,400 21,908
988,877
TOTAL CONSTRUCTION & REAL ESTATE 1,591,997
DURABLES - 1.8%
AUTOS, TIRES, & ACCESSORIES - 0.9%
Eaton Corp. 116,600 7,608
Ford Motor Co. 5,352,800 304,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - CONTINUED
AUTOS, TIRES, & ACCESSORIES - CONTINUED
General Motors Corp. 622,638 $ 45,025
Republic Industries, Inc. (a) 2,616,100 54,938
412,346
CONSUMER DURABLES - 0.2%
Minnesota Mining & Manufacturing Co. 898,400 67,268
CONSUMER ELECTRONICS - 0.3%
General Motors Corp. Class H 3,250,600 138,557
TEXTILES & APPAREL - 0.4%
Fruit of the Loom, Inc. Class A (a) 2,951,500 92,050
Unifi, Inc. (d) 3,688,300 99,815
191,865
TOTAL DURABLES 810,036
ENERGY - 4.5%
OIL & GAS - 4.5%
Amoco Corp. 2,489,600 103,941
Anadarko Petroleum Corp. 942,200 32,329
British Petroleum Co. PLC ADR 5,335,796 428,198
Chevron Corp. 952,600 78,709
Exxon Corp. 6,750,000 473,344
Mobil Corp. 971,600 67,769
Royal Dutch Petroleum Co. 11,981,100 611,036
Texaco, Inc. 600,000 36,488
Tosco Corp. 1,691,600 47,365
Total SA:
Class B 276,000 31,555
sponsored ADR 1,022,477 58,473
USX-Marathon Group 936,000 31,941
2,001,148
FINANCE - 16.3%
BANKS - 5.7%
Banc One Corp. 7,321,360 378,423
Bank of New York, Inc. 5,038,254 322,448
Chase Manhattan Corp. 1,457,500 110,223
Citicorp 5,846,600 993,922
Credit Suisse Group (Reg.) 647,500 163,638
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
BANKS - CONTINUED
National City Corp. 2,051,570 $ 137,199
NationsBank Corp. 3,085,106 246,037
Norwest Corp. 4,328,600 155,559
2,507,449
CREDIT & OTHER FINANCE - 4.2%
American Express Co. 8,482,130 936,215
Associates First Capital Corp. 6,005,969 466,589
Capital Trust Class A (a)(d) 1,635,782 14,415
Fleet Financial Group, Inc. 1,184,999 101,836
Household International, Inc. 6,895,240 343,038
1,862,093
FEDERAL SPONSORED CREDIT - 3.2%
Fannie Mae 12,854,300 796,967
Freddie Mac 5,523,200 260,971
SLM Holding Corp. 7,504,600 347,088
1,405,026
INSURANCE - 2.6%
AFLAC, Inc. 595,600 20,474
Allmerica Financial Corp. 1,216,100 81,327
Allstate Corp. 4,325,820 183,577
American International Group, Inc. 1,760,000 265,430
Aon Corp. 800,000 54,400
General Re Corp. 379,300 89,894
Hartford Financial Services Group, Inc. 4,498,200 234,188
MBIA, Inc. 2,576,900 173,619
UNUM Corp. 682,600 35,964
1,138,873
SAVINGS & LOANS - 0.1%
Washington Mutual, Inc. 1,232,500 49,223
SECURITIES INDUSTRY - 0.5%
Lehman Brothers Holdings, Inc. 1,787,420 128,694
Travelers Group, Inc. (The) 1,728,997 115,843
244,537
TOTAL FINANCE 7,207,201
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - 17.6%
DRUGS & PHARMACEUTICALS - 10.6%
Allergan, Inc. 2,388,300 $ 124,789
American Home Products Corp. 6,371,600 328,137
Amgen, Inc. (a) 1,610,600 118,278
Bristol-Myers Squibb Co. 6,635,000 755,975
Forest Laboratories, Inc. (a)(d) 4,523,000 169,613
Genentech, Inc. (special) (a) 2,272,300 156,931
Lilly (Eli) & Co. 8,364,332 562,501
Merck & Co., Inc. 9,113,900 1,123,858
Pfizer, Inc. 3,320,700 365,277
Schering-Plough Corp. 2,553,500 247,051
SmithKline Beecham PLC ADR 1,641,100 93,953
Warner-Lambert Co. 8,184,480 618,440
4,664,803
MEDICAL EQUIPMENT & SUPPLIES - 4.2%
Abbott Laboratories 1,000,000 41,563
Allegiance Corp. 1,980,820 117,116
Bard (C.R.), Inc. (d) 3,617,300 146,501
Bausch & Lomb, Inc. (d) 4,199,500 214,699
Baxter International, Inc. rights 12/31/07 (a) 4,276,900 255,545
Becton, Dickinson & Co. 3,582,900 296,037
Boston Scientific Corp. (a) 1,305,200 100,011
Cardinal Health, Inc. 868,100 83,392
Guidant Corp. 273,250 20,306
Johnson & Johnson 3,030,600 234,114
Medtronic, Inc. 2,379,400 147,374
Stryker Corp. 4,757,800 206,667
1,863,325
MEDICAL FACILITIES MANAGEMENT - 2.8%
Columbia/HCA Healthcare Corp. 4,174,500 118,973
Coram Healthcare Corp. (a)(d) 3,118,000 7,405
Health Management Associates, Inc. Class A (a) 9,015,000 211,853
HEALTHSOUTH Corp. (a) 1,292,500 32,474
Humana, Inc. (a) 4,071,200 110,686
Tenet Healthcare Corp. (a) 10,234,600 306,398
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - CONTINUED
United HealthCare Corp. 5,343,000 $ 301,880
Wellpoint Health Networks, Inc. (a) 2,556,200 156,727
1,246,396
TOTAL HEALTH 7,774,524
HOLDING COMPANIES - 0.1%
BTR PLC 4,875,000 12,257
U.S. Industries, Inc. 871,740 16,781
29,038
INDUSTRIAL MACHINERY & EQUIPMENT - 6.4%
ELECTRICAL EQUIPMENT - 4.5%
Alcatel Alsthom Compagnie Generale d'Electricite SA 1,288,576 256,352
Emerson Electric Co. 1,474,000 87,611
General Electric Co. 16,814,900 1,501,774
Oak Industries, Inc. (a) 775,700 28,798
Philips Electronics NV 1,800,300 147,062
2,021,597
INDUSTRIAL MACHINERY & EQUIPMENT - 1.7%
Tyco International Ltd. 11,929,528 738,885
POLLUTION CONTROL - 0.2%
Waste Management, Inc. 1,529,388 84,307
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,844,789
MEDIA & LEISURE - 3.8%
BROADCASTING - 1.6%
CBS Corp. 4,546,134 154,284
Jacor Communications, Inc. Class A (a) 1,488,700 87,275
MediaOne Group, Inc. (a) 4,468,200 215,870
Time Warner, Inc. 2,754,200 248,050
705,479
ENTERTAINMENT - 0.6%
Disney (Walt) Co. 1,299,700 44,758
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
News Corp. Ltd. ADR 1,043,000 $ 30,377
Viacom, Inc. Class B (non-vtg.) (a) 2,510,200 171,949
247,084
LODGING & GAMING - 0.2%
Mirage Resorts, Inc. (a) 3,824,400 82,225
PUBLISHING - 0.3%
ACNielsen Corp. (a) 841,332 21,927
Times Mirror Co. Class A 2,128,100 127,819
149,746
RESTAURANTS - 1.1%
McDonald's Corp. 4,250,900 284,013
Starbucks Corp. (a) 1,864,000 78,055
Tricon Global Restaurants, Inc. 3,222,210 113,986
476,054
TOTAL MEDIA & LEISURE 1,660,588
NONDURABLES - 9.6%
BEVERAGES - 2.5%
Anheuser-Busch Companies, Inc. 4,414,700 228,185
Coca-Cola Co. (The) 3,550,000 286,441
PepsiCo, Inc. 13,418,600 520,809
Whitman Corp. 3,190,900 67,607
1,103,042
FOODS - 1.9%
Bestfoods 3,030,200 168,555
Campbell Soup Co. 1,663,200 89,813
Hershey Foods Corp. 950,100 59,975
Nestle SA (Reg.) 15,000 31,131
Quaker Oats Co. 825,400 43,643
Ralston Purina Co. 5,571,821 179,343
Sara Lee Corp. 2,824,300 141,568
Sysco Corp. 5,085,700 120,785
834,813
HOUSEHOLD PRODUCTS - 3.1%
Avon Products, Inc. 1,442,600 124,785
Colgate-Palmolive Co. 117,300 10,843
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - CONTINUED
Gillette Co. 3,187,000 $ 166,919
Procter & Gamble Co. 7,763,700 616,244
Unilever NV 6,561,800 456,045
1,374,836
TOBACCO - 2.1%
Philip Morris Companies, Inc. 20,898,400 915,611
UST, Inc. 808,600 21,832
937,443
TOTAL NONDURABLES 4,250,134
RETAIL & WHOLESALE - 5.7%
DRUG STORES - 1.3%
CVS Corp. 6,556,568 268,819
Rite Aid Corp. 2,921,480 115,398
Walgreen Co. 3,948,900 170,543
554,760
GENERAL MERCHANDISE STORES - 2.1%
Federated Department Stores, Inc. (a) 2,028,430 107,380
May Department Stores Co. (The) 805,200 51,684
Proffitts, Inc. (a) 1,306,530 41,156
Wal-Mart Stores, Inc. 11,665,200 736,366
936,586
GROCERY STORES - 1.1%
Kroger Co. (The) (a) 3,697,852 174,955
Meyer (Fred), Inc. (a) 2,837,560 125,030
Safeway, Inc. (a) 4,317,800 191,333
491,318
RETAIL & WHOLESALE, MISCELLANEOUS - 1.2%
Home Depot, Inc. 12,886,700 539,631
TOTAL RETAIL & WHOLESALE 2,522,295
SERVICES - 1.7%
ADVERTISING - 0.2%
Omnicom Group, Inc. 1,581,400 83,024
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - CONTINUED
PRINTING - 0.2%
Donnelley (R.R.) & Sons Co. 2,538,500 $ 107,886
SERVICES - 1.3%
Block (H & R), Inc. (d) 6,577,100 279,527
Cendant Corp. (a) 2,495,453 43,203
Service Corp. International, Inc. 5,114,300 193,704
Servicemaster Co. 1,173,500 39,899
556,333
TOTAL SERVICES 747,243
TECHNOLOGY - 10.2%
COMMUNICATIONS EQUIPMENT - 0.7%
Cisco Systems, Inc. (a) 2,906,100 278,259
Lucent Technologies, Inc. 399,252 36,906
315,165
COMPUTER SERVICES & SOFTWARE - 5.0%
America Online, Inc. 129,700 15,175
Automatic Data Processing, Inc. 2,705,200 183,108
BMC Software, Inc. 2,550,000 125,747
Ceridian Corp. (a) 3,618,700 206,944
Computer Associates International, Inc. 1,960,300 65,057
DST Systems, Inc. (a) 1,467,300 92,073
Electronic Data Systems Corp. 5,288,000 186,072
Equifax, Inc. 2,579,500 105,437
First Data Corp. 2,795,200 80,886
HBO & Co. 2,023,700 59,636
Microsoft Corp. (a) 7,986,500 878,016
Oracle Corp. (a) 7,534,500 199,664
2,197,815
COMPUTERS & OFFICE EQUIPMENT - 3.2%
Compaq Computer Corp. 2,710,100 89,095
Dell Computer Corp. (a) 865,000 93,934
EMC Corp. (a) 1,394,000 68,306
Hewlett-Packard Co. 302,000 16,761
IBM Corp. 3,663,200 485,374
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - CONTINUED
Pitney-Bowes, Inc. 9,055,800 $ 457,318
Xerox Corp. 1,861,300 196,483
1,407,271
ELECTRONICS - 1.2%
Intel Corp. 4,399,800 371,508
Motorola, Inc. 806,400 42,134
Texas Instruments, Inc. 1,879,200 111,460
525,102
PHOTOGRAPHIC EQUIPMENT - 0.1%
Eastman Kodak Co. 573,600 48,254
TOTAL TECHNOLOGY 4,493,607
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.6%
AMR Corp. (a) 632,500 45,184
Southwest Airlines Co. 4,059,450 133,708
Viad Corp. 3,085,300 74,240
253,132
RAILROADS - 0.3%
CSX Corp. 2,598,200 105,065
Union Pacific Corp. 683,800 28,720
133,785
TOTAL TRANSPORTATION 386,917
UTILITIES - 7.0%
ELECTRIC UTILITY - 0.6%
Duke Energy Corp. 2,070,200 118,260
FPL Group, Inc. 1,462,200 88,920
PG&E Corp. 2,088,400 63,566
270,746
GAS - 0.2%
Enron Corp. 1,911,900 101,211
TELEPHONE SERVICES - 6.2%
Ameritech Corp. 4,839,000 238,018
AT&T Corp. 9,128,800 553,434
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Bell Atlantic Corp. 2,255,386 $ 102,338
BellSouth Corp. 3,722,200 254,273
GTE Corp. 6,309,500 343,079
MCI Communications Corp. 6,219,800 402,732
SBC Communications, Inc. 11,814,892 482,934
U.S. WEST, Inc. 1,679,926 89,666
WorldCom, Inc. (a) 5,296,100 280,031
2,746,505
TOTAL UTILITIES 3,118,462
TOTAL COMMON STOCKS 41,800,890
(Cost $25,846,703)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 0.4%
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.1%
Sealed Air Corp. Series A, $2.00 1,054,927 47,076
FINANCE - 0.2%
CREDIT & OTHER FINANCE - 0.2%
Union Pacific Capital Trust $3.13 TIDES (a)(e) 1,377,000 61,965
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Loral Space & Communications Ltd. Series C, $3.00 (e) 727,000 53,980
TOTAL CONVERTIBLE PREFERRED STOCKS 163,021
(Cost $147,089)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 0.3%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) (F) AMOUNT (000S)
CONVERTIBLE BONDS - 0.3%
TECHNOLOGY - 0.3%
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Quantum Corp. 7% 8/1/04 B2 $ 40,000 36,800
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE (NOTE 1)
(UNAUDITED) (F) AMOUNT (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.2%
Micron Technology, Inc. 7% 7/1/04 B1 $ 86,500 $ 85,851
TOTAL TECHNOLOGY 122,651
NONCONVERTIBLE BONDS - 0.0%
MEDIA & LEISURE - 0.0%
BROADCASTING - 0.0%
Orion Network Systems, Inc. 0% 1/15/07 (c) B2 20,000 15,050
TOTAL CORPORATE BONDS 137,701
(Cost $135,922)
</TABLE>
U.S. TREASURY OBLIGATIONS - 0.4%
U.S. Treasury Bonds:
6% 2/15/26 Aaa 172,500 177,351
8.125% 8/15/19 Aaa 10,000 12,773
TOTAL U.S. TREASURY OBLIGATIONS 190,124
(Cost $166,451)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 4.4%
MATURITY
AMOUNT (000S)
Investments in repurchase agreements (U.S. Treasury $ 134,889 134,826
obligations), in a joint trading account at 5.6227%,
dated 7/31/98 due 8/3/98
SHARES
Taxable Central Cash Fund (b) 1,816,427,611 1,816,428
TOTAL CASH EQUIVALENTS 1,951,254
(Cost $1,951,254)
TOTAL INVESTMENT IN SECURITIES - 100% $ 44,242,990
(Cost $28,247,419)
</TABLE>
SECURITY TYPE ABBREVIATIONS
TIDES - Term Income Deferred
Equity Securities
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.62%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(c) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date.
(d) Affiliated company (see Note 6 of Notes to Financial Statements).
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $115,945,000 or 0.3% of net assets.
(f) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Services, Inc.
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $28,274,368,000. Net unrealized appreciation
aggregated $15,968,622,000, of which $16,501,583,000 related to
appreciated investment securities and $532,961,000 related to
depreciated investment securities.
The fund hereby designates approximately $1,091,517,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) JULY 31, 1998
ASSETS
Investment in securities, at value (including repurchase $ 44,242,990
agreements of $134,826) (cost $28,247,419) -
See accompanying schedule
Receivable for investments sold 260,642
Receivable for fund shares sold 49,009
Dividends receivable 42,727
Interest receivable 14,333
Other receivables 468
TOTAL ASSETS 44,610,169
LIABILITIES
Payable for investments purchased $ 160,128
Payable for fund shares redeemed 61,978
Accrued management fee 18,582
Other payables and accrued expenses 8,858
TOTAL LIABILITIES 249,546
NET ASSETS $ 44,360,623
Net Assets consist of:
Paid in capital $ 26,635,837
Undistributed net investment income 33,271
Accumulated undistributed net realized gain (loss) on 1,695,923
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on investments 15,995,592
and assets and liabilities in foreign currencies
NET ASSETS, for 1,014,388 shares outstanding $ 44,360,623
NET ASSET VALUE, offering price and redemption price $43.73
per share ($44,360,623 (divided by) 1,014,388 shares)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1998
INVESTMENT INCOME $ 540,199
Dividends (including $13,029 received from
affiliated issuers)
Interest 124,688
TOTAL INCOME 664,887
EXPENSES
Management fee $ 192,514
Transfer agent fees 74,093
Accounting fees and expenses 947
Non-interested trustees' compensation 182
Custodian fees and expenses 792
Registration fees 1,774
Audit 215
Legal 165
Miscellaneous 155
Total expenses before reductions 270,837
Expense reductions (5,513) 265,324
NET INVESTMENT INCOME 399,563
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain of 1,972,861
$17,946 on sales of investments in affiliated issuers)
Foreign currency transactions (455) 1,972,406
Change in net unrealized appreciation (depreciation) on:
Investment securities 4,607,245
Assets and liabilities in foreign currencies 197 4,607,442
NET GAIN (LOSS) 6,579,848
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 6,979,411
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
Operations $ 399,563 $ 364,039
Net investment income
Net realized gain (loss) 1,972,406 1,120,918
Change in net unrealized appreciation (depreciation) 4,607,442 8,174,155
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 6,979,411 9,659,112
FROM OPERATIONS
Distributions to shareholders (397,518) (377,487)
From net investment income
From net realized gain (1,237,608) (790,992)
TOTAL DISTRIBUTIONS (1,635,126) (1,168,479)
Share transactions 12,370,734 11,063,971
Net proceeds from sales of shares
Reinvestment of distributions 1,603,367 1,144,961
Cost of shares redeemed (9,241,449) (5,621,525)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 4,732,652 6,587,407
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 10,076,937 15,078,040
NET ASSETS
Beginning of period 34,283,686 19,205,646
End of period (including undistributed net investment $ 44,360,623 $ 34,283,686
income of $33,271 and $32,461, respectively)
OTHER INFORMATION
Shares
Sold 309,914 345,996
Issued in reinvestment of distributions 43,076 39,330
Redeemed (229,152) (175,754)
Net increase (decrease) 123,838 209,572
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
Net asset value, $ 38.50 $ 28.20 $ 25.10 $ 22.17 $ 21.90
beginning of period
Income from
Investment Operations
Net investment income .41 B .46 B .49 .43 .45
Net realized and 6.59 11.44 3.99 4.14 1.07
unrealized gain (loss)
Total from investment 7.00 11.90 4.48 4.57 1.52
operations
Less Distributions
From net (.41) (.48) (.48) (.40) (.48)
investment income
From net realized gain (1.36) (1.12) (.90) (1.24) (.77)
Total distributions (1.77) (1.60) (1.38) (1.64) (1.25)
Net asset value, $ 43.73 $ 38.50 $ 28.20 $ 25.10 $ 22.17
end of period
TOTAL RETURN A 19.06% 44.16% 18.39% 21.95% 7.08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 44,361 $ 34,284 $ 19,206 $ 12,106 $ 8,757
(in millions)
Ratio of expenses to .69% .73% .75% .78% .83%
average net assets
Ratio of expenses to .68% C .71% C .74% C .77% C .82% C
average net assets after
expense reductions
Ratio of net investment 1.02% 1.43% 1.82% 2.21% 2.09%
income to average
net assets
Portfolio turnover rate 32% 38% 41% 67% 92%
Average commission rate D $ .0444 $ .0433
</TABLE>
J 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).
K NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
L 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).
M FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Growth & Income Portfolio (the fund) is a fund of Fidelity
Securities Fund (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. Effective the close of
business on April 3, 1998, the fund was closed to new accounts. The
financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities (including restricted
securities) for which exchange quotations are not readily available
(and in certain cases debt securities which trade on an exchange) are
valued primarily using dealer-supplied valuations or at their fair
value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities with remaining maturities of sixty days or less
for which quotations are not readily available are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, gains and losses between trade date
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
is accrued as earned. Investment income is recorded net of foreign
taxes withheld where recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Under the Plan, deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of a
cross-section of Fidelity funds, including shares of the fund.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for 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.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management &
Research Company (FMR), may transfer uninvested cash balances into one
or more joint trading accounts. These
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
balances are invested in one or more repurchase agreements for U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in U.S. Treasury securities
and repurchase agreements for these securities. Income distributions
from the Cash Fund are declared daily and paid monthly from net
interest income. Income distributions earned by the fund are recorded
as interest income in the accompanying financial statements.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $14,830,258,000 and $12,088,546,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .2500% to .5200% for the
period. The annual individual fund fee rate is .20%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annual rate of .49% of average net assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .19% of average net assets.
ACCOUNTING FEES. FSC maintains the fund's accounting records. The
accounting fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $2,863,000 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 $3,319,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $7,000 and $2,187,000, 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
Bard (C.R.), Inc. $ 28,420 $ - $ 588 $ 146,501
Bausch & Lomb, Inc. 13,086 15,267 4,375 214,699
Block (H&R), Inc. 51,962 - 3,747 279,527
CBL & Associates Properties, Inc. 4,979 - 3,715 52,444
Capital Trust Class A 5,611 - - 14,415
Carson Pirie Scott & Co. - 8,143 - -
Coram Healthcare Corp. - 4,602 - 7,405
Forest Laboratories, Inc. 15,591 - - 169,613
ITT Corp. 9,465 21,468 - -
Jostens, Inc. - 22,504 604 -
Litton Industries, Inc. 16,643 - - 191,877
Oak Industries, Inc. - 13,141 - -
Quality Foods Centers, Inc. 6,257 - - -
Unifi, Inc. 15,613 - - 99,815
TOTALS $ 167,627 $ 85,125 $ 13,029 $ 1,176,296
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity Growth & Income Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Growth & Income Portfolio (a fund of Fidelity Securities Fund
) at July 31, 1998, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Growth & Income Portfolio's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at July 31,
1998
by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
Boston, Massachusetts
September 9, 1998
DISTRIBUTIONS
The Board of Trustees of Fidelity Growth & Income Portfolio voted to
pay to shareholders of record at the opening of business on record
date, the following distributions derived from capital gains realized
from sales of portfolio securities, and dividends derived from net
investment income:
PAY DATE 9/8/97 12/22/97 9/8/98
RECORD DATE 9/5/97 12/19/97 9/4/98
DIVIDENDS $.10 $.11 $.09
SHORT-TERM
CAPITAL GAINS $.20 $.09 $.14
LONG-TERM
CAPITAL GAINS $.88 $.19 $1.44
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 47.60% 23.37%
20% rate 52.40% 76.63%
A total of 3.36% 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 61% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund will notify shareholders in January 1999 of the applicable
percentages for use in preparing 1998 income tax returns.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
toll-free number to access account balances, positions, quotes and
trading. It's easy to navigate the service, and on your first call,
the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
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(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+
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research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY
MARKET FUNDS WILL BE ABLE TO
MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND
IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
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OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Richard A. Spillane Jr., Vice President
Steven Kaye, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
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FIDELITY
BLUE CHIP GROWTH
FUND
ANNUAL REPORT
JULY 31, 1998
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the fund's
investments over the past six months.
INVESTMENTS 10 A complete list of the fund's investments
with their market values.
FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net assets,
as well as financial highlights.
NOTES 23 Notes to the financial statements.
REPORT OF INDEPENDENT 27 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 28
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
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
So far, 1998 has been a year of considerable volatility in the U.S.
stock and bond markets. In the first quarter, the U.S. stock market
soared as inflation and interest rates remained stable, while the
economy maintained strong growth. By summer, however, investors began
to exercise caution relative to the troublesome Asian economic climate
and reports of concerns about corporate earnings domestically. Market
volatility and low interest rates were also the main stories in the
bond market, with many investors moving assets to highly rated U.S.
Treasuries.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
If you have questions, please call us at 1-800-544-8888. We are
available 24 hours a day, seven days a week to provide you the
information you need to make the investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Blue Chip Growth 20.17% 172.39% 619.41%
Fidelity Blue Chip Growth 16.56% 164.22% 597.83%
(incl. 3.00% sales charge)
S&P 500 (registered trademark) 19.29% 180.53% 445.15%
Growth Funds Average 13.15% 136.52% 357.07%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare the fund's returns to the performance of the
Standard & Poor's 500 Index - a 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 mutual funds with similar objectives
tracked by Lipper Analytical Services, Inc. The past one year average
represents a peer group of 908 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JULY 31, 1998 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Fidelity Blue Chip Growth 20.17% 22.19% 21.81%
Fidelity Blue Chip Growth 16.56% 21.45% 21.44%
(incl. 3.00% sales charge)
S&P 500 19.29% 22.91% 18.48%
Growth Funds Average 13.15% 18.42% 16.02%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a slightly different figure than
that obtained by averaging the cumulative total returns and
annualizing the result.)
$10,000 OVER 10 YEARS
Blue Chip Growth S&P 500
00312 SP001
1988/07/31 9700.00 10000.00
1988/08/31 9292.36 9660.00
1988/09/30 9709.26 10071.52
1988/10/31 9690.74 10351.50
1988/11/30 9514.71 10203.48
1988/12/31 9811.79 10382.04
1989/01/31 10536.53 11142.00
1989/02/28 10220.62 10864.57
1989/03/31 10462.20 11117.71
1989/04/30 11177.64 11694.72
1989/05/31 11902.37 12168.36
1989/06/30 11484.26 12099.00
1989/07/31 12599.23 13191.54
1989/08/31 12905.85 13450.09
1989/09/30 13225.18 13394.95
1989/10/31 13028.35 13084.18
1989/11/30 13253.30 13351.10
1989/12/31 13367.15 13671.53
1990/01/31 12247.68 12754.17
1990/02/28 12579.73 12918.70
1990/03/31 13205.87 13261.04
1990/04/30 13082.54 12929.52
1990/05/31 14562.51 14190.14
1990/06/30 14894.55 14093.65
1990/07/31 14543.53 14048.55
1990/08/31 13291.25 12778.56
1990/09/30 12663.40 12156.25
1990/10/31 12587.28 12103.97
1990/11/30 13386.47 12885.89
1990/12/31 13835.19 13245.41
1991/01/31 14918.61 13822.91
1991/02/28 16069.14 14811.25
1991/03/31 16874.52 15169.68
1991/04/30 16692.35 15206.08
1991/05/31 17574.43 15862.99
1991/06/30 16692.35 15136.46
1991/07/31 18159.28 15841.82
1991/08/31 18955.07 16217.27
1991/09/30 18658.05 15946.44
1991/10/31 19032.36 16160.13
1991/11/30 18629.25 15508.87
1991/12/31 21418.11 17283.09
1992/01/31 20744.28 16961.62
1992/02/29 20840.54 17182.12
1992/03/31 20272.60 16847.07
1992/04/30 20542.13 17342.38
1992/05/31 20965.68 17427.35
1992/06/30 20359.23 17167.69
1992/07/31 21196.70 17869.85
1992/08/31 20975.30 17503.51
1992/09/30 21253.83 17710.06
1992/10/31 21548.89 17772.04
1992/11/30 22679.94 18378.07
1992/12/31 22739.95 18604.12
1993/01/31 22789.75 18760.39
1993/02/28 22640.34 19015.53
1993/03/31 23736.01 19416.76
1993/04/30 24114.51 18946.88
1993/05/31 25379.50 19454.65
1993/06/30 25618.55 19511.07
1993/07/31 25618.55 19433.03
1993/08/31 27212.24 20169.54
1993/09/30 27778.52 20014.23
1993/10/31 28089.02 20428.53
1993/11/30 27235.15 20234.46
1993/12/31 28311.88 20479.29
1994/01/31 29436.39 21175.59
1994/02/28 29459.82 20601.73
1994/03/31 28534.44 19703.49
1994/04/30 29377.82 19955.70
1994/05/31 29752.66 20282.97
1994/06/30 28721.86 19786.04
1994/07/31 29448.11 20435.02
1994/08/31 31041.16 21272.86
1994/09/30 30948.96 20751.67
1994/10/31 32377.74 21218.59
1994/11/30 30689.19 20445.80
1994/12/31 31100.59 20749.02
1995/01/31 30321.58 21287.04
1995/02/28 31328.30 22116.59
1995/03/31 32646.63 22769.25
1995/04/30 33857.10 23439.81
1995/05/31 34612.14 24376.70
1995/06/30 36529.71 24942.97
1995/07/31 39058.51 25770.08
1995/08/31 39465.99 25834.76
1995/09/30 39900.58 26924.99
1995/10/31 38895.85 26828.87
1995/11/30 40239.68 28006.65
1995/12/31 39925.77 28546.06
1996/01/31 40470.74 29517.77
1996/02/29 40146.35 29791.40
1996/03/31 40639.42 30078.29
1996/04/30 40860.01 30521.64
1996/05/31 41690.44 31308.80
1996/06/30 41820.20 31428.08
1996/07/31 39912.79 30039.59
1996/08/31 40950.84 30673.13
1996/09/30 43397.72 32399.41
1996/10/31 44043.98 33292.98
1996/11/30 47233.12 35809.60
1996/12/31 46065.94 35100.21
1997/01/31 48743.37 37293.27
1997/02/28 48447.45 37585.65
1997/03/31 46065.94 36041.26
1997/04/30 48870.20 38192.92
1997/05/31 51730.82 40518.11
1997/06/30 53774.13 42333.32
1997/07/31 58072.11 45701.78
1997/08/31 55169.21 43141.57
1997/09/30 57916.75 45504.43
1997/10/31 55995.41 43984.58
1997/11/30 57712.97 46020.63
1997/12/31 58513.35 46810.80
1998/01/31 59610.66 47328.53
1998/02/28 63866.44 50741.86
1998/03/31 66698.69 53340.35
1998/04/30 67262.18 53876.96
1998/05/31 65927.61 52950.81
1998/06/30 69516.11 55101.68
1998/07/31 69783.03 54514.84
IMATRL PRASUN SHR__CHT 19980731 19980821 155337 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Blue Chip Growth Fund on July 31, 1988 and the
current 3.00% sales charge was paid. As the chart shows, by July 31,
1998, the value of the investment would have grown to $69,783 - a
597.83% on the initial investment. For comparison, look at how the
Standard & Poor's 500 Index did over the same period. With dividends
and capital gains, if any, reinvested, the same $10,000 would have
grown to $54,515 - a 445.15% 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
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
For the most part, the past 12
months have been witness to solid
gains and record-setting stock
market performance in the U.S.
Despite that, the final few weeks
of the period ending July 31, 1998,
left many investors asking "What
have you done for me lately?" For
the 12-month period, the Standard
& Poor's 500 Index - a measure
of the U.S. stock market -
produced a return of 19.29%. But
whether one of the longest
running bull markets in recent
history is now an endangered
species remains to be seen.
There have been some
extraordinary highs and lows in
the equity market over the past 12
months. In late October, the Dow
Jones Industrial Average fell
550-plus points in one trading
session. That, however, was
quickly overcome by the first
quarter of 1998 as investors in
stocks were rewarded with strong
gains and an upward trend in
stock prices. But despite low
interest rates, a strong economy
and tame inflation domestically,
investor uncertainty over
corporate earnings reports and
the Asian market upheaval
began to have a tangible effect on
our markets at home. After hitting
a record of 9337.97 on July 17,
1998, the Dow Jones Industrial
Average racked up losses of over
400 points the week of July
20th. Still, the 12-month S&P
return of 19.29% is nearly twice
that of the stock market's historical
annual performance.
An interview with John McDowell, Portfolio Manager of Fidelity Blue
Chip Growth Fund
Q. HOW DID THE FUND PERFORM OVER THE PAST YEAR, JOHN?
A. Quite well. For the 12 months that ended July 31, 1998, the fund
posted a return of 20.17%, beating both the 19.29% return of the
Standard & Poor's 500 Index and the 13.15% return of the growth funds
average tracked by Lipper Analytical Services.
Q. WHY DID THE FUND'S PERFORMANCE BEAT THAT OF THE S&P 500?
A. Several sectors in the S&P 500 struggled due to the decline in
commodity prices that occurred during the period, with the energy and
other cyclical sectors - those that tend to move up and down with the
economy - especially affected. While the U.S. economy remained
relatively strong, economic problems in Asia reduced demand for
commodities such as oil, dampening the earnings of companies in these
sectors. In addition, large-capitalization banks lagged in the first
seven months of 1998. Fortunately, I did not have heavy exposure to
these sectors because I felt the valuations of stocks in these parts
of the market were high relative to their earnings projections.
Instead, I focused on growth companies, including retailers Home Depot
and Wal-Mart, technology companies Microsoft, EMC, BMC Software, Dell
Computer and America Online, and pharmaceutical firms Schering-Plough
and Warner Lambert. These investments all contributed positively to
performance.
Q. AND WHY DID THE FUND BEAT ITS PEERS?
A. It did so because of solid stock picking and because of the style
of the fund. Many of the funds in Lipper's growth category follow a
more aggressive growth approach, sometimes paying a premium for rapid,
short-term earnings growth. Remember, stock prices usually follow
earnings. Aggressive growth stocks tended to lag during the period due
to fallout from financial and economic problems in the Far East amid a
general environment in which more and more companies missed earnings
estimates. On the other hand, many of the fund's large-cap companies
were able to post steady earnings resulting from strong unit growth.
Q. THE MAKE-UP OF THE FUND REMAINED FAIRLY STABLE DURING THE PAST SIX
MONTHS: SEVEN OF THE TOP 10 STOCKS REMAINED IN THAT GROUP, AND THE
ONLY SIGNIFICANT SECTOR WEIGHTING CHANGE WAS AN INCREASE OF ABOUT 4%
IN THE FUND'S TECHNOLOGY INVESTMENTS. WHAT DOES THAT SAY ABOUT YOUR
INVESTMENT APPROACH?
A. As I said, I tend to look for companies that can provide growth
over both the short and long term. There usually is not a lot of
turnover in the fund. The typical stock is held for a period of two
years. In terms of technology, part of the increased weighting
resulted from the strong price appreciation of some of the fund's
holdings. In addition, I added to selected technology holdings that I
felt had positive prospects.
Q. FOUR OF THE TOP 10 HOLDINGS ARE HEALTH STOCKS. WHY DID YOU FIND
THEM ATTRACTIVE?
A. These holdings were selected on a stock-by-stock basis because I
anticipated that they would deliver some of the best revenue growth
among the blue chip stocks. Demand has been driven by more direct
marketing to the consumer, and the companies have benefited from rapid
new-product development, richer new-product pipelines and somewhat
faster approvals from the Food and Drug Administration.
Q. WHICH STOCKS DIDN'T PERFORM AS WELL AS YOU WOULD HAVE LIKED?
A. I'd mention two. Oxford Health, a health maintenance organization,
had problems with its computer systems that hurt its earnings. Cendant
- - a consumer-services and franchising company formed by the merger of
HFS and CUC - suffered from accounting irregularities at CUC, causing
the stock to drop. The fund no longer holds either stock.
Q. WHAT'S YOUR OUTLOOK?
A. The U.S. economy has had an incredible run in the 1990s. Executives
of companies with whom I meet are indicating that economic growth
should continue, but I'm cautious because of the uncertain outlook for
overseas economies. The question going forward is to what degree the
problems in the Far East will spill over and slow the U.S. economy.
The outlook for corporate profit growth in the U.S. is fairly modest,
at a time when the prices investors are paying for future earnings are
at record levels. As a result, the market is vulnerable to bad news
such as earnings disappointments or signs of inflation. The stocks
that should do well are those that post good earnings growth, but
presently that list is growing smaller. However, my investment style
won't be affected by this backdrop. I'll still look to buy individual
stocks based on their individual prospects, particularly stocks with
attractive valuations relative to their longer-term earnings outlook.
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.
JOHN MCDOWELL ON MANAGING
DURING PERIODS OF VOLATILITY:
"WHENEVER STOCK PRICES MOVE
SHARPLY UP OR DOWN, I LOOK CLOSELY
FOR OPPORTUNITY. IF A STOCK'S PRICE
MOVES UP, I MIGHT PARE MY
POSITION. ON DAYS WHEN THERE ARE
BROAD PRICE DECLINES IN STOCK
PRICES, I LOOK TO BUY STOCKS OF
COMPANIES WITH SOLID
FUNDAMENTALS WHOSE PRICES ARE BEING
DRAGGED DOWN WITH THE OVERALL
MARKET. WHILE VOLATILITY MAY CREATE
OPPORTUNITIES TO BUY OR SELL, IT
DOESN'T CHANGE MY BEDROCK APPROACH.
I LOOK AT A CORE UNIVERSE OF 500 TO 600
BLUE CHIP GROWTH STOCKS, THEN
DETERMINE WHICH COMPANIES OFFER THE
BEST NEAR-TERM AND LONG-TERM
EARNINGS GROWTH, AND CONCLUDE BY
CHOOSING STOCKS BASED ON STRICT
VALUATION PARAMETERS.
"IT'S IMPORTANT FOR INVESTORS TO
REMEMBER THAT VOLATILITY IS PART OF
INVESTING IN THE STOCK MARKET. OVER
THE PAST FEW YEARS, WE'VE
EXPERIENCED A KIND OF INVESTMENT
UTOPIA. HOWEVER, PERIODIC MARKET
CORRECTIONS OF 10% TO 20% ARE MORE
THE HISTORIC NORM RATHER THAN THE
EXCEPTION. STOCK PRICES DURING THE
PAST FEW YEARS HAVE FAR OUTPACED
EARNINGS GROWTH, SO RECENT PRICE
DROPS ARE PART OF A HEALTHY
CORRECTIVE PROCESS. IT'S IMPORTANT
FOR INVESTORS TO REMEMBER THAT THE
20% TO 40% ANNUAL GAINS IN THE
MARKET WE'VE SEEN FOR SEVERAL YEARS
ARE EXCEPTIONAL. ANNUAL GAINS IN THE
8% TO 11% RANGE ARE MORE TYPICAL
WHEN LOOKING AT THE COMPLETE
HISTORY OF THE STOCK MARKET."
FUND FACTS
GOAL: TO INCREASE THE VALUE OF
THE FUND'S SHARES BY INVESTING
MAINLY IN COMMON STOCKS OF
WELL-KNOWN AND ESTABLISHED
COMPANIES
FUND NUMBER: 312
TRADING SYMBOL: FBGRX
START DATE: DECEMBER 31, 1987
SIZE: AS OF JULY 31, 1998,
MORE THAN $17.0 BILLION
MANAGER: JOHN MCDOWELL,
SINCE 1996; LEADER, FIDELITY
GROWTH FUNDS GROUP;
MANAGER, FIDELITY LARGE CAP
STOCK FUND, 1995-1996;
JOINED FIDELITY IN 1985
(CHECKMARK)
INVESTMENT CHANGES
TOP TEN STOCKS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STOCKS
6 MONTHS AGO
Microsoft Corp. 3.3 2.6
General Electric Co. 3.3 3.2
Philip Morris Companies, Inc. 2.4 2.8
Merck & Co., Inc. 2.2 2.7
Bristol-Myers Squibb Co. 2.0 1.9
Intel Corp. 2.0 1.6
Johnson & Johnson 1.8 1.4
Schering-Plough Corp. 1.7 1.5
Wal-Mart Stores, Inc. 1.7 1.5
Coca-Cola Co. (The) 1.6 1.0
<TABLE>
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TOP FIVE MARKET SECTORS AS OF JULY 31, 1998
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE MARKET SECTORS
6 MONTHS AGO
TECHNOLOGY 23.2 19.5
HEALTH 17.9 18.6
FINANCE 11.7 12.4
NONDURABLES 11.5 12.5
RETAIL & WHOLESALE 8.1 6.5
</TABLE>
ASSET ALLOCATION (% OF FUND'S INVESTMENTS)
AS OF JULY 31, 1998 * AS OF JANUARY 31, 1998 **
ROW: 1, COL: 1, VALUE: 96.09999999999999
ROW: 1, COL: 2, VALUE: 3.9
STOCKS 95.8%
SHORT-TERM
INVESTMENTS 4.2%
FOREIGN
INVESTMENTS 3.0%
STOCKS 96.1%
SHORT-TERM
INVESTMENTS 3.9%
FOREIGN
INVESTMENTS 3.3%
ROW: 1, COL: 1, VALUE: 95.8
ROW: 1, COL: 2, VALUE: 4.2
*
**
INVESTMENTS JULY 31, 1998
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
<TABLE>
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COMMON STOCKS - 96.1%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.7%
AEROSPACE & DEFENSE - 0.4%
Textron, Inc. 887,400 $ 65,557
SHIP BUILDING & REPAIR - 0.3%
General Dynamics Corp. 1,262,300 60,038
TOTAL AEROSPACE & DEFENSE 125,595
BASIC INDUSTRIES - 1.2%
CHEMICALS & PLASTICS - 0.5%
Monsanto Co. 1,147,100 64,955
Sealed Air Corp. (a) 667,200 26,688
91,643
PACKAGING & CONTAINERS - 0.6%
Owens Illinois, Inc. (a) 2,283,300 100,751
PAPER & FOREST PRODUCTS - 0.1%
Fort James Corp. 503,712 17,000
TOTAL BASIC INDUSTRIES 209,394
CONSTRUCTION & REAL ESTATE - 0.6%
ENGINEERING - 0.6%
IMS Health, Inc. 1,621,200 101,832
DURABLES - 0.7%
HOME FURNISHINGS - 0.5%
Leggett & Platt, Inc. 3,248,200 87,092
TEXTILES & APPAREL - 0.2%
NIKE, Inc. Class B 878,100 39,075
TOTAL DURABLES 126,167
ENERGY - 3.1%
ENERGY SERVICES - 1.0%
Dresser Industries, Inc. 1,396,500 49,314
Halliburton Co. 2,054,800 74,615
Noble Drilling Corp. (a) 1,257,200 23,730
Transocean Offshore, Inc. 530,600 20,926
168,585
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - 2.1%
Anadarko Petroleum Corp. 1,962,000 $ 67,321
Royal Dutch Petroleum Co. 1,303,300 66,468
Texaco, Inc. 2,164,300 131,616
Total SA:
Class B 717,000 81,974
sponsored ADR 199,500 11,409
358,788
TOTAL ENERGY 527,373
FINANCE - 11.7%
BANKS - 2.6%
Bank of New York, Inc. 1,871,800 119,795
BankAmerica Corp. 1,006,500 90,333
Citicorp 550,400 93,568
NationsBank Corp. 773,600 61,695
U.S. Bancorp 1,820,200 83,729
449,120
CREDIT & OTHER FINANCE - 2.2%
American Express Co. 1,471,743 162,444
Associates First Capital Corp. 1,008,000 78,309
Fleet Financial Group, Inc. 1,012,600 87,020
Household International, Inc. 1,090,100 54,232
382,005
FEDERAL SPONSORED CREDIT - 2.3%
Fannie Mae 3,714,200 230,280
Freddie Mac 3,419,000 161,548
391,828
INSURANCE - 3.6%
Allstate Corp. 706,900 29,999
AMBAC, Inc. 1,514,600 88,225
American International Group, Inc. 1,146,700 172,937
MBIA, Inc. 1,066,900 71,882
MGIC Investment Corp. 815,300 43,720
Old Republic International Corp. 1,035,850 27,515
Progressive Corp. 469,000 57,980
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Provident Companies, Inc. 748,500 $ 27,601
UNUM Corp. 1,824,600 96,134
615,993
SAVINGS & LOANS - 0.5%
Washington Mutual, Inc. 2,023,850 80,828
SECURITIES INDUSTRY - 0.5%
Travelers Group, Inc. (The) 1,305,300 87,455
TOTAL FINANCE 2,007,229
HEALTH - 17.9%
DRUGS & PHARMACEUTICALS - 11.8%
American Home Products Corp. 5,247,100 270,226
Bristol-Myers Squibb Co. 3,019,400 344,023
Elan Corp. PLC ADR (a) 597,300 43,006
Genentech, Inc. special (a) 374,300 25,850
Lilly (Eli) & Co. 3,324,700 223,586
Merck & Co., Inc. 3,083,700 380,259
Pfizer, Inc. 1,765,200 194,172
Schering-Plough Corp. 3,046,900 294,788
Warner-Lambert Co. 3,335,400 252,031
2,027,941
MEDICAL EQUIPMENT & SUPPLIES - 4.3%
Abbott Laboratories 2,246,900 93,387
Becton, Dickinson & Co. 907,400 74,974
Bergen Brunswig Corp. Class A 419,100 22,212
Cardinal Health, Inc. 1,086,500 104,372
Guidant Corp. 959,600 71,310
Johnson & Johnson 3,984,900 307,834
Medtronic, Inc. 1,060,000 65,654
739,743
MEDICAL FACILITIES MANAGEMENT - 1.8%
Health Management Associates, Inc. Class A (a) 4,851,850 114,018
HEALTHSOUTH Corp. (a) 3,217,100 80,830
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT - CONTINUED
Pacificare Health Sytems, Inc. Class B (a) 595,300 $ 42,713
Tenet Healthcare Corp. (a) 2,192,400 65,635
303,196
TOTAL HEALTH 3,070,880
INDUSTRIAL MACHINERY & EQUIPMENT - 7.0%
ELECTRICAL EQUIPMENT - 4.5%
Alcatel Alsthom Compagnie Generale d'Electricite SA 708,635 140,977
General Electric Co. 6,376,100 569,465
Honeywell, Inc. 700,200 58,686
769,128
INDUSTRIAL MACHINERY & EQUIPMENT - 1.8%
Cooper Industries, Inc. 1,118,200 58,636
Ingersoll-Rand Co. 1,650,250 72,920
Tyco International Ltd. 2,721,700 168,575
300,131
POLLUTION CONTROL - 0.7%
Waste Management, Inc. 2,172,790 119,775
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,189,034
MEDIA & LEISURE - 5.4%
BROADCASTING - 2.5%
CBS Corp. 2,169,900 73,641
Clear Channel Communications, Inc. (a) 1,081,900 60,789
Comcast Corp. Class A special 1,439,800 65,376
MediaOne Group, Inc. (a) 1,001,400 48,380
Tele-Communications, Inc. (TCI Group) Series A (a) 1,426,100 59,540
Time Warner, Inc. 1,238,887 111,577
419,303
ENTERTAINMENT - 1.2%
Carnival Corp. Class A 2,343,100 86,548
Disney (Walt) Co. 3,557,900 122,525
Iwerks Entertainment, Inc. warrants 7/2/99 (a) 82 -
209,073
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.2%
Mirage Resorts, Inc. (a) 1,664,000 $ 35,776
PUBLISHING - 0.7%
Times Mirror Co. Class A 650,600 39,077
Tribune Co. 1,188,100 79,900
118,977
RESTAURANTS - 0.8%
Brinker International, Inc. (a) 274,100 5,345
McDonald's Corp. 2,054,300 137,253
142,598
TOTAL MEDIA & LEISURE 925,727
NONDURABLES - 11.5%
BEVERAGES - 2.9%
Coca-Cola Co. (The) 3,442,800 277,791
PepsiCo, Inc. 5,811,500 225,559
503,350
FOODS - 1.9%
Heinz (H.J.) Co. 737,600 40,660
Hershey Foods Corp. 992,300 62,639
Quaker Oats Co. 1,298,100 68,637
Ralston Purina Co. 1,467,100 47,222
Sara Lee Corp. 2,018,800 101,192
320,350
HOUSEHOLD PRODUCTS - 4.3%
Avon Products, Inc. 1,417,600 122,622
Clorox Co. 1,144,500 117,311
Colgate-Palmolive Co. 771,800 71,343
Gillette Co. 4,318,300 226,171
Procter & Gamble Co. 2,530,200 200,835
738,282
TOBACCO - 2.4%
Philip Morris Companies, Inc. 9,203,900 403,246
TOTAL NONDURABLES 1,965,228
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 8.1%
APPAREL STORES - 0.9%
Gap, Inc. 1,828,600 $ 109,030
TJX Companies, Inc. 1,677,400 39,419
148,449
DRUG STORES - 1.5%
CVS Corp. 1,137,100 46,621
Rite Aid Corp. 3,348,000 132,246
Walgreen Co. 1,926,500 83,201
262,068
GENERAL MERCHANDISE STORES - 2.9%
Consolidated Stores Corp. (a) 1,604,387 53,948
Costco Companies, Inc. (a) 1,052,900 59,752
Dayton Hudson Corp. 1,739,500 83,170
Wal-Mart Stores, Inc. 4,655,200 293,860
490,730
GROCERY STORES - 1.2%
Meyer (Fred), Inc. (a) 983,600 43,340
Safeway, Inc. (a) 3,702,300 164,058
207,398
RETAIL & WHOLESALE, MISCELLANEOUS - 1.6%
Home Depot, Inc. 3,506,500 146,835
Lowe's Companies, Inc. 765,400 29,468
Staples, Inc. (a) 3,017,750 99,209
275,512
TOTAL RETAIL & WHOLESALE 1,384,157
SERVICES - 1.9%
ADVERTISING - 0.8%
Omnicom Group, Inc. 2,461,600 129,234
EDUCATIONAL SERVICES - 0.2%
Apollo Group, Inc. Class A (a) 1,129,150 40,508
SERVICES - 0.9%
AccuStaff, Inc. (a) 1,991,800 47,056
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
SERVICES - CONTINUED
SERVICES - CONTINUED
Robert Half International, Inc. (a) 639,450 $ 34,051
Service Corp. International, Inc. 1,877,900 71,125
152,232
TOTAL SERVICES 321,974
TECHNOLOGY - 23.2%
COMMUNICATIONS EQUIPMENT - 4.2%
Advanced Fibre Communications, Inc. (a) 257,100 5,126
Ascend Communications, Inc. (a) 1,110,600 49,387
Aspect Telecommunications Corp. (a) 1,416,500 45,195
Cisco Systems, Inc. (a) 2,182,850 209,008
Lucent Technologies, Inc. 2,828,642 261,473
OY Nokia AB sponsored ADR 829,200 72,244
Tellabs, Inc. (a) 1,075,900 80,995
723,428
COMPUTER SERVICES & SOFTWARE - 8.4%
America Online, Inc. 848,900 99,321
Automatic Data Processing, Inc. 1,561,990 105,727
BMC Software, Inc. 1,420,500 70,048
Ceridian Corp. (a) 561,341 32,102
Computer Associates International, Inc. 1,306,050 43,345
Compuware Corp. (a) 1,350,400 72,668
DST Systems, Inc. (a) 710,900 44,609
Electronic Data Systems Corp. 1,272,900 44,790
Equifax, Inc. 1,950,300 79,719
HBO & Co. 976,000 28,762
J.D. Edwards & Co. 773,600 28,913
Microsoft Corp. (a) 5,210,800 572,861
Oracle Corp. (a) 2,770,000 73,405
PeopleSoft, Inc. (a) 28,900 1,089
Saville System PLC sponsored ADR (a) 238,800 6,030
Shared Medical Systems Corp. 781,400 53,038
SunGard Data Systems, Inc. (a) 2,362,200 84,153
1,440,580
COMPUTERS & OFFICE EQUIPMENT - 6.1%
Comdisco, Inc. 3,243,600 50,073
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - CONTINUED
Compaq Computer Corp. 4,183,100 $ 137,519
Dell Computer Corp. (a) 1,655,400 179,766
EMC Corp. (a) 2,158,600 105,771
Fore Systems, Inc. (a) 2,487,500 59,234
Gateway 2000, Inc. (a) 1,008,000 54,432
Hewlett-Packard Co. 1,257,100 69,769
IBM Corp. 804,700 106,623
Pitney-Bowes, Inc. 3,023,600 152,692
Xerox Corp. 1,165,700 123,054
1,038,933
ELECTRONIC INSTRUMENTS - 0.4%
Applied Materials, Inc. (a) 365,500 12,244
Novellus Systems, Inc. (a) 1,508,900 59,224
71,468
ELECTRONICS - 4.1%
Intel Corp. 4,073,660 343,970
Linear Technology Corp. 1,222,290 73,108
Maxim Integrated Products, Inc. (a) 1,414,300 45,258
Micron Technology, Inc. (a) 2,038,300 68,028
Motorola, Inc. 394,300 20,602
Texas Instruments, Inc. 1,728,300 102,510
Xilinx, Inc. (a) 1,247,600 46,785
700,261
TOTAL TECHNOLOGY 3,974,670
UTILITIES - 3.1%
CELLULAR - 0.2%
Nextel Communications, Inc. Class A (a) 1,102,100 29,516
TELEPHONE SERVICES - 2.9%
AT&T Corp. 2,334,400 141,523
MCI Communications Corp. 1,149,700 74,443
SBC Communications, Inc. 2,659,500 108,707
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Telebras sponsored ADR (a) 413,700 $ 50,290
WorldCom, Inc. (a) 2,486,600 131,479
506,442
TOTAL UTILITIES 535,958
TOTAL COMMON STOCKS 16,465,218
(Cost $11,295,386)
</TABLE>
CASH EQUIVALENTS - 3.9%
Taxable Central Cash Fund (b) 668,217,671 668,218
TOTAL INVESTMENT IN SECURITIES - 100% $ 17,133,436
(Cost $11,963,604)
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.62%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
INCOME TAX INFORMATION
At July 31, 1998, the aggregate cost of investment securities for
income tax purposes was $11,969,777,000. Net unrealized appreciation
aggregated $5,163,659,000, of which $5,408,369,000 related to
appreciated investment securities and $244,710,000 related to
depreciated investment securities.
The fund hereby designates approximately $431,972,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNT) JULY 31, 1998
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $11,963,604) - $ 17,133,436
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 144,551
RECEIVABLE FOR FUND SHARES SOLD 45,476
DIVIDENDS RECEIVABLE 10,342
INTEREST RECEIVABLE 2,866
OTHER RECEIVABLES 742
TOTAL ASSETS 17,337,413
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 238,454
PAYABLE FOR FUND SHARES REDEEMED 82,016
ACCRUED MANAGEMENT FEE 6,721
OTHER PAYABLES AND ACCRUED EXPENSES 3,981
TOTAL LIABILITIES 331,172
NET ASSETS $ 17,006,241
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 10,969,219
UNDISTRIBUTED NET INVESTMENT INCOME 41,266
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 825,828
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 5,169,928
AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES
NET ASSETS, FOR 361,351 SHARES OUTSTANDING $ 17,006,241
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $47.06
($17,006,241 (DIVIDED BY) 361,351 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/97.00 OF $47.06) $48.52
</TABLE>
<TABLE>
<CAPTION>
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STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1998
INVESTMENT INCOME $ 142,667
DIVIDENDS
INTEREST 32,929
TOTAL INCOME 175,596
EXPENSES
MANAGEMENT FEE $ 85,630
BASIC FEE
PERFORMANCE ADJUSTMENT (18,210)
TRANSFER AGENT FEES 33,554
ACCOUNTING FEES AND EXPENSES 835
NON-INTERESTED TRUSTEES' COMPENSATION 64
CUSTODIAN FEES AND EXPENSES 370
REGISTRATION FEES 1,087
AUDIT 134
LEGAL 70
MISCELLANEOUS 57
TOTAL EXPENSES BEFORE REDUCTIONS 103,591
EXPENSE REDUCTIONS (2,642) 100,949
NET INVESTMENT INCOME 74,647
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 1,048,125
FOREIGN CURRENCY TRANSACTIONS (659) 1,047,466
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 1,649,172
ASSETS AND LIABILITIES IN FOREIGN CURRENCIES 115 1,649,287
NET GAIN (LOSS) 2,696,753
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 2,771,400
FROM OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED YEAR ENDED
JULY 31, JULY 31,
1998 1997
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 74,647 $ 81,862
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 1,047,466 397,079
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 1,649,287 3,376,584
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,771,400 3,855,525
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (83,745) (77,278)
FROM NET INVESTMENT INCOME
FROM NET REALIZED GAIN (562,631) (604,630)
TOTAL DISTRIBUTIONS (646,376) (681,908)
SHARE TRANSACTIONS 5,357,347 3,742,863
NET PROCEEDS FROM SALES OF SHARES
REINVESTMENT OF DISTRIBUTIONS 636,271 668,511
COST OF SHARES REDEEMED (3,989,701) (2,887,001)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 2,003,917 1,524,373
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,128,941 4,697,990
NET ASSETS
BEGINNING OF PERIOD 12,877,300 8,179,310
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 17,006,241 $ 12,877,300
INCOME OF $41,266 AND $55,275, RESPECTIVELY)
OTHER INFORMATION
SHARES
SOLD 126,191 109,213
ISSUED IN REINVESTMENT OF DISTRIBUTIONS 16,359 22,656
REDEEMED (93,696) (85,260)
NET INCREASE (DECREASE) 48,854 46,609
</TABLE>
<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31,
1998 1997 1996 1995 1994
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 41.21 $ 30.76 $ 32.59 $ 25.14 $ 25.72
BEGINNING OF PERIOD
INCOME FROM
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .22 C .28 C .34 .07 C .12
NET REALIZED AND 7.64 12.70 .42 7.96 3.43
UNREALIZED GAIN (LOSS)
TOTAL FROM INVESTMENT 7.86 12.98 .76 8.03 3.55
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INVESTMENT INCOME (.26) (.28) (.12) - (.01)
FROM NET REALIZED GAIN (1.75) (2.25) (2.47) (.58) (4.12)
TOTAL DISTRIBUTIONS (2.01) (2.53) (2.59) (.58) (4.13)
NET ASSET VALUE, END OF PERIOD $ 47.06 $ 41.21 $ 30.76 $ 32.59 $ 25.14
TOTAL RETURN A, B 20.17% 45.50% 2.19% 32.64% 14.95%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 17,006 $ 12,877 $ 8,179 $ 6,421 $ 2,229
(IN MILLIONS)
RATIO OF EXPENSES TO .72% .80% .98% 1.05% 1.27%
AVERAGE NET ASSETS
RATIO OF EXPENSES .70% D .78% D .95% D 1.02% D 1.22% D
TO AVERAGE NET ASSETS
AFTER EXPENSE REDUCTIONS
RATIO OF NET INVESTMENT INCOME .52% .81% 1.10% .25% .21%
TO AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 49% 51% 206% 182% 271%
AVERAGE COMMISSION RATE E $ .0448 $ .0441
</TABLE>
N 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).
O TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
P NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
Q 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).
R FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY
VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF
TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND
COMMISSION RATE STRUCTURES MAY DIFFER.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Blue Chip Growth Fund (the fund) is a fund of Fidelity
Securities Fund (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company
organized as a Massachusetts business trust. The financial statements
have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and
assumptions at the date of the financial statements. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities with
remaining maturities of sixty days or less for which quotations are
not readily available are valued at amortized cost or original cost
plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
date and settlement on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
the securities received. Interest income is accrued as earned.
Investment income is recorded net of foreign taxes withheld where
recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Under the Plan, deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of a
cross-section of Fidelity funds, including shares of the fund.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, foreign currency transactions and
losses deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part
of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
balances are invested in one or more repurchase agreements for U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the SEC, the fund may invest in the Taxable Central Cash Fund (the
Cash Fund) managed by Fidelity Investments Money Management, Inc., an
affiliate of FMR. The Cash Fund is an open-end money market fund
available only to investment companies and other accounts managed by
FMR and its affiliates. The Cash Fund seeks preservation of capital,
liquidity, and current income by investing in U.S. Treasury securities
and repurchase agreements for these securities. Income distributions
from the Cash Fund are declared daily and paid monthly from net
interest income. Income distributions earned by the fund are recorded
as interest income in the accompanying financial statements.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $8,263,640,000 and $6,825,887,000, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly basic fee that is calculated on the basis of a group fee rate
plus a fixed individual fund fee rate applied to the average net
assets of the fund. The group fee rate is the weighted average of a
series of rates and is based on the monthly average net assets of all
the mutual funds advised by FMR. The rates ranged from .2500% to
.5200% for the period. The annual individual fund fee rate is .30%. In
the event that these rates were lower than the contractual rates in
effect during the period, FMR voluntarily implemented the above rates,
as they resulted in the same or a lower management fee. The basic fee
is subject to a performance adjustment (up to a maximum of
(plus/minus).20% of the fund's average net assets over the performance
period) based on the fund's investment performance as compared to the
appropriate index over a specified period of time. For the period, the
management fee was equivalent to an annual rate of .47% of average net
assets after the performance adjustment.
SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of
FMR, is the general distributor of the fund. FDC receives a sales
charge of up to 3% for selling shares of the fund. Prior to October
12, 1990,
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
FDC received a sales charge of up to 2% and a deferred sales charge of
up to 1%. Shares purchased before October 12, 1990 are subject to a 1%
deferred sales charge upon redemption. For the period, FDC received
sales charges of $4,097,000 of which $4,066,000 was retained, and
deferred sales charges of $19,000, respectively, on sales of shares of
the fund.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing and
shareholder servicing agent. FSC receives account fees and asset-based
fees that vary according to account size and type of account. FSC pays
for typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees were
equivalent to an annual rate of .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.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $1,863,796 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 $1,884,000 under this arrangement.
In addition, the fund has entered into arrangements with its custodian
and transfer agent whereby credits realized as a result of uninvested
cash balances were used to reduce a portion of the fund's expenses.
During the period, the fund's custodian and transfer agent fees were
reduced by $1,000 and $757,000, respectively, under these
arrangements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity Blue Chip Growth Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Blue Chip Growth Fund (a fund of Fidelity Securities Fund) at
July 31, 1998, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity Blue
Chip Growth Fund 's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included
confirmation of securities at July 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion
expressed above.
/s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
Boston, Massachusetts
September 9, 1998
DISTRIBUTIONS
The Board of Trustees of Fidelity Blue Chip Growth Fund voted to pay
to shareholders of record at the opening of business on record date,
the following distributions derived from capital gains realized from
sales of portfolio securities, and dividends derived from net
investment income:
PAY DATE 9/8/97 12/22/97 9/8/98
RECORD DATE 9/5/97 12/19/97 9/4/98
DIVIDENDS $ .16 $ .10 $ .10
SHORT-TERM
CAPITAL GAINS $ .33 $ .29 $ .36
LONG-TERM
CAPITAL GAINS $ .80 $ .33 $1.70
LONG-TERM
CAPITAL GAIN PERCENTAGES:
28% rate 54.80% 54.95%
20% rate 45.20% 45.05%
A total of 0.74% 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 44% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund will notify shareholders in January 1999 of the applicable
percentages for use in preparing 1998 income tax returns.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity TouchTone Xpress(registered trademark) provides a single
toll-free number to access account balances, positions, quotes and
trading. It's easy to navigate the service, and on your first call,
the system will help you create a personal identification number (PIN)
for security.
(PHONE_GRAPHIC)TOUCHTONE XPRESS
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call Fidelity at
1-800-544-7272 and we'll send you an America Online CD or disk with up
to 50 free hours of Web access.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+
TM
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY
MARKET FUNDS WILL BE ABLE TO
MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND
IS NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE PRICE,
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY
SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19100 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree
Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
HAWAII
700 Bishop Street
Honolulu, HI
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
Fidelity Brokerage Services, Inc.
100 Summer St., Boston, MA 02110 Member NYSE/SIPC
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
2200 West Main Street
Durham, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Las Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Abigail Johnson, Vice President
John McDowell, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
* INDEPENDENT TRUSTEES
BCF-ANN-0998 60538
1.536058.101
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund
Contrafund II
Disciplined Equity Fund
Dividend Growth Fund
Emerging Growth Fund
Export and Multinational Fund
Fidelity Fifty SM
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium(registered trademark) Fund
OTC Portfolio
Retirement Growth Fund
Small Cap Selector
Small Cap Stock Fund
Stock Selector
TechnoQuant SM Growth Fund
Trend Fund
Value Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-7777
Account Assistance 1-800-544-6666
Product Information 1-800-544-8888
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
(registered trademark)
TouchTone Xpress (registered trademark) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(FIDELITY_LOGO_GRAPHIC)(REGISTERED TRADEMARK)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
