FIDELITY
BLUE CHIP GROWTH
FUND
ANNUAL REPORT
JULY 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 20 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 24 Notes to the financial
statements.
REPORT OF INDEPENDENT 28 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 29
OF SPECIAL NOTE 30
Standard & Poor's, S&P and S&P 500 are registered service marks of The
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Distributors Corporation.
Other third party marks appearing herein are the property of their
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trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
In July, the steadily growing U.S. economy again sparked fears of
inflation and posed the threat of another Federal Reserve Board
interest-rate hike at its August policy meeting. Despite rising
profits and continued productivity gains at many U.S. corporations,
stock and bond markets sold off sharply toward the month's end.
Renewed jitters about inflation were sparked by a government report
that showed a larger-than-expected increase in the employment-cost
index.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). Total returns do not include the effect of the
3.00% sales load which was eliminated as of September 30, 1998.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY BLUE CHIP GROWTH 19.30% 182.70% 560.75%
S&P 500 (registered trademark) 20.20% 220.67% 396.75%
Growth Funds Average 18.63% 167.08% 318.64%
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 market capitalization-weighted index
of common stocks. To measure how the fund's performance stacked up
against its peers, you can compare it to the growth funds average,
which reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past one year average represents a peer
group of 1,067 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, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY BLUE CHIP GROWTH 19.30% 23.10% 20.78%
S&P 500 20.20% 26.25% 17.38%
Growth Funds Average 18.63% 21.27% 14.98%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Blue Chip Growth S&P 500
00312 SP001
1989/07/31 10000.00 10000.00
1989/08/31 10243.36 10196.00
1989/09/30 10496.82 10154.20
1989/10/31 10340.59 9918.62
1989/11/30 10519.13 10120.96
1989/12/31 10609.49 10363.86
1990/01/31 9720.97 9668.45
1990/02/28 9984.52 9793.17
1990/03/31 10481.48 10052.69
1990/04/30 10383.60 9801.37
1990/05/31 11558.25 10757.01
1990/06/30 11821.79 10683.86
1990/07/31 11543.19 10649.67
1990/08/31 10549.25 9686.94
1990/09/30 10050.92 9215.19
1990/10/31 9990.51 9175.56
1990/11/30 10624.83 9768.30
1990/12/31 10980.97 10040.84
1991/01/31 11840.88 10478.62
1991/02/28 12754.06 11227.84
1991/03/31 13393.29 11499.55
1991/04/30 13248.70 11527.15
1991/05/31 13948.80 12025.12
1991/06/30 13248.70 11474.37
1991/07/31 14413.00 12009.08
1991/08/31 15044.62 12293.69
1991/09/30 14808.87 12088.39
1991/10/31 15105.96 12250.37
1991/11/30 14786.02 11756.68
1991/12/31 16999.53 13101.65
1992/01/31 16464.71 12857.96
1992/02/29 16541.11 13025.11
1992/03/31 16090.34 12771.12
1992/04/30 16304.27 13146.59
1992/05/31 16640.44 13211.01
1992/06/30 16159.10 13014.17
1992/07/31 16823.80 13546.45
1992/08/31 16648.08 13268.74
1992/09/30 16869.15 13425.32
1992/10/31 17103.33 13472.30
1992/11/30 18001.04 13931.71
1992/12/31 18048.68 14103.07
1993/01/31 18088.20 14221.54
1993/02/28 17969.62 14414.95
1993/03/31 18839.24 14719.10
1993/04/30 19139.66 14362.90
1993/05/31 20143.68 14747.83
1993/06/30 20333.42 14790.60
1993/07/31 20333.42 14731.43
1993/08/31 21598.33 15289.75
1993/09/30 22047.79 15172.02
1993/10/31 22294.23 15486.08
1993/11/30 21616.51 15338.97
1993/12/31 22471.11 15524.57
1994/01/31 23363.63 16052.40
1994/02/28 23382.23 15617.38
1994/03/31 22647.76 14936.47
1994/04/30 23317.15 15127.65
1994/05/31 23614.66 15375.75
1994/06/30 22796.51 14999.04
1994/07/31 23372.93 15491.01
1994/08/31 24637.34 16126.14
1994/09/30 24564.16 15731.05
1994/10/31 25698.18 16085.00
1994/11/30 24357.98 15499.18
1994/12/31 24684.51 15729.04
1995/01/31 24066.21 16136.89
1995/02/28 24865.24 16765.74
1995/03/31 25911.60 17260.50
1995/04/30 26872.34 17768.82
1995/05/31 27471.62 18479.04
1995/06/30 28993.60 18908.31
1995/07/31 31000.70 19535.31
1995/08/31 31324.12 19584.34
1995/09/30 31669.05 20410.80
1995/10/31 30871.59 20337.94
1995/11/30 31938.19 21230.77
1995/12/31 31689.04 21639.68
1996/01/31 32121.59 22376.29
1996/02/29 31864.12 22583.72
1996/03/31 32255.47 22801.20
1996/04/30 32430.55 23137.29
1996/05/31 33089.66 23734.00
1996/06/30 33192.65 23824.43
1996/07/31 31678.74 22771.86
1996/08/31 32502.64 23252.12
1996/09/30 34444.72 24560.75
1996/10/31 34957.66 25238.14
1996/11/30 37488.88 27145.89
1996/12/31 36562.49 26608.13
1997/01/31 38687.56 28270.60
1997/02/28 38452.69 28492.25
1997/03/31 36562.49 27321.50
1997/04/30 38788.23 28952.59
1997/05/31 41058.70 30715.23
1997/06/30 42680.47 32091.27
1997/07/31 46091.78 34644.77
1997/08/31 43787.75 32703.97
1997/09/30 45968.47 34495.17
1997/10/31 44443.50 33343.03
1997/11/30 45806.73 34886.48
1997/12/31 46441.99 35485.48
1998/01/31 47312.92 35877.95
1998/02/28 50690.73 38465.47
1998/03/31 52938.68 40435.28
1998/04/30 53385.92 40842.06
1998/05/31 52326.68 40139.99
1998/06/30 55174.87 41770.47
1998/07/31 55386.72 41325.62
1998/08/31 47195.23 35350.76
1998/09/30 50735.94 37615.33
1998/10/31 54163.87 40674.96
1998/11/30 57852.63 43140.27
1998/12/31 62584.67 45626.01
1999/01/31 65789.05 47534.09
1999/02/28 63168.41 46056.73
1999/03/31 66161.65 47899.46
1999/04/30 66111.97 49754.61
1999/05/31 64012.98 48579.90
1999/06/30 67863.20 51276.09
1999/07/30 66074.71 49675.25
IMATRL PRASUN SHR__CHT 19990731 19990811 141854 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Blue Chip Growth Fund on July 31, 1989. As the
chart shows, by July 31, 1999, the value of the investment would have
grown to $66,075 - a 560.75% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 would have grown to $49,675 - a 396.75% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Federal Reserve Board policy,
Internet stock mania and Y2K
concerns all played key roles in
the direction of the U.S. equity
market for the 12 months that ended
July 31, 1999. As we entered the
period, investors were still leery of
troubled overseas markets and
overall liquidity. The Fed then made
three successive interest-rate cuts
in the fall and confidence was
restored. The second quarter of 1999
saw more sharing of the market's
gains by smaller stocks, many of
which rely on borrowed money to
fund their growth. The Russell 2000
Index - a measure of small-stock
performance - handily outpaced
the large-cap oriented Standard &
Poor's 500 Index during that time.
For the entire 12 months, though, the
S&P 500(registered trademark) returned 20.20%, while
the Russell 2000 could only muster
7.41%. The Dow Jones Industrial
Average - an index of 30 blue-chip
stocks - returned 21.88%. Internet
stocks continued to attract investors,
with many stock valuations peaking
around April, then cooling off some
as the period ended. Technology
stocks prospered - the tech-heavy
NASDAQ index returned a tidy
41.42% during the period - as did
telecommunications stocks with
Internet exposure. Y2K concerns
mounted toward the end of the
period, as many investors
anticipated a spending freeze within
the technology sector.
(photograph of John McDowell)
An interview with John McDowell, Portfolio Manager of Fidelity Blue
Chip Growth Fund
Q. HOW DID THE FUND PERFORM, JOHN?
A. For the 12 months that ended July 31, 1999, the fund had a total
return of 19.30%. That slightly lagged the total return of the fund's
benchmark, the Standard & Poor's 500 Index, which posted a return of
20.20% during the same period. The fund outpaced the growth funds
average, which was up 18.63% during the period, as measured by Lipper
Inc.
Q. WHAT WERE THE MAJOR FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
RELATIVE TO THE S&P 500 INDEX?
A. Most of the fund's relative performance can be attributed to three
sectors: financial services, health care and technology. Because I
invest most heavily in the growth sectors of the market, including
technology and health care, stocks from these sectors tend to be
well-represented in the fund. While the performance of technology
stocks was particularly volatile over the past year, they generally
performed well, especially Internet stocks. America Online was the
fund's single biggest contributor over the past 12 months. I did,
however, cut back my AOL position significantly from late 1998 to
early 1999 as the stock's valuation increased and as I became more
concerned about the possible slowdown in subscriber growth. Weakness
in the health care sector offset strength in technology. Slowing
earnings growth hurt several hospital and pharmaceutical stocks. In a
period where the S&P 500 was up over 20%, all the major U.S.
pharmaceutical stocks underperformed, and three - Warner-Lambert,
Pfizer and Eli Lilly - actually posted declines.
Q. HOW DID THE FINANCE SECTOR FARE?
A. As a group, financial services stocks made up one of the market's
weakest sectors. Financial services is also one of the S&P's biggest
sectors. Generally, most bank and insurance stocks do not meet my
growth criteria, and I tend to have less exposure to these issues.
Bank stocks were greatly impacted by the credit crisis in September
and October of last year. While many of the larger banks have
rebounded, they have not fully participated in the strong stock
market. My modest exposure to the group's weak performance made the
sector one of the biggest contributors to the fund's relative
performance.
Q. THE FUND PERFORMED WELL AGAINST ITS PEER GROUP. WHAT WERE THE KEYS
HERE?
A. While it is difficult to generalize, cutting back on Internet
positions earlier in 1999 likely had a positive impact on performance
relative to my competitors. The average growth manager was probably
somewhat more aggressive than I was, and therefore in all likelihood
had more exposure to the Internet. If so, the recent decline in
Internet stocks would have hurt the typical growth manager more than
me.
Q. WHICH PARTICULAR HOLDINGS CONTRIBUTED WELL TO PERFORMANCE?
A. As I mentioned earlier, AOL was my biggest contributor. I owned a
sizable position last year and was fortunate to cut it back early this
year before the weakness in Internet stocks toward the end of the
period. Positions in other technology stocks, including Xilinx, Cisco
Systems, Linear Technology, Texas Instruments, EMC Corp., Micron
Technology, Novellus Systems and Microsoft, also contributed.
Q. WHICH HOLDINGS DETRACTED?
A. Holdings in various health care and consumer stocks, including Eli
Lilly, Warner-Lambert, Becton Dickinson and Gillette, hurt
performance. The combination of a modest slowdown in earnings growth
and higher interest rates caused these stocks to lag the market.
Q. WHAT IS YOUR INVESTMENT OUTLOOK? WHAT CHANGES DO YOU ANTICIPATE
MAKING TO THE PORTFOLIO?
A. I try not to make broad predictions about future market
performance. I do, however, have some observations. First, stock
valuations are high. This is unusual in an environment of rising
interest rates. Offsetting high interest rates, corporate earnings are
accelerating from negative growth last year to low double-digit growth
this year. Additionally, there is precious little hard evidence that
inflation is indeed going to be a problem in the year ahead. If
inflation does accelerate from here, I would expect the market, and
growth stocks in particular, to be weak. The other big unknown factor
on the horizon is technology spending. Year 2000 concerns may cause a
slowdown in corporate technology spending in the second half of the
year. So far, most of the companies I talk to have not seen any
evidence to that effect. Since technology stocks make up such a large
part of my investment universe, I am watching this closely, and it may
have an impact on my positioning in the months ahead.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks growth of capital
over the long term 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, 1999,
more than $23.6 billion
MANAGER: John McDowell,
since 1996; leader, Fidelity
Growth Funds Group;
manager, Fidelity Large-Cap
Stock Fund, 1995-1996;
joined Fidelity in 1985
JOHN MCDOWELL ON THE
NEAR-TERM PROSPECTS OF
CYCLICAL STOCKS:
"There has been debate about the
sustainability of the market rotation
into economically sensitive stocks
and small-caps. Over the long run,
growth and value stocks have
provided similar returns and small
stocks have outperformed large
stocks. Therefore, some investors
feel the recent strength in value
and small-cap stocks simply
reflects a reversal in performance
driven by their valuation disparity
compared to large growth stocks.
"Others view improving world growth
as evidence that inflation may be on
the rise. Higher inflation tends to
be bad for growth-stock valuations.
Additionally, higher inflation tends
to benefit cyclicals because they
can generally offset inflation with
higher prices, accelerating their
earnings growth.
"I expect aggregate earnings growth
to accelerate in the quarters ahead.
But will the market be strong as
well? Perhaps, but the key variable
is interest rates. Stock valuations
are at record-highs and need low
interest rates to be sustained. If
inflation picks up and rates rise,
stock valuations are at risk
regardless of earnings growth. In
the face of falling valuations, the
market would be hard-pressed to
show strong results.
"As always, I will resist the urge to
reach for performance. If market
gains are coming from excessively
valued stocks, in my experience,
the rewards are not worth the risk.
My long-term record has been
built on prudent and balanced
investment decisions."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF JULY 31,
1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
General Electric Co. 4.0 3.6
Microsoft Corp. 4.0 4.8
Cisco Systems, Inc. 2.6 2.3
Lucent Technologies, Inc. 2.3 1.4
Intel Corp. 2.1 2.9
Procter & Gamble Co. 2.1 1.5
Merck & Co., Inc. 1.9 2.5
Bristol-Myers Squibb Co. 1.9 1.7
Johnson & Johnson 1.8 1.5
Philip Morris Companies, Inc. 1.7 2.2
TOP FIVE MARKET SECTORS AS OF
JULY 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
TECHNOLOGY 26.0 28.6
HEALTH 16.0 17.6
FINANCE 9.3 8.4
NONDURABLES 8.6 9.7
RETAIL & WHOLESALE 8.3 8.6
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF JULY 31, 1999 * AS OF JANUARY 31, 1999 **
Stocks 96.2% Stocks 95.7%
Short-Term Investments 3.8% Short-Term Investments 4.3%
* FOREIGN INVESTMENTS 3.3% ** FOREIGN INVESTMENTS 1.0%
Row: 1, Col: 1, Value: 96.2 Row: 1, Col: 1, Value: 95.7
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 3.8 Row: 1, Col: 8, Value: 4.3
</TABLE>
INVESTMENTS JULY 31, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 96.2%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 1.8%
AEROSPACE & DEFENSE - 1.1%
Boeing Co. 2,064,400 $ 93,672
Textron, Inc. 1,118,420 91,990
United Technologies Corp. 1,065,400 71,049
256,711
DEFENSE ELECTRONICS - 0.3%
Raytheon Co. Class B 1,225,300 86,154
SHIP BUILDING & REPAIR - 0.4%
General Dynamics Corp. 1,325,900 89,250
TOTAL AEROSPACE & DEFENSE 432,115
BASIC INDUSTRIES - 1.0%
CHEMICALS & PLASTICS - 0.3%
Monsanto Co. 1,537,000 60,135
IRON & STEEL - 0.1%
Nucor Corp. 519,300 25,186
PACKAGING & CONTAINERS - 0.6%
Corning, Inc. 1,302,500 91,175
Owens-Illinois, Inc. (a) 2,089,000 52,094
143,269
TOTAL BASIC INDUSTRIES 228,590
CONSTRUCTION & REAL ESTATE -
0.3%
BUILDING MATERIALS - 0.3%
Masco Corp. 2,353,400 70,014
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
0.1%
Federal-Mogul Corp. 269,300 13,061
Honda Motor Co. Ltd. 473,000 20,522
33,583
CONSUMER DURABLES - 0.5%
Minnesota Mining & 1,337,600 117,625
Manufacturing Co.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.2%
Matsushita Electric 1,077,000 $ 25,094
Industrial Co. Ltd.
Sony Corp. 253,600 31,748
56,842
HOME FURNISHINGS - 0.5%
Leggett & Platt, Inc. 3,427,200 87,822
Newell Rubbermaid, Inc. 558,800 24,168
111,990
TEXTILES & APPAREL - 0.2%
NIKE, Inc. Class B 680,700 35,396
TOTAL DURABLES 355,436
ENERGY - 4.0%
ENERGY SERVICES - 1.5%
Baker Hughes, Inc. 1,542,100 53,684
Halliburton Co. 3,778,000 174,260
Noble Drilling Corp. (a) 1,299,300 29,478
Schlumberger Ltd. 1,832,900 111,005
368,427
OIL & GAS - 2.5%
Anadarko Petroleum Corp. 2,333,200 89,099
Exxon Corp. 2,569,900 203,986
Texaco, Inc. 1,595,700 99,432
Total Fina SA Class B (a) 766,400 97,607
USX-Marathon Group 3,108,000 94,406
584,530
TOTAL ENERGY 952,957
FINANCE - 9.3%
BANKS - 1.0%
Bank of New York Co., Inc. 3,896,300 143,920
Northern Trust Corp. 421,300 36,653
State Street Corp. 864,200 61,250
241,823
CREDIT & OTHER FINANCE - 3.3%
American Express Co. 1,564,443 206,115
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Associates First Capital 3,149,800 $ 120,677
Corp. Class A
Citigroup, Inc. 5,372,500 239,412
Fleet Financial Group, Inc. 2,526,800 102,335
Household International, Inc. 890,000 38,214
Providian Financial Corp. 831,300 75,648
782,401
FEDERAL SPONSORED CREDIT - 2.4%
Fannie Mae 4,811,100 331,966
Freddie Mac 3,921,400 224,990
556,956
INSURANCE - 2.2%
AFLAC, Inc. 729,400 33,826
Ambac Financial Group, Inc. 1,689,700 93,990
American International Group, 1,952,750 226,763
Inc.
CIGNA Corp. 751,300 66,255
MBIA, Inc. 612,500 35,066
MGIC Investment Corp. 1,097,500 54,120
510,020
SECURITIES INDUSTRY - 0.4%
Morgan Stanley, Dean Witter & 468,300 42,206
Co.
Nikko Securities Co. Ltd. 3,420,000 27,467
Nomura Securities Co. Ltd. 2,524,000 35,431
105,104
TOTAL FINANCE 2,196,304
HEALTH - 16.0%
DRUGS & PHARMACEUTICALS - 11.0%
American Home Products Corp. 1,982,900 101,128
Amgen, Inc. (a) 2,525,500 194,148
Bristol-Myers Squibb Co. 6,643,200 441,773
Genzyme Corp. (General 802,300 45,380
Division)
Lilly (Eli) & Co. 6,027,800 395,574
Merck & Co., Inc. 6,605,300 447,096
PE Corp. (Biosystems Group) 1,105,800 61,994
Pfizer, Inc. 7,272,400 246,807
Quintiles Transnational Corp. 1,770,600 67,283
(a)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Schering-Plough Corp. 6,863,400 $ 336,307
SmithKline Beecham PLC 820,700 49,293
sponsored ADR
Warner-Lambert Co. 3,441,200 227,119
2,613,902
MEDICAL EQUIPMENT & SUPPLIES
- - 4.5%
Abbott Laboratories 5,870,600 252,069
Becton, Dickinson & Co. 2,481,100 68,075
Boston Scientific Corp. (a) 1,169,400 47,434
Cardinal Health, Inc. 1,539,050 105,040
Guidant Corp. 1,303,700 76,348
Johnson & Johnson 4,676,300 430,804
Medtronic, Inc. 1,150,000 82,872
1,062,642
MEDICAL FACILITIES MANAGEMENT
- - 0.5%
Health Management Associates, 4,315,450 35,602
Inc. Class A (a)
United HealthCare Corp. 1,494,100 91,140
126,742
TOTAL HEALTH 3,803,286
INDUSTRIAL MACHINERY &
EQUIPMENT - 6.0%
ELECTRICAL EQUIPMENT - 4.6%
Ericsson (L.M.) Telefon AB 500,000 16,031
ADR Class B
General Electric Co. 8,839,900 963,547
Honeywell, Inc. 708,500 84,887
Omron Corp. 1,310,000 21,843
1,086,308
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.3%
Illinois Tool Works, Inc. 897,600 66,703
Ingersoll-Rand Co. 1,664,950 107,077
Parker-Hannifin Corp. 1,050,500 49,570
Tyco International Ltd. 980,100 95,744
319,094
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.1%
Waste Management, Inc. 1,107,290 $ 28,305
TOTAL INDUSTRIAL MACHINERY & 1,433,707
EQUIPMENT
MEDIA & LEISURE - 6.7%
BROADCASTING - 3.8%
AT&T Corp. (Liberty Media 3,226,400 119,377
Group) Class A (a)
Cablevision Systems Corp. 735,400 51,340
Class A (a)
CBS Corp. (a) 3,254,100 142,977
Clear Channel Communications, 1,157,400 80,512
Inc. (a)
Comcast Corp. Class A 3,868,500 148,937
(special)
Cox Communications, Inc. 2,058,700 77,073
Class A (a)
MediaOne Group, Inc. 684,600 49,548
Time Warner, Inc. 3,302,805 237,802
907,566
ENTERTAINMENT - 0.7%
Disney (Walt) Co. 4,203,100 116,111
Viacom, Inc. Class B 1,128,400 47,322
(non-vtg.) (a)
163,433
PUBLISHING - 0.6%
McGraw-Hill Companies, Inc. 250,000 12,719
Tribune Co. 1,320,900 116,322
129,041
RESTAURANTS - 1.6%
Brinker International, Inc. 1,690,500 47,123
(a)
Darden Restaurants, Inc. 305,100 6,655
McDonald's Corp. 6,306,100 262,886
Tricon Global Restaurants, 1,640,100 66,732
Inc. (a)
383,396
TOTAL MEDIA & LEISURE 1,583,436
NONDURABLES - 8.6%
BEVERAGES - 2.4%
Anheuser-Busch Companies, 1,648,100 130,097
Inc.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
Coca-Cola Co. (The) 4,474,300 $ 269,856
PepsiCo, Inc. 4,478,900 175,237
575,190
FOODS - 0.8%
Heinz (H.J.) Co. 1,081,200 50,952
Nabisco Group Holdings Corp. 2,531,200 47,460
Quaker Oats Co. 1,403,000 95,492
193,904
HOUSEHOLD PRODUCTS - 3.7%
Avon Products, Inc. 1,419,800 64,601
Clorox Co. 709,750 79,492
Colgate-Palmolive Co. 1,078,900 53,271
Gillette Co. 4,158,500 182,194
Procter & Gamble Co. 5,545,300 501,850
881,408
TOBACCO - 1.7%
Philip Morris Companies, Inc. 10,820,700 403,071
TOTAL NONDURABLES 2,053,573
RETAIL & WHOLESALE - 8.3%
APPAREL STORES - 1.0%
Gap, Inc. 1,933,600 90,396
Limited, Inc. (The) 1,679,300 76,723
TJX Companies, Inc. 2,328,300 76,979
244,098
DRUG STORES - 1.0%
CVS Corp. 2,418,100 120,300
Walgreen Co. 4,044,500 114,510
234,810
GENERAL MERCHANDISE STORES -
2.8%
Costco Companies, Inc. (a) 1,165,000 87,084
Dayton Hudson Corp. 2,592,200 167,683
Nordstrom, Inc. 1,916,500 60,250
Wal-Mart Stores, Inc. 8,101,300 342,280
657,297
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 1.5%
Albertson's, Inc. 1,435,200 $ 71,312
Kroger Co. (a) 4,435,200 116,701
Safeway, Inc. 3,116,800 167,918
355,931
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.0%
Home Depot, Inc. 4,990,500 318,456
Lowe's Companies, Inc. 1,133,500 59,792
Staples, Inc. (a) 3,427,575 98,971
477,219
TOTAL RETAIL & WHOLESALE 1,969,355
SERVICES - 0.8%
ADVERTISING - 0.8%
Omnicom Group, Inc. 2,599,400 184,232
SERVICES - 0.0%
Gartner Group, Inc. Class B 300,397 6,496
(a)
TOTAL SERVICES 190,728
TECHNOLOGY - 26.0%
COMMUNICATIONS EQUIPMENT - 5.5%
Cisco Systems, Inc. (a) 10,020,250 622,508
Lucent Technologies, Inc. 8,229,514 535,433
Newbridge Networks Corp. (a) 1,228,400 32,620
Nokia AB sponsored ADR 1,353,300 115,115
1,305,676
COMPUTER SERVICES & SOFTWARE
- - 9.3%
Amazon.com, Inc. (a) 190,800 19,092
America Online, Inc. (a) 1,633,900 155,425
At Home Corp. Series A (a) 1,481,452 67,684
Automatic Data Processing, 3,982,980 159,568
Inc.
BMC Software, Inc. (a) 514,500 27,719
Ceridian Corp. (a) 347,582 9,732
Compuware Corp. (a) 1,316,900 36,544
DST Systems, Inc. (a) 1,051,500 69,793
eBay, Inc. 155,400 15,181
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Electronic Data Systems Corp. 1,663,300 $ 100,318
First Data Corp. 1,966,900 97,484
IMS Health, Inc. 2,307,200 64,313
International Business 1,232,800 154,948
Machines Corp.
Intuit, Inc. (a) 551,600 45,128
Lycos, Inc. (a) 1,098,000 45,361
Microsoft Corp. (a) 11,058,800 948,983
Oracle Corp. (a) 2,256,400 85,884
Shared Medical Systems Corp. 923,300 55,283
Siebel Systems, Inc. (a) 109,400 6,468
Synopsys, Inc. (a) 79,200 4,767
VeriSign, Inc. (a) 472,400 35,017
Veritas Software Corp. (a) 38,900 2,183
2,206,875
COMPUTERS & OFFICE EQUIPMENT
- - 5.1%
Compaq Computer Corp. 2,541,800 61,003
Comverse Technology, Inc. (a) 520,800 39,353
Dell Computer Corp. (a) 4,626,600 189,112
EMC Corp. (a) 3,493,800 211,593
Gateway, Inc. (a) 510,700 38,909
Hewlett-Packard Co. 2,718,900 284,635
Pitney Bowes, Inc. 3,075,000 195,647
Ricoh Co. Ltd. 1,789,000 30,017
Sun Microsystems, Inc. (a) 1,532,300 104,005
Xerox Corp. 1,321,600 64,428
1,218,702
ELECTRONIC INSTRUMENTS - 0.6%
Applied Materials, Inc. (a) 1,033,500 74,347
Novellus Systems, Inc. (a) 880,100 56,656
131,003
ELECTRONICS - 5.4%
Altera Corp. (a) 1,066,200 38,650
Intel Corp. 7,443,320 513,589
Linear Technology Corp. 2,233,980 137,111
Micron Technology, Inc. (a) 2,133,400 132,537
Motorola, Inc. 1,530,700 139,676
Texas Instruments, Inc. 1,592,200 229,277
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Vitesse Semiconductor Corp. 354,200 $ 22,625
(a)
Xilinx, Inc. (a) 1,253,200 78,168
1,291,633
PHOTOGRAPHIC EQUIPMENT - 0.1%
Fuji Photo Film Co. Ltd. 506,000 19,418
TOTAL TECHNOLOGY 6,173,307
TRANSPORTATION - 0.6%
AIR TRANSPORTATION - 0.2%
AMR Corp. (a) 603,400 39,146
RAILROADS - 0.4%
Burlington Northern Santa Fe 1,657,900 53,053
Corp.
Union Pacific Corp. 987,800 53,650
106,703
TOTAL TRANSPORTATION 145,849
UTILITIES - 5.3%
CELLULAR - 0.9%
ALLTEL Corp. 765,800 54,994
Vodafone AirTouch PLC 724,250 152,455
sponsored ADR
207,449
ELECTRIC UTILITY - 0.5%
AES Corp. (a) 1,232,600 73,956
CMS Energy Corp. 1,315,900 49,182
123,138
TELEPHONE SERVICES - 3.9%
AT&T Corp. 6,326,594 328,587
MCI WorldCom, Inc. (a) 4,099,833 338,236
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
SBC Communications, Inc. 2,972,700 $ 170,001
Sprint Corp. (FON Group) 1,569,500 81,124
917,948
TOTAL UTILITIES 1,248,535
TOTAL COMMON STOCKS 22,837,192
(Cost $15,330,006)
CASH EQUIVALENTS - 3.8%
Taxable Central Cash Fund (b) 910,994,526 910,995
(Cost $910,995)
TOTAL INVESTMENT IN $ 23,748,187
SECURITIES - 100%
(Cost $16,241,001)
</TABLE>
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.06%. 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, 1999, the aggregate cost of investment securities for
income tax purposes was $16,254,603,000. Net unrealized appreciation
aggregated $7,493,584,000, of which $8,010,593,000 related to
appreciated investment securities and $517,009,000 related to
depreciated investment securities.
The fund hereby designates approximately $689,681,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) JULY 31, 1999
ASSETS
Investment in securities, at $ 23,748,187
value (cost $16,241,001) -
See accompanying schedule
Receivable for investments 89,920
sold
Receivable for fund shares 33,317
sold
Dividends receivable 13,329
Interest receivable 3,811
Other receivables 1,014
TOTAL ASSETS 23,889,578
LIABILITIES
Payable for investments $ 159,634
purchased
Payable for fund shares 31,049
redeemed
Accrued management fee 9,619
Other payables and accrued 5,072
expenses
TOTAL LIABILITIES 205,374
NET ASSETS $ 23,684,204
Net Assets consist of:
Paid in capital $ 15,123,597
Undistributed net investment 64,832
income
Accumulated undistributed net 988,561
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 7,507,214
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 445,219 $ 23,684,204
shares outstanding
NET ASSET VALUE, offering $53.20
price and redemption price
per share ($23,684,204
(divided by) 445,219 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED JULY 31, 1999
INVESTMENT INCOME $ 164,601
Dividends
Interest 40,319
TOTAL INCOME 204,920
EXPENSES
Management fee Basic fee $ 117,605
Performance adjustment (22,693)
Transfer agent fees 45,051
Accounting fees and expenses 999
Non-interested trustees' 83
compensation
Custodian fees and expenses 380
Registration fees 2,012
Audit 47
Legal 75
Miscellaneous 28
Total expenses before 143,587
reductions
Expense reductions (3,263) 140,324
NET INVESTMENT INCOME 64,596
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 994,428
Foreign currency transactions 243 994,671
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 2,337,354
Assets and liabilities in (68) 2,337,286
foreign currencies
NET GAIN (LOSS) 3,331,957
NET INCREASE (DECREASE) IN $ 3,396,553
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, YEAR ENDED JULY 31,
1999 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 64,596 $ 74,647
income
Net realized gain (loss) 994,671 1,047,466
Change in net unrealized 2,337,286 1,649,287
appreciation (depreciation)
NET INCREASE (DECREASE) IN 3,396,553 2,771,400
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (36,306) (83,745)
From net investment income
From net realized gain (747,879) (562,631)
TOTAL DISTRIBUTIONS (784,185) (646,376)
Share transactions Net 8,609,208 5,357,347
proceeds from sales of shares
Reinvestment of distributions 766,939 636,271
Cost of shares redeemed (5,310,552) (3,989,701)
NET INCREASE (DECREASE) IN 4,065,595 2,003,917
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 6,677,963 4,128,941
IN NET ASSETS
NET ASSETS
Beginning of period 17,006,241 12,877,300
End of period (including $ 23,684,204 $ 17,006,241
undistributed net investment
income of $64,832 and
$41,266, respectively)
OTHER INFORMATION
Shares
Sold 172,671 126,191
Issued in reinvestment of 19,630 16,359
distributions
Redeemed (108,433) (93,696)
Net increase (decrease) 83,868 48,854
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 47.06 $ 41.21 $ 30.76 $ 32.59 $ 25.14
of period
Income from Investment
Operations
Net investment income .16 C .22 C .28 C .34 .07 C
Net realized and unrealized 8.14 7.64 12.70 .42 7.96
gain (loss)
Total from investment 8.30 7.86 12.98 .76 8.03
operations
Less Distributions
From net investment income (.10) (.26) (.28) (.12) -
From net realized gain (2.06) (1.75) (2.25) (2.47) (.58)
Total distributions (2.16) (2.01) (2.53) (2.59) (.58)
Net asset value, end of period $ 53.20 $ 47.06 $ 41.21 $ 30.76 $ 32.59
TOTAL RETURN A, B 19.30% 20.17% 45.50% 2.19% 32.64%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 23,684 $ 17,006 $ 12,877 $ 8,179 $ 6,421
(in millions)
Ratio of expenses to average .71% .72% .80% .98% 1.05%
net assets
Ratio of expenses to average .70% D .70% D .78% D .95% D 1.02% D
net assets after expense
reductions
Ratio of net investment .32% .52% .81% 1.10% .25%
income to average net assets
Portfolio turnover rate 38% 49% 51% 206% 182%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE FORMER ONE TIME SALES CHARGE.
C NET INVESTMENT INCOME 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1999
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
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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
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. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, foreign currency transactions and
losses deferred due to wash sales. The fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part
of the dividends paid deduction for income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 $10,408,613,000 and $7,368,421,000, 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
received a sales charge of up to 3% for selling shares of the fund.
Effective September 30, 1998, the fund's 3% sales charge was
eliminated. Prior to October 12, 1990, 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 $743,000 all
of which was retained, and deferred sales charges of $21,000,
respectively, on redemption 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 .22% 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 $1,237,000 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 $2,206,000 under this arrangement.
In addition, the fund has entered into an arrangement with its
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 transfer agent fees were reduced by $1,057,000
under this arrangement.
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, 1999, 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,
1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 8, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity Blue Chip Growth Fund voted to pay
on September 7, 1999, to shareholders of record at the opening of
business on September 3, 1999, a distribution of $2.07 per share
derived from capital gains realized from sales of portfolio securities
and a dividend of $.14 per share from net investment income.
A total of 82% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 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.
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
John McDowell, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy 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-0999 83746
1.536058.102
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Aggressive Growth Fund
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund (registered trademark)
Contrafund(registered trademark)II
Disciplined Equity Fund
Dividend Growth Fund
Export and Multinational Fund
Fidelity FiftySM
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium Fund(registered trademark)
OTC Portfolio
Retirement Growth Fund
Small Cap Selector
Small Cap Stock Fund
Stock Selector
Tax Managed Stock Fund
TechnoQuant(registered trademark) 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)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY
DIVIDEND GROWTH
FUND
ANNUAL REPORT
JULY 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 17 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 21 Notes to the financial
statements.
REPORT OF INDEPENDENT 25 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 26
OF SPECIAL NOTE 27
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
In July, the steadily growing U.S. economy again sparked fears of
inflation and posed the threat of another Federal Reserve Board
interest-rate hike at its August policy meeting. Despite rising
profits and continued productivity gains at many U.S. corporations,
stock and bond markets sold off sharply toward the month's end.
Renewed jitters about inflation were sparked by a government report
that showed a larger-than-expected increase in the employment-cost
index.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY DIVIDEND GROWTH 21.90% 261.72% 327.80%
S&P 500 (registered trademark) 20.20% 220.67% 247.62%
Growth Funds Average 18.63% 167.08% 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 market
capitalization-weighted index of common stocks. To measure how the
fund's performance stacked up against its peers, you can compare it to
the growth funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Inc. The past one year
average represents a peer group of 1,067 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, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
FIDELITY DIVIDEND GROWTH 21.90% 29.32% 26.12%
S&P 500 20.20% 26.25% 22.01%
Growth Funds Average 18.63% 21.27% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$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
1998/08/31 30488.61 24738.13
1998/09/30 33019.39 26322.86
1998/10/31 35516.54 28463.96
1998/11/30 37158.69 30189.16
1998/12/31 39469.17 31928.66
1999/01/31 40018.69 33263.92
1999/02/28 39455.43 32230.07
1999/03/31 41502.39 33519.60
1999/04/30 43013.56 34817.81
1999/05/31 41955.74 33995.77
1999/06/30 44181.29 35882.53
1999/07/30 42780.02 34762.28
IMATRL PRASUN SHR__CHT 19990731 19990812 115925 R00000000000079
$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, 1999, the value of the
investment would have grown to $42,780 - a 327.80% 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 $34,762 - a
247.62% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Federal Reserve Board monetary
policy, Internet stock mania and
Y2K concerns all played key roles
in the direction of the U.S. equity
market for the 12 months that ended
July 31, 1999. As we entered the
period, investors were still leery of
troubled overseas markets and
overall liquidity. The Fed then made
three successive interest-rate cuts
in the fall and confidence was
restored. The second quarter of 1999
saw more sharing of the market's
gains by smaller stocks, many of
which rely on borrowed money to
fund their growth. The Russell 2000
Index - a measure of small-stock
performance - handily outpaced
the large-cap oriented Standard &
Poor's 500SM Index during that time.
For the entire 12 months, though, the
S&P 500(registered trademark)
returned 20.20%, while the Russell
2000 could only muster 7.41%.
The Dow Jones Industrial Average -
an index of 30 blue-chip stocks -
returned 21.88%. Internet stocks
continued to attract investors, with
many stock valuations peaking
around April, then cooling off some
as the period ended. Technology
stocks prospered - the tech-heavy
NASDAQ index returned a tidy
41.42% during the period - as
did telecommunications stocks with
Internet exposure. Y2K concerns
mounted toward the end of the
period, as many investors
anticipated a spending freeze within
the technology sector.
(photograph of Charles Mangum)
An interview with Charles Mangum, Portfolio Manager of Fidelity
Dividend Growth Fund
Q. HOW DID THE FUND PERFORM, CHARLES?
A. Relatively well. For the 12 months that ended July 31, 1999, the
fund returned 21.90%. This topped the Standard & Poor's 500 Index,
which returned 20.20% during the same period. The fund also outpaced
the growth funds average - as tracked by Lipper Inc. - which returned
18.63%.
Q. CAN YOU HIGHLIGHT SOME OF THE MAIN FACTORS THAT CONTRIBUTED TO
PERFORMANCE?
A. While the fund managed to top the S&P 500's return for the period,
the overall market environment wasn't conducive to ideal returns for
stable-growth funds such as Dividend Growth. Instead, investors -
perhaps spurred on by a steady economy - favored stocks with more
inherent volatility. Since I typically focus on stable growers, or
those companies that have shown the ability to generate sustainable
earnings growth over time, this sentiment change hurt performance
somewhat. My industry selection strategies - particularly my decision
to underweight technology stocks relative to the S&P 500 - also proved
harmful to performance. Despite these factors, the fund was able to
generate a 20%-plus return due mainly to the strong performance of a
core group of individual holdings.
Q. WHY DID YOU CHOOSE TO MINIMIZE THE FUND'S EXPOSURE TO TECHNOLOGY
STOCKS?
A. The big issue I had with the technology sector through much of the
period was that the stocks had become extraordinarily expensive. I
felt the market was pricing in very high growth rates and low earnings
volatility in assessing these valuations, and I found that scenario
hard to believe. Technology-company earnings are and always will be
subject to a fairly high level of volatility due to inventory cycles
and other types of corrections. I also felt that some areas of
technology - namely companies specializing in computer hardware
equipment - would feel the brunt of an industry-wide sales slowdown as
Y2K approached.
Q. HEALTH CARE STOCKS ENDURED A VERY BUMPY PERIOD, YET THE FUND'S
EXPOSURE TO THEM - AROUND 19% OF INVESTMENTS AT THE END OF THE PERIOD
- - WAS SIGNIFICANT. ARE YOU ANTICIPATING A TURNAROUND?
A. I am. In the fall of 1998 and early 1999, I scaled back the fund's
health-care investments relative to the index. Stock valuations - I
felt - were stretched, and it seemed like the number of exciting new
product announcements was dwindling. Pharmaceutical stocks, long a
staple for stable-growth investors, were also hurt by investors'
interest in more volatile investments during the period. In May 1999,
drug-stock valuations corrected substantially and the stocks began to
look attractive to me again. Additionally, as we progressed through
the period, several key indicators suggested that the economy would
slow in the future. Drug stocks typically perform quite well during an
economic slowdown. The fund's sizable holdings in both Schering-Plough
and Eli Lilly reflected my renewed optimism in drug stocks.
Q. DOES THE FUND HOLD ANY OTHER INVESTMENTS THAT COULD BENEFIT SHOULD
THE ECONOMY SLOW?
A. Two areas I've focused on over the past few months are supermarket
chains and defense stocks. When the economy is slow, people generally
don't buy fewer groceries. The fund held positions in the country's
three biggest chains - Safeway, Kroger and Albertson's - at the end of
the period. On the defense side, we've seen a dramatic pickup in
government-funded spending and I've increased the fund's exposure to
names such as Raytheon.
Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHICH DIDN'T PAN OUT AS YOU
HAD HOPED?
A. The fund received a nice boost from its energy service investments
when the price of oil rebounded earlier this year. Oil prices per
barrel jumped from a low of around $12 in December to approximately
$22 at the end of the period, and the fund's stakes in ENSCO and Mobil
performed well. Texas Instruments prospered due to its digital signal
processor (DSP) expertise. DSPs are the working brains of much of
today's digital gadgetry and that area has been growing nicely.
Disappointments, meanwhile, included retailer Saks as well as
government mortgage lender Fannie Mae. Saks merged with Proffitts
during the period and the slow integration of the two companies hurt
performance. Fannie Mae - the fund's largest individual position at
the close of the period - stumbled due to the switch in sentiment from
stable-growth names to more volatile investments.
Q. WHAT'S YOUR OUTLOOK?
A. A little bit of uncertainty could help stable-growth stocks fall
back into favor. In terms of the fund itself, I'm very happy with the
way the portfolio is positioned. I certainly don't profess to know
which way the market will turn, but I feel like I own a number of
names with very strong upside potential.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: to 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, 1999,
more than $14.2 billion
MANAGER: Charles Mangum,
since 1997; joined Fidelity
in 1990
CHARLES MANGUM TALKS
ABOUT HIS INVESTING STYLE:
"While the market environment
during the past period hasn't
rewarded many stable-growth
companies, it does nonetheless
provide an effective backdrop for
explaining my investment
approach.
"First and foremost, I believe in
showing patience. Finance stocks
- - which represented around 18%
of the fund's investments at the end
of the period - provide a prime
example. Many of the fund's finance
holdings - including Fannie Mae,
Comerica and Freddie Mac -
suffered dismal performance
periods but still reside in the
fund's top-20 list of holdings.
That's because I believe in each of
these companies and prefer to
take a long-term view of their
prospects. Each of these
companies has shown consistency
in generating solid earnings growth
over time, is capable of paying out
steady dividends and - in my
opinion - is well run. I don't
believe in turning my back on
companies such as these based on
short-term market swings. In my
experience, companies that have
good earnings-growth track
records over prolonged periods of
time are going to win out in the
end.
"I also try to avoid sector rotation,
or simply jumping headfirst into an
industry that may be performing well
at the time. While this can result in
eye-catching returns on an
occasional basis, too much rotation
can be a losing proposition over
the long haul."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF JULY 31,
1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
Fannie Mae 5.3 2.6
Schering-Plough Corp. 5.0 2.0
Cardinal Health, Inc. 3.7 1.0
Abbott Laboratories 3.4 0.0
Microsoft Corp. 3.3 3.7
General Electric Co. 3.2 4.6
Lilly (Eli) & Co. 2.4 0.8
Mobil Corp. 2.2 1.6
Philip Morris Companies, Inc. 2.2 1.7
Johnson & Johnson 2.0 4.0
TOP FIVE MARKET SECTORS AS OF
JULY 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
HEALTH 19.2 15.2
FINANCE 17.7 19.2
TECHNOLOGY 12.2 11.2
UTILITIES 8.1 8.4
RETAIL & WHOLESALE 7.8 5.7
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF JULY 31, 1999 * AS OF JANUARY 31, 1999 **
Stocks 96.7% Stocks 96.8%
Short-term Investments 3.3% Short-term Investments 3.2%
* FOREIGN INVESTMENTS 0.5% ** FOREIGN INVESTMENTS 4.0%
Row: 1, Col: 1, Value: 96.7 Row: 1, Col: 1, Value: 96.8
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 3.3 Row: 1, Col: 8, Value: 3.2
</TABLE>
INVESTMENTS JULY 31, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 96.7%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 3.7%
AEROSPACE & DEFENSE - 0.9%
Cordant Technologies, Inc. (c) 2,908,310 $ 130,329
DEFENSE ELECTRONICS - 1.6%
Litton Industries, Inc. (a) 758,200 51,795
Raytheon Co. Class A 2,401,600 166,911
218,706
SHIP BUILDING & REPAIR - 1.2%
General Dynamics Corp. 2,363,450 159,090
Newport News Shipbuilding, 375,000 12,070
Inc.
171,160
TOTAL AEROSPACE & DEFENSE 520,195
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.4%
E.I. du Pont de Nemours and 790,000 56,929
Co.
METALS & MINING - 0.1%
Alcoa, Inc. 288,200 17,256
PACKAGING & CONTAINERS - 0.0%
Owens-Illinois, Inc. (a) 10,100 252
TOTAL BASIC INDUSTRIES 74,437
CONSTRUCTION & REAL ESTATE -
0.9%
BUILDING MATERIALS - 0.5%
Masco Corp. 2,569,000 76,428
REAL ESTATE - 0.1%
Stewart Enterprises, Inc. 1,000,000 12,438
Class A
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Apartment Investment & 300,000 12,244
Management Co. Class A
Glenborough Realty Trust, 1,740,500 30,459
Inc. (c)
42,703
TOTAL CONSTRUCTION & REAL 131,569
ESTATE
DURABLES - 1.0%
AUTOS, TIRES, & ACCESSORIES -
0.1%
Ford Motor Co. 300,000 14,588
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
DURABLES - CONTINUED
HOME FURNISHINGS - 0.9%
Newell Rubbermaid, Inc. 3,029,272 $ 131,016
TOTAL DURABLES 145,604
ENERGY - 6.2%
ENERGY SERVICES - 1.8%
ENSCO International, Inc. 4,740,220 96,878
Halliburton Co. 2,130,400 98,265
Smith International, Inc. (a) 1,477,400 64,082
259,225
OIL & GAS - 4.4%
Chevron Corp. 611,200 55,772
Cooper Cameron Corp. (a) 1,718,300 62,288
Exxon Corp. 1,200,000 95,250
Mobil Corp. 3,032,400 310,063
Santa Fe Snyder Corp. (a)(c) 11,384,515 105,307
628,680
TOTAL ENERGY 887,905
FINANCE - 17.7%
BANKS - 3.9%
Chase Manhattan Corp. 1,154,500 88,752
Comerica, Inc. 5,057,145 280,672
Mellon Bank Corp. 127,700 4,310
U.S. Bancorp 500,000 15,563
Wells Fargo & Co. 4,074,000 158,886
548,183
CREDIT & OTHER FINANCE - 2.9%
Associates First Capital 6,419,674 245,954
Corp. Class A
Fleet Financial Group, Inc. 1,884,600 76,326
Household International, Inc. 2,253,600 96,764
419,044
FEDERAL SPONSORED CREDIT - 7.1%
Fannie Mae 10,900,500 752,130
Freddie Mac 4,581,400 262,858
1,014,988
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
INSURANCE - 3.2%
AFLAC, Inc. 823,600 $ 38,194
Allmerica Financial Corp. 1,077,200 63,757
American International Group, 898,757 104,368
Inc.
Hartford Financial Services 866,500 46,791
Group, Inc.
Hartford Life, Inc. Class A 1,028,800 52,083
MBIA, Inc. 142,300 8,147
MGIC Investment Corp. 540,400 26,648
Travelers Property Casualty 2,819,300 111,362
Corp. Class A
451,350
SAVINGS & LOANS - 0.3%
Charter One Financial, Inc. 1,879,052 48,620
SECURITIES INDUSTRY - 0.3%
Cendant Corp. (a) 99,874 2,010
Morgan Stanley, Dean Witter & 455,300 41,034
Co.
43,044
TOTAL FINANCE 2,525,229
HEALTH - 19.2%
DRUGS & PHARMACEUTICALS - 9.6%
American Home Products Corp. 543,200 27,703
Bristol-Myers Squibb Co. 1,564,400 104,033
Lilly (Eli) & Co. 5,243,200 344,085
Merck & Co., Inc. 2,341,500 158,490
Schering-Plough Corp. 14,627,300 716,738
Warner-Lambert Co. 200,000 13,200
1,364,249
MEDICAL EQUIPMENT & SUPPLIES
- - 9.6%
Abbott Laboratories 11,227,600 482,085
Becton, Dickinson & Co. 2,654,614 72,836
Cardinal Health, Inc. 7,673,780 523,735
Johnson & Johnson 3,119,500 287,384
1,366,040
TOTAL HEALTH 2,730,289
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
INDUSTRIAL MACHINERY &
EQUIPMENT - 4.5%
ELECTRICAL EQUIPMENT - 4.3%
Emerson Electric Co. 400,000 $ 23,875
General Electric Co. 4,224,400 460,460
Honeywell, Inc. 590,000 70,689
Koninklijke Philips 561,028 56,734
Electronics NV (NY shares)
611,758
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Caterpillar, Inc. 384,700 22,553
Ingersoll-Rand Co. 218,800 14,072
36,625
TOTAL INDUSTRIAL MACHINERY & 648,383
EQUIPMENT
MEDIA & LEISURE - 5.4%
BROADCASTING - 2.9%
CBS Corp. (a) 2,730,000 119,949
Clear Channel Communications, 2,314,300 160,988
Inc. (a)
Time Warner, Inc. 1,850,256 133,218
414,155
ENTERTAINMENT - 0.1%
Viacom, Inc. Class B 270,800 11,357
(non-vtg.) (a)
PUBLISHING - 0.3%
McGraw-Hill Companies, Inc. 788,200 40,100
RESTAURANTS - 2.1%
McDonald's Corp. 2,925,500 121,957
Tricon Global Restaurants, 4,339,600 176,567
Inc. (a)
298,524
TOTAL MEDIA & LEISURE 764,136
NONDURABLES - 6.4%
BEVERAGES - 0.5%
PepsiCo, Inc. 1,475,000 57,709
Seagram Co. Ltd. 315,600 16,290
73,999
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONDURABLES - CONTINUED
FOODS - 1.2%
Quaker Oats Co. 2,266,000 $ 154,230
Tootsie Roll Industries, Inc. 577,957 20,012
174,242
HOUSEHOLD PRODUCTS - 2.5%
Alberto-Culver Co. Class A (c) 4,336,500 94,048
Clorox Co. 715,363 80,121
Gillette Co. 1,423,100 62,350
Procter & Gamble Co. 1,325,800 119,985
356,504
TOBACCO - 2.2%
Philip Morris Companies, Inc. 8,323,800 310,062
TOTAL NONDURABLES 914,807
RETAIL & WHOLESALE - 7.8%
APPAREL STORES - 0.1%
Gap, Inc. 210,637 9,847
GENERAL MERCHANDISE STORES -
3.6%
Dayton Hudson Corp. 3,057,500 197,782
Federated Department Stores, 2,337,600 119,948
Inc. (a)
Saks, Inc. (a) 5,589,954 128,569
Wal-Mart Stores, Inc. 1,770,400 74,799
521,098
GROCERY STORES - 2.1%
Albertson's, Inc. 1,689,400 83,942
Kroger Co. (a) 3,247,800 85,458
Safeway, Inc. 2,344,300 126,299
295,699
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.0%
Home Depot, Inc. 2,783,700 177,635
Lowe's Companies, Inc. 1,292,000 68,153
Staples, Inc. (a) 1,100,000 31,763
Tweeter Home Entertainment 376,000 12,526
Group, Inc. (a)
290,077
TOTAL RETAIL & WHOLESALE 1,116,721
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
SERVICES - 1.9%
ADVERTISING - 1.8%
Omnicom Group, Inc. 3,636,300 $ 257,723
SERVICES - 0.1%
Forrester Research, Inc. 509,100 15,718
(a)(c)
TOTAL SERVICES 273,441
TECHNOLOGY - 12.2%
COMMUNICATIONS EQUIPMENT - 2.2%
Cisco Systems, Inc. (a) 2,796,600 173,739
Lucent Technologies, Inc. 2,251,200 146,469
320,208
COMPUTER SERVICES & SOFTWARE
- - 6.1%
Automatic Data Processing, 1,039,200 41,633
Inc.
Computer Sciences Corp. (a) 589,600 37,956
DST Systems, Inc. (a) 1,586,900 105,330
Electronic Data Systems Corp. 357,100 21,538
International Business 1,500,000 188,531
Machines Corp.
Microsoft Corp. (a) 5,524,200 474,045
869,033
COMPUTERS & OFFICE EQUIPMENT
- - 1.7%
Hewlett-Packard Co. 1,239,700 129,781
Pitney Bowes, Inc. 530,800 33,772
Xerox Corp. 1,534,800 74,822
238,375
ELECTRONIC INSTRUMENTS - 0.2%
DBT Online, Inc. (a) 768,300 23,193
ELECTRONICS - 2.0%
Intel Corp. 1,979,800 136,606
Motorola, Inc. 550,000 50,188
Texas Instruments, Inc. 681,300 98,107
284,901
TOTAL TECHNOLOGY 1,735,710
TRANSPORTATION - 1.2%
RAILROADS - 1.2%
Burlington Northern Santa Fe 5,192,200 166,150
Corp.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - 8.1%
ELECTRIC UTILITY - 2.0%
AES Corp. (a) 982,200 $ 58,932
CMS Energy Corp. 1,828,300 68,333
Entergy Corp. 1,753,000 53,138
Illinova Corp. 348,300 11,450
IPALCO Enterprises, Inc. 1,416,200 30,360
PG&E Corp. 2,060,900 65,176
287,389
GAS - 0.1%
Dynegy, Inc. 201,300 4,831
TELEPHONE SERVICES - 6.0%
Ameritech Corp. 1,882,400 137,886
AT&T Corp. 2,431,781 126,301
Bell Atlantic Corp. 2,348,200 149,698
MCI WorldCom, Inc. (a) 2,364,142 195,042
SBC Communications, Inc. 4,327,112 247,457
856,384
TOTAL UTILITIES 1,148,604
TOTAL COMMON STOCKS 13,783,180
(Cost $11,801,650)
CASH EQUIVALENTS - 3.3%
Taxable Central Cash Fund (b) 468,278,772 468,279
(Cost $468,279)
TOTAL INVESTMENT IN $ 14,251,459
SECURITIES - 100%
(Cost $12,269,929)
</TABLE>
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.06%. 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
INCOME TAX INFORMATION
At July 31, 1999, the aggregate cost of investment securities for
income tax purposes was $12,303,625,000. Net unrealized appreciation
aggregated $1,947,834,000, of which $2,343,431,000 related to
appreciated investment securities and $395,597,000 related to
depreciated investment securities.
The fund hereby designates approximately $279,657,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) JULY 31, 1999
ASSETS
Investment in securities, at $ 14,251,459
value (cost $12,269,929) -
See accompanying schedule
Receivable for investments 169,245
sold
Receivable for fund shares 28,790
sold
Dividends receivable 13,276
Interest receivable 1,938
Other receivables 16
TOTAL ASSETS 14,464,724
LIABILITIES
Payable for investments $ 145,830
purchased
Payable for fund shares 24,839
redeemed
Accrued management fee 7,845
Other payables and accrued 2,712
expenses
TOTAL LIABILITIES 181,226
NET ASSETS $ 14,283,498
Net Assets consist of:
Paid in capital $ 11,183,733
Undistributed net investment 45,206
income
Accumulated undistributed net 1,073,029
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,981,530
(depreciation) on investments
NET ASSETS, for 458,655 $ 14,283,498
shares outstanding
NET ASSET VALUE, offering $31.14
price and redemption price
per share ($14,283,498
(divided by) 458,655 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED JULY 31, 1999
INVESTMENT INCOME $ 134,182
Dividends (including $3,094
received from affiliated
issuers)
Interest 19,739
TOTAL INCOME 153,921
EXPENSES
Management fee Basic fee $ 63,271
Performance adjustment 6,465
Transfer agent fees 21,370
Accounting fees and expenses 926
Non-interested trustees' 34
compensation
Custodian fees and expenses 227
Registration fees 2,161
Audit 62
Legal 22
Miscellaneous 17
Total expenses before 94,555
reductions
Expense reductions (3,623) 90,932
NET INVESTMENT INCOME 62,989
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 1,195,032
(including realized loss of
$91 on sales of investments
in affiliated issuers)
Foreign currency transactions 10 1,195,042
Change in net unrealized 801,977
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 1,997,019
NET INCREASE (DECREASE) IN $ 2,060,008
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1999 YEAR ENDED JULY 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 62,989 $ 34,229
income
Net realized gain (loss) 1,195,042 743,965
Change in net unrealized 801,977 341,085
appreciation (depreciation)
NET INCREASE (DECREASE) IN 2,060,008 1,119,279
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (38,407) (26,753)
From net investment income
From net realized gain (597,854) (391,699)
TOTAL DISTRIBUTIONS (636,261) (418,452)
Share transactions Net 9,445,534 4,628,616
proceeds from sales of shares
Reinvestment of distributions 617,315 412,992
Cost of shares redeemed (4,574,330) (2,738,785)
NET INCREASE (DECREASE) IN 5,488,519 2,302,823
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 6,912,266 3,003,650
IN NET ASSETS
NET ASSETS
Beginning of period 7,371,232 4,367,582
End of period (including $ 14,283,498 $ 7,371,232
undistributed net investment
income of $45,206 and
$25,375, respectively)
OTHER INFORMATION
Shares
Sold 331,300 177,628
Issued in reinvestment of 26,258 17,960
distributions
Redeemed (161,099) (107,573)
Net increase (decrease) 196,459 88,015
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 28.11 $ 25.07 $ 17.24 $ 16.04 $ 11.68
of period
Income from Investment
Operations
Net investment income .17 B .17 B .20 B .11 .05
Net realized and unrealized 5.18 5.21 8.09 2.25 4.47
gain (loss)
Total from investment 5.35 5.38 8.29 2.36 4.52
operations
Less Distributions
From net investment income (.13) (.15) (.09) (.09) (.01)
From net realized gain (2.19) (2.19) (.37) (1.07) (.15)
Total distributions (2.32) (2.34) (.46) (1.16) (.16)
Net asset value, end of $ 31.14 $ 28.11 $ 25.07 $ 17.24 $ 16.04
period
TOTAL RETURNA 21.90% 23.81% 49.21% 15.44% 39.14%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 14,283 $ 7,371 $ 4,368 $ 1,220 $ 465
(in millions)
Ratio of expenses to average .87% .89% .95% 1.02% 1.21%
net assets
Ratio of expenses to average .84% C .86% C .92% C .99% C 1.19% C
net assets after expense
reductions
Ratio of net investment .58% .64% .99% .86% .78%
income to average net assets
Portfolio turnover rate 104% 109% 141% 129% 162%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Dividend Growth Fund (the fund) is a fund of Fidelity
Securities Fund (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended, 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
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.
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 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.
2. OPERATING POLICIES - CONTINUED
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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $15,530,788,000 and $10,827,907,000, 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 .64% 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $2,102,000 for the
period.
5. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which the loans
were outstanding amounted to $19,473,000. The weighted average
interest rate was 5.78%. Interest earned from the interfund lending
program amounted to $13,000 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 $3,342,000 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 $2,000 and $279,000, 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS WITH
AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE
Alberto-Culver Co. Class A $ 20,626 $ - $ 1,079 $ 94,048
Cordant Technologies, Inc. 36,213 1,740 585 130,329
Forrester Research, Inc. 1,979 - - 15,718
Glenborough Realty Trust, Inc. 2,583 - 1,430 30,459
Santa Fe Snyder Corp. 32,957 - - 105,307
TOTALS $ 94,358 $ 1,740 $ 3,094 $ 375,861
</TABLE>
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, 1999, 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,
1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 8, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity Dividend Growth Fund voted to pay on
September 7, 1999, to shareholders of record at the opening of
business on September 3, 1999, a distribution of $2.14 per share
derived from capital gains realized from sales of portfolio securities
and a dividend of $.09 per share from net investment income.
A total of 19% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 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 75039-5517
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 75039-5517
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
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
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
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
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
Matthew N. Karstetter, Deputy 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-0999 83752
1.536090.102
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
Aggressive Growth Fund
Blue Chip Growth Fund
Capital Appreciation Fund
Contrafund(registered trademark)
Contrafund(registered trademark)II
Disciplined Equity Fund
Dividend Growth Fund
Export and Multinational Fund
Fidelity FiftySM
Growth Company Fund
Large Cap Stock Fund
Low-Priced Stock Fund
Magellan(registered trademark) Fund
Mid-Cap Stock Fund
New Millennium Fund(registered trademark)
OTC Portfolio
Retirement Growth Fund
Small Cap Selector
Small Cap Stock Fund
Stock Selector
Tax Managed Stock Fund
TechnoQuant (registered trademark) 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)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY
GROWTH & INCOME
PORTFOLIO
ANNUAL REPORT
JULY 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 22 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 26 Notes to the financial
statements.
REPORT OF INDEPENDENT 30 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 31
OF SPECIAL NOTE 32
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY FUND, INCLUDING CHARGES AND
EXPENSES, CALL 1-800-544-8888 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(photo_of_Edward_C_Johnson_3d)
DEAR SHAREHOLDER:
In July, the steadily growing U.S. economy again sparked fears of
inflation and posed the threat of another Federal Reserve Board
interest-rate hike at its August policy meeting. Despite rising
profits and continued productivity gains at many U.S. corporations,
stock and bond markets sold off sharply toward the month's end.
Renewed jitters about inflation were sparked by a government report
that showed a larger-than-expected increase in the employment-cost
index.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY GROWTH & INCOME 15.20% 185.47% 416.42%
S&P 500 (registered trademark) 20.20% 220.67% 396.75%
Growth & Income Funds Average 14.11% 155.10% 278.51%
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 market capitalization-weighted index
of common stocks. To measure how the fund's performance stacked up
against its peers, you can compare it to the growth and income funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past one year average represents
a peer group of 841 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, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY GROWTH & INCOME 15.20% 23.34% 17.84%
S&P 500 20.20% 26.25% 17.38%
Growth & Income Funds Average 14.11% 20.39% 14.04%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
Growth & Income S&P 500
00027 SP001
1989/07/31 10000.00 10000.00
1989/08/31 10215.52 10196.00
1989/09/30 10160.66 10154.20
1989/10/31 9839.62 9918.62
1989/11/30 10002.96 10120.96
1989/12/31 10195.86 10363.86
1990/01/31 9661.42 9668.45
1990/02/28 9809.88 9793.17
1990/03/31 9982.18 10052.69
1990/04/30 9724.69 9801.37
1990/05/31 10443.27 10757.01
1990/06/30 10394.73 10683.86
1990/07/31 10322.30 10649.67
1990/08/31 9440.98 9686.94
1990/09/30 8896.59 9215.19
1990/10/31 8878.05 9175.56
1990/11/30 9316.71 9768.30
1990/12/31 9502.90 10040.84
1991/01/31 10370.78 10478.62
1991/02/28 11244.89 11227.84
1991/03/31 11864.31 11499.55
1991/04/30 12027.70 11527.15
1991/05/31 12718.94 12025.12
1991/06/30 11855.09 11474.37
1991/07/31 12581.43 12009.08
1991/08/31 12947.76 12293.69
1991/09/30 12833.55 12088.39
1991/10/31 13063.08 12250.37
1991/11/30 12381.07 11756.68
1991/12/31 13479.08 13101.65
1992/01/31 13801.42 12857.96
1992/02/29 14104.02 13025.11
1992/03/31 13814.33 12771.12
1992/04/30 14124.98 13146.59
1992/05/31 14177.86 13211.01
1992/06/30 13899.24 13014.17
1992/07/31 14185.07 13546.45
1992/08/31 14038.83 13268.74
1992/09/30 14182.63 13425.32
1992/10/31 14294.95 13472.30
1992/11/30 14736.75 13931.71
1992/12/31 15034.09 14103.07
1993/01/31 15453.61 14221.54
1993/02/28 15629.05 14414.95
1993/03/31 16202.66 14719.10
1993/04/30 16179.65 14362.90
1993/05/31 16517.20 14747.83
1993/06/30 16771.53 14790.60
1993/07/31 16894.96 14731.43
1993/08/31 17558.42 15289.75
1993/09/30 17654.00 15172.02
1993/10/31 17851.56 15486.08
1993/11/30 17448.53 15338.97
1993/12/31 17970.15 15524.57
1994/01/31 18649.48 16052.40
1994/02/28 18293.64 15617.38
1994/03/31 17488.89 14936.47
1994/04/30 17838.18 15127.65
1994/05/31 17895.04 15375.75
1994/06/30 17584.45 14999.04
1994/07/31 18090.36 15491.01
1994/08/31 18783.95 16126.14
1994/09/30 18565.86 15731.05
1994/10/31 18787.09 16085.00
1994/11/30 18089.38 15499.18
1994/12/31 18377.55 15729.04
1995/01/31 18595.40 16136.89
1995/02/28 19144.37 16765.74
1995/03/31 19746.84 17260.50
1995/04/30 20298.28 17768.82
1995/05/31 20875.98 18479.04
1995/06/30 21252.77 18908.31
1995/07/31 22061.39 19535.31
1995/08/31 22228.39 19584.34
1995/09/30 23122.17 20410.80
1995/10/31 23013.87 20337.94
1995/11/30 24096.88 21230.77
1995/12/31 24879.94 21639.68
1996/01/31 25707.74 22376.29
1996/02/29 25992.87 22583.72
1996/03/31 26214.01 22801.20
1996/04/30 26481.69 23137.29
1996/05/31 26989.35 23734.00
1996/06/30 27155.94 23824.43
1996/07/31 26118.60 22771.86
1996/08/31 26526.13 23252.12
1996/09/30 27926.30 24560.75
1996/10/31 28369.58 25238.14
1996/11/30 30161.95 27145.89
1996/12/31 29862.00 26608.13
1997/01/31 31135.00 28270.60
1997/02/28 31484.83 28492.25
1997/03/31 30197.72 27321.50
1997/04/30 31806.05 28952.59
1997/05/31 33521.61 30715.23
1997/06/30 35256.50 32091.27
1997/07/31 37652.57 34644.77
1997/08/31 35608.58 32703.97
1997/09/30 37520.19 34495.17
1997/10/31 36520.59 33343.03
1997/11/30 37964.45 34886.48
1997/12/31 38872.50 35485.48
1998/01/31 39474.46 35877.95
1998/02/28 41923.12 38465.47
1998/03/31 43803.62 40435.28
1998/04/30 43875.20 40842.06
1998/05/31 43363.95 40139.99
1998/06/30 45115.17 41770.47
1998/07/31 44828.13 41325.62
1998/08/31 38728.72 35350.76
1998/09/30 41383.49 37615.33
1998/10/31 44448.14 40674.96
1998/11/30 47041.31 43140.27
1998/12/31 49876.68 45626.01
1999/01/31 50518.63 47534.09
1999/02/28 49572.02 46056.73
1999/03/31 50843.74 47899.46
1999/04/30 52108.30 49754.61
1999/05/31 50778.34 48579.90
1999/06/30 53247.78 51276.09
1999/07/30 51641.82 49675.25
IMATRL PRASUN SHR__CHT 19990731 19990813 101727 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Growth & Income Portfolio on July 31, 1989. As
the chart shows, by July 31, 1999, the value of the investment would
have grown to $51,642 - a 416.42% increase on the initial investment.
For comparison, look at how the Standard & Poor's 500 Index did over
the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 would have grown to $49,675 - a 396.75% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Federal Reserve Board policy,
Internet stock mania and Y2K
concerns all played key roles in
the direction of the U.S. equity
market for the 12 months that ended
July 31, 1999. As we entered the
period, investors were still leery of
troubled overseas markets and
overall liquidity. The Fed then made
three successive interest-rate cuts
in the fall and confidence was
restored. The second quarter of 1999
saw more sharing of the market's
gains by smaller stocks, many of
which rely on borrowed money to
fund their growth. The Russell 2000
Index - a measure of small-stock
performance - handily outpaced
the large-cap oriented Standard &
Poor's 500 Index during that time.
For the entire 12 months, though, the
S&P 500 returned 20.20%, while the
Russell 2000 could only muster
4.89%. The Dow Jones Industrial
Average - an index of 30 blue-chip
stocks - returned 14.70%. Internet
stocks continued to attract investors,
with many stock valuations peaking
around April, then cooling off some
as the period ended. Technology
stocks prospered - the tech-heavy
NASDAQ index returned a tidy
41.42% during the period - as did
telecommunications stocks with
Internet exposure. Y2K concerns
mounted toward the end of the
period, as many investors
anticipated a spending freeze within
the technology sector.
(photograph of Steven Kaye)
An interview with Steven Kaye, Portfolio Manager of Fidelity Growth &
Income Portfolio
Q. HOW DID THE FUND PERFORM, STEVE?
A. Like the stock market itself, the fund had its share of ups and
downs over the past 12 months. For the year ending July 31, 1999, the
fund had a double-digit return of 15.20%. This outpaced the growth and
income funds average, as tracked by Lipper Inc., which returned 14.11%
during that time frame. However, the fund's performance trailed that
of its benchmark, the Standard & Poor's 500 Index, which returned
20.20% over the past 12 months.
Q. WHAT WERE SOME OF THE FACTORS THAT HELPED THE FUND OUTPERFORM ITS
PEERS, YET CAUSED IT TO LAG ITS BENCHMARK?
A. Relative to its peers, the fund benefited from an overweighting in
large-capitalization technology stocks, particularly within the
computer services and software fields. Significant positions in
Microsoft and communications equipment company Cisco Systems were
especially beneficial to performance. Conversely, the fund's
underweighting in technology relative to the S&P 500 index was the
primary drawback to its performance compared to the benchmark. I just
didn't own enough large-cap technology and Internet shares, which
accounted for approximately 50% of the S&P 500's total return over the
past one-year period.
Q. GIVEN THE STRONG RUN OF TECHNOLOGY STOCKS - PARTICULARLY INTERNET
ISSUES - WHAT CONSIDERATIONS AFFECTED YOUR DECISION TO UNDERWEIGHT
THIS SECTOR?
A. It came down to a combination of Y2K concerns, valuations, earnings
and fundamentals. I anticipated that Year 2000 concerns would cause a
slowdown in tech spending, which did not occur. Also, technology
valuations in general were stratospheric and, in my mind, their
earnings did not justify the high prices of these stocks. Take America
Online, for example. At one point during the past year, it was trading
at 250 times earnings. Historically, it's a stretch to believe that
kind of bet will pay off in the long run. As much as I believe in the
power and the potential of the Internet, I cannot abandon my focus on
companies with strong, long-term fundamentals and reasonable
valuations to chase the latest hot trend. I did, however, have some
exposure to the Internet through investments in more established
earnings growers, such as MCI WorldCom, which was a top contributor to
fund performance.
Q. WHAT OTHER STOCKS WOULD YOU CONSIDER TO BE STANDOUTS DURING THE
PERIOD?
A. As I mentioned earlier, Microsoft performed exceptionally well. A
surge in PC demand helped Microsoft's traditional software business,
and the company continued to beat earnings estimates. General
Electric, the fund's largest holding, reported double-digit earnings
growth. Its internationally diversified business was well-positioned
to take advantage of the improved global economy. Another company that
gave the fund exposure to the Internet was Cisco Systems. Cisco is
considered the leader in the switching business - a business that's
becoming synonymous with Internet-related industries - and its
earnings exceeded expectations. Also, American Express performed well
as the financial services industry recovered from last fall's global
economic crisis. The company's stock was also rewarded for its
increased use of the Internet to deliver new products and services to
customers.
Q. WHICH STOCKS DETRACTED FROM THE FUND'S OVERALL PERFORMANCE?
A. The health care industry in general during 1999 has been a drag on
the fund's return. The big pharmaceutical stocks that were so
successful in 1998, such as Merck, Pfizer and Eli Lilly, have fallen
victim so far this year to high valuations and fears over potential
governmental price controls. Health Management Associates, an operator
of hospitals in rural communities, was hurt along with the rest of the
hospital sector by cutbacks in Medicare reimbursements. Tobacco giant
Philip Morris, hampered by its ongoing struggle with litigation, was
the largest single detractor from performance during the period.
Q. GIVEN THE RISING INTEREST-RATE ENVIRONMENT, WHAT'S YOUR CURRENT
OUTLOOK FOR THE ECONOMY, STEVE?
A. Over the past year, the consumer has been the backbone of the U.S.
economy. But the warning signs are out there that consumer spending
may begin to slow. Rising interest rates have driven mortgage rates up
and we have seen an increase in gas prices. All of this hits the U.S.
consumer in the pocketbook. Without continued spending by consumers,
the economy could begin to soften. Under this scenario, steady growth
companies with predictable earnings could outperform the market on a
relative basis.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: to seek 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, 1999,
more than $48.5 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
STEVEN KAYE ON
MAINTAINING A
LONG-TERM INVESTMENT
HORIZON:
"The past one-year period is an
excellent example of why it's critical
to have a patient, long-term outlook
concerning your investments. We had
an extraordinary period of volatility
over the past 12 months. The market
went from being flat late last summer
to being up nearly 30% in just a matter
of months. We witnessed incredible
speculation in the market, and it
seemed nearly anyone could make
money day-trading Internet stocks.
But as we saw late in the period, that
bubble burst and some investors who
tried to time the market suffered
fairly heavy losses.
"It's not my style to try to catch
different waves. What I'm focused on
is the fundamentals of the
companies that I own, and whether I
see them continuing to grow their
earnings for a number of years.
Eventually, stocks are driven by their
earnings. That's why, over the long
term, a disciplined approach has
served shareholders of this fund well.
As of June 30, 1999, Fidelity Growth &
Income Portfolio outperformed over
75% of its peers over the past three-,
five- and 10-year periods. Obviously,
investors expect good returns. But
they must also expect short-term
periods of underperformance.
When there's a shift in the market, as
we experienced in the second
quarter of 1999, I can't panic and
change everything, nor should
investors. History has shown that
those who are in it for the long haul
usually win."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF JULY 31,
1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
General Electric Co. 4.4 4.2
Microsoft Corp. 3.2 3.5
Merck & Co., Inc. 2.6 3.1
Fannie Mae 2.2 1.9
American Express Co. 2.1 2.0
Citigroup, Inc. 1.9 2.0
Exxon Corp. 1.9 1.2
AT&T Corp. 1.7 1.9
MCI WorldCom, Inc. 1.7 2.2
Philip Morris Companies, Inc. 1.6 2.4
TOP FIVE MARKET SECTORS AS OF
JULY 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
TECHNOLOGY 16.2 17.0
FINANCE 15.9 14.9
HEALTH 13.0 15.5
UTILITIES 8.4 8.7
NONDURABLES 7.6 8.4
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF JULY 31, 1999 * AS OF JANUARY 31, 1999 **
Stocks 93.6% Stocks 93.1%
Bonds 0.3% Bonds 0.5%
Convertible Securities 0.6% Convertible Securities 0.6%
Short-term Investments 5.5% Short-term Investments 5.8%
* FOREIGN INVESTMENTS 3.3% ** FOREIGN INVESTMENTS 2.8%
Row: 1, Col: 1, Value: 93.59999999999999 Row: 1, Col: 1, Value: 93.09999999999999
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.3 Row: 1, Col: 3, Value: 0.5
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.6000000000000001 Row: 1, Col: 5, Value: 0.6000000000000001
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 5.5 Row: 1, Col: 8, Value: 5.8
</TABLE>
INVESTMENTS JULY 31, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 93.6%
SHARES VALUE (NOTE 1) (000S)
AEROSPACE & DEFENSE - 3.8%
AEROSPACE & DEFENSE - 1.9%
AlliedSignal, Inc. 5,033,200 $ 325,585
Boeing Co. 3,222,300 146,212
Gulfstream Aerospace Corp. (a) 1,366,800 90,892
Lockheed Martin Corp. 644,900 22,451
Northrop Grumman Corp. 1,304,800 94,109
Textron, Inc. 1,966,000 161,704
United Technologies Corp. 1,102,200 73,503
914,456
DEFENSE ELECTRONICS - 1.3%
Litton Industries, Inc. (a)(d) 3,371,600 230,322
Raytheon Co. Class A 5,691,818 395,581
625,903
SHIP BUILDING & REPAIR - 0.6%
General Dynamics Corp. 4,245,000 285,742
TOTAL AEROSPACE & DEFENSE 1,826,101
BASIC INDUSTRIES - 1.7%
CHEMICALS & PLASTICS - 1.2%
E.I. du Pont de Nemours and 3,510,200 252,954
Co.
IMC Global, Inc. 4,661,000 85,063
Monsanto Co. 1,069,500 41,844
Union Carbide Corp. 3,869,100 185,717
565,578
METALS & MINING - 0.2%
Alcoa, Inc. 1,738,100 104,069
PACKAGING & CONTAINERS - 0.2%
Corning, Inc. 1,680,200 117,614
PAPER & FOREST PRODUCTS - 0.1%
Kimberly-Clark Corp. 589,500 35,960
TOTAL BASIC INDUSTRIES 823,221
CONSTRUCTION & REAL ESTATE -
1.6%
BUILDING MATERIALS - 0.1%
Fortune Brands, Inc. 1,506,400 59,503
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - 1.5%
Boston Properties, Inc. 516,900 $ 17,704
CBL & Associates Properties, 2,151,900 54,066
Inc. (d)
Equity Office Properties Trust 6,446,590 161,971
Equity Residential Properties 3,577,365 147,790
Trust (SBI)
Macerich Co. 647,600 15,785
Mack-Cali Realty Corp. 699,800 19,594
Manufactured Home 921,400 22,344
Communities, Inc.
Public Storage, Inc. 3,540,100 90,936
Rouse Co. (The) 71,400 1,736
Simon Property Group, Inc. 588,900 15,643
Starwood Hotels & Resorts 4,710,543 127,185
Worldwide, Inc.
Urban Shopping Centers, Inc. 716,400 21,940
696,694
TOTAL CONSTRUCTION & REAL 756,197
ESTATE
DURABLES - 1.6%
AUTOS, TIRES, & ACCESSORIES -
1.2%
AutoNation, Inc. (a) 2,824,100 42,008
Danaher Corp. 200,000 11,413
Eaton Corp. 1,069,900 105,853
Federal-Mogul Corp. 1,768,100 85,753
Ford Motor Co. 4,710,900 229,068
General Motors Corp. 1,655,138 100,860
574,955
CONSUMER DURABLES - 0.2%
Minnesota Mining & 1,386,500 121,925
Manufacturing Co.
CONSUMER ELECTRONICS - 0.1%
General Motors Corp. Class H 521,800 28,993
(a)
TEXTILES & APPAREL - 0.1%
Unifi, Inc. (a)(d) 3,831,300 61,540
TOTAL DURABLES 787,413
ENERGY - 5.8%
ENERGY SERVICES - 0.1%
Schlumberger Ltd. 376,300 22,790
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
ENERGY - CONTINUED
OIL & GAS - 5.7%
BP Amoco PLC sponsored ADR 4,223,610 $ 489,411
Chevron Corp. 1,730,900 157,945
Exxon Corp. 11,334,800 899,700
Mobil Corp. 5,430,400 555,258
Royal Dutch Petroleum Co. (NY 8,353,600 509,570
Registry Gilder 1.25)
Texaco, Inc. 2,701,600 168,343
2,780,227
TOTAL ENERGY 2,803,017
FINANCE - 15.7%
BANKS - 2.8%
Bank of America Corp. 2,956,006 196,205
Bank of New York Co., Inc. 9,676,508 357,426
Bank One Corp. 5,650,460 308,303
Chase Manhattan Corp. 1,844,500 141,796
Mellon Bank Corp. 2,083,300 70,311
Wachovia Corp. 2,239,300 174,805
Wells Fargo & Co. 2,629,400 102,547
1,351,393
CREDIT & OTHER FINANCE - 6.2%
American Express Co. 7,807,930 1,028,695
Associates First Capital 19,180,638 734,858
Corp. Class A
Capital Trust, Inc. (a)(d) 1,635,782 6,850
Citigroup, Inc. 20,424,296 910,158
Concord EFS, Inc. (a) 804,400 27,400
Fleet Financial Group, Inc. 2,369,998 95,985
Household International, Inc. 4,639,940 199,227
3,003,173
FEDERAL SPONSORED CREDIT - 4.2%
Fannie Mae 15,075,400 1,040,203
Freddie Mac 7,818,500 448,586
SLM Holding Corp. (d) 12,176,650 554,038
2,042,827
INSURANCE - 2.2%
Allmerica Financial Corp. 1,216,100 71,978
American International Group, 4,980,000 578,303
Inc.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - CONTINUED
INSURANCE - CONTINUED
Hartford Financial Services 4,813,700 $ 259,940
Group, Inc.
MBIA, Inc. 3,212,700 183,927
1,094,148
SECURITIES INDUSTRY - 0.3%
Franklin Resources, Inc. 583,600 22,250
Morgan Stanley, Dean Witter & 1,230,400 110,890
Co.
133,140
TOTAL FINANCE 7,624,681
HEALTH - 13.0%
DRUGS & PHARMACEUTICALS - 9.0%
Allergan, Inc. 1,848,100 174,645
American Home Products Corp. 931,400 47,501
Amgen, Inc. (a) 2,435,750 187,248
Bausch & Lomb, Inc. 791,700 56,854
Bristol-Myers Squibb Co. 11,091,600 737,591
Forest Laboratories, Inc. (a) 1,988,500 101,911
Lilly (Eli) & Co. 6,394,232 419,621
Merck & Co., Inc. 18,315,100 1,239,703
Pfizer, Inc. 8,130,000 275,912
Quintiles Transnational Corp. 771,600 29,321
(a)
Schering-Plough Corp. 7,316,400 358,504
SmithKline Beecham PLC 1,097,900 65,943
sponsored ADR
Teva Pharmaceutical 1,800,000 83,475
Industries Ltd. ADR
Warner-Lambert Co. 8,969,580 591,992
4,370,221
MEDICAL EQUIPMENT & SUPPLIES
- - 3.3%
Abbott Laboratories 1,833,700 78,734
Bard (C.R.), Inc. (d) 4,246,200 206,471
Baxter International, Inc. 3,497,900 240,262
Becton, Dickinson & Co. 7,732,500 212,160
Cardinal Health, Inc. 2,078,100 141,830
Guidant Corp. 796,500 46,645
Johnson & Johnson 4,040,700 372,249
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - CONTINUED
Medtronic, Inc. 1,321,895 $ 95,259
Stryker Corp. 2,971,900 181,286
1,574,896
MEDICAL FACILITIES MANAGEMENT
- - 0.7%
Health Management Associates, 2,404,270 19,835
Inc. Class A (a)
Tenet Healthcare Corp. (a) 3,808,000 68,306
United HealthCare Corp. 873,400 53,277
Wellpoint Health Networks, 2,556,200 209,928
Inc. (a)
351,346
TOTAL HEALTH 6,296,463
INDUSTRIAL MACHINERY &
EQUIPMENT - 6.2%
ELECTRICAL EQUIPMENT - 4.7%
Emerson Electric Co. 1,474,000 87,979
General Electric Co. 19,483,200 2,123,664
Honeywell, Inc. 422,300 50,597
2,262,240
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.4%
Caterpillar, Inc. 1,715,600 100,577
Tyco International Ltd. 5,966,900 582,892
683,469
POLLUTION CONTROL - 0.1%
Waste Management, Inc. 1,432,387 36,615
TOTAL INDUSTRIAL MACHINERY & 2,982,324
EQUIPMENT
MEDIA & LEISURE - 4.2%
BROADCASTING - 2.0%
CBS Corp. (a) 7,318,034 321,536
Clear Channel Communications, 623,446 43,368
Inc. (a)
Infinity Broadcasting Corp. 971,000 26,763
Class A
MediaOne Group, Inc. 1,645,500 119,093
Nielsen Media Research, Inc. 2,456,866 79,848
(a)
Time Warner, Inc. 4,897,523 352,622
943,230
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.6%
Disney (Walt) Co. 4,222,400 $ 116,644
Viacom, Inc. Class B 4,456,800 186,907
(non-vtg.) (a)
303,551
LODGING & GAMING - 0.1%
Marriott International, Inc. 1,372,500 48,123
Class A
Mirage Resorts, Inc. (a) 990,300 13,926
62,049
PUBLISHING - 0.3%
Times Mirror Co. Class A 2,128,100 128,218
RESTAURANTS - 1.2%
McDonald's Corp. 6,481,700 270,206
Starbucks Corp. (a) 2,150,700 50,004
Tricon Global Restaurants, 6,917,310 281,448
Inc. (a)
601,658
TOTAL MEDIA & LEISURE 2,038,706
NONDURABLES - 7.6%
BEVERAGES - 2.3%
Anheuser-Busch Companies, 3,276,200 258,615
Inc.
Coca-Cola Co. (The) 3,325,000 200,539
PepsiCo, Inc. 13,208,900 516,798
Whitman Corp. 6,930,400 132,111
1,108,063
FOODS - 1.5%
Bestfoods 2,530,200 123,347
Nabisco Group Holdings Corp. 2,671,500 50,091
Nestle SA (Reg.) 35,000 68,845
Quaker Oats Co. 1,960,090 133,409
Ralston Purina Co. 2,891,221 86,556
Sara Lee Corp. 2,786,700 61,307
Sysco Corp. 5,681,700 185,721
709,276
HOUSEHOLD PRODUCTS - 2.2%
Avon Products, Inc. 2,205,700 100,359
Clorox Co. 460,200 51,542
Colgate-Palmolive Co. 500,000 24,688
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONDURABLES - CONTINUED
HOUSEHOLD PRODUCTS - CONTINUED
Gillette Co. 2,630,100 $ 115,231
Procter & Gamble Co. 7,690,200 695,963
Unilever NV NY Shares 1,405,892 98,237
1,086,020
TOBACCO - 1.6%
Philip Morris Companies, Inc. 20,723,400 771,947
TOTAL NONDURABLES 3,675,306
RETAIL & WHOLESALE - 5.7%
APPAREL STORES - 0.3%
Abercrombie & Fitch Co. Class 593,200 24,618
A (a)
Limited, Inc. (The) 2,797,800 127,824
152,442
DRUG STORES - 1.1%
CVS Corp. 6,154,468 306,185
Walgreen Co. 7,897,800 223,606
529,791
GENERAL MERCHANDISE STORES -
1.9%
Dayton Hudson Corp. 2,857,100 184,819
Federated Department Stores, 523,530 26,864
Inc. (a)
May Department Stores Co. 1,057,800 40,924
(The)
Wal-Mart Stores, Inc. 15,588,600 658,618
911,225
GROCERY STORES - 1.0%
Kroger Co. (a) 12,531,624 329,738
Safeway, Inc. 2,916,800 157,143
486,881
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.4%
CDnow, Inc. (a) 1,000,000 19,750
Home Depot, Inc. 10,634,500 678,614
698,364
TOTAL RETAIL & WHOLESALE 2,778,703
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
SERVICES - 1.7%
ADVERTISING - 0.5%
Interpublic Group of 3,223,934 $ 135,405
Companies, Inc.
Omnicom Group, Inc. 1,581,400 112,082
247,487
SERVICES - 1.2%
ACNielsen Corp. (a) 841,332 24,346
Block (H&R), Inc. (d) 5,652,900 308,790
Gartner Group, Inc. Class B 3,232,338 69,899
(a)
Service Corp. International 373,600 5,931
ServiceMaster Co. 1,760,250 31,685
Viad Corp. 3,377,700 111,675
552,326
TOTAL SERVICES 799,813
TECHNOLOGY - 15.9%
COMMUNICATIONS EQUIPMENT - 2.6%
ADC Telecommunications, Inc. 2,221,700 98,866
(a)
Cisco Systems, Inc. (a) 9,943,200 617,721
Lucent Technologies, Inc. 6,924,629 450,534
Nokia AB sponsored ADR 1,138,400 96,835
1,263,956
COMPUTER SERVICES & SOFTWARE
- - 8.3%
America Online, Inc. (a) 127,800 12,157
At Home Corp. Series A (a) 453,900 20,738
Automatic Data Processing, 6,813,000 272,946
Inc.
BMC Software, Inc. (a) 1,395,600 75,188
Ceridian Corp. (a) 5,267,700 147,496
Compuware Corp. (a) 2,229,600 61,871
DST Systems, Inc. (a) 2,669,300 177,175
Electronic Data Systems Corp. 5,064,500 305,453
Equifax, Inc. 2,579,500 84,801
First Data Corp. 1,673,400 82,938
IMS Health, Inc. (d) 17,168,500 478,572
International Business 4,450,400 559,360
Machines Corp.
Lycos, Inc. (a) 457,400 18,896
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Microsoft Corp. (a) 18,143,400 $ 1,556,931
Oracle Corp. (a) 4,696,260 178,751
4,033,273
COMPUTERS & OFFICE EQUIPMENT
- - 2.9%
Compaq Computer Corp. 5,036,100 120,866
EMC Corp. (a) 2,696,600 163,313
Gateway, Inc. (a) 619,900 47,229
Hewlett-Packard Co. 3,622,900 379,272
Pitney Bowes, Inc. 8,569,800 545,254
Sun Microsystems, Inc. (a) 405,000 27,489
Xerox Corp. 2,492,800 121,524
1,404,947
ELECTRONICS - 2.0%
Intel Corp. 7,200,300 496,821
Motorola, Inc. 2,492,700 227,459
Texas Instruments, Inc. 1,666,200 239,933
964,213
PHOTOGRAPHIC EQUIPMENT - 0.1%
Eastman Kodak Co. 475,800 32,890
TOTAL TECHNOLOGY 7,699,279
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 907,600 58,881
Southwest Airlines Co. 8,050,263 148,930
207,811
RAILROADS - 0.3%
Burlington Northern Santa Fe 3,378,000 108,096
Corp.
Union Pacific Corp. 333,800 18,130
126,226
TOTAL TRANSPORTATION 334,037
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - 8.4%
CELLULAR - 0.5%
ALLTEL Corp. 1,632,700 $ 117,248
Vodafone AirTouch PLC 568,950 119,764
sponsored ADR
237,012
ELECTRIC UTILITY - 0.4%
CMS Energy Corp. 463,779 17,334
Duke Energy Corp. 909,900 48,168
FPL Group, Inc. 641,900 34,622
PG&E Corp. 2,585,000 81,751
181,875
GAS - 0.4%
Enron Corp. 1,520,000 129,485
Williams Companies, Inc. 2,123,100 89,303
218,788
TELEPHONE SERVICES - 7.1%
Ameritech Corp. 4,401,300 322,395
AT&T Corp. 16,322,350 847,742
Bell Atlantic Corp. 2,843,186 181,253
BellSouth Corp. 5,858,100 281,189
GTE Corp. 4,212,400 310,401
MCI WorldCom, Inc. (a) 9,769,409 805,976
SBC Communications, Inc. 11,814,892 675,664
U.S. WEST, Inc. 248,026 14,215
3,438,835
TOTAL UTILITIES 4,076,510
TOTAL COMMON STOCKS 45,301,771
(Cost $26,484,753)
CONVERTIBLE PREFERRED STOCKS
- - 0.3%
BASIC INDUSTRIES - 0.1%
CHEMICAL & PLASTICS - 0.1%
Sealed Air Corp. Series A, 1,054,927 64,878
$2.00
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 0.2%
CREDIT & OTHER FINANCE - 0.2%
Union Pacific Capital Trust 1,377,000 $ 67,645
$3.125 TIDES (c)
TOTAL CONVERTIBLE PREFERRED 132,523
STOCKS
(Cost $110,600)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CONVERTIBLE BONDS - 0.3%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT (000S)
TECHNOLOGY - 0.3%
COMPUTERS & OFFICE EQUIPMENT
- - 0.1%
Quantum Corp. 7% 8/1/04 B2 $ 40,000 37,000
ELECTRONICS - 0.2%
Micron Technology, Inc. 7% B2 86,500 100,989
7/1/04
TOTAL CONVERTIBLE BONDS 137,989
(Cost $120,160)
U.S. TREASURY OBLIGATIONS -
0.3%
U.S. Treasury Bonds:
6% 2/15/26 Aaa 172,500 165,897
8.125% 8/15/19 Aaa 10,000 11,944
TOTAL U.S. TREASURY OBLIGATIONS 177,841
(Cost $166,451)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 5.5%
MATURITY AMOUNT (000S)
Investments in repurchase $ 145,646 145,585
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.06%,
dated 7/30/99 due 8/2/99
SHARES
Taxable Central Cash Fund (b) 2,509,332,914 2,509,333
TOTAL CASH EQUIVALENTS 2,654,918
(Cost $2,654,918)
TOTAL INVESTMENT IN $ 48,405,042
SECURITIES - 100%
(Cost $29,536,882)
</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 5.06%. The yield refers to the income earned by investing in
the fund over the seven-day period, expressed as an annual percentage.
(c) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$67,645,000 or 0.1% of net assets.
(d) Affiliated company
INCOME TAX INFORMATION
At July 31, 1999, the aggregate cost of investment securities for
income tax purposes was $29,551,313,000. Net unrealized appreciation
aggregated $18,853,729,000, of which $19,478,121,000 related to
appreciated investment securities and $624,392,000 related to
depreciated investment securities.
The fund hereby designates approximately $2,246,595,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) JULY 31, 1999
ASSETS
Investment in securities, at $ 48,405,042
value (including repurchase
agreements of $145,585)
(cost $29,536,882) - See
accompanying schedule
Receivable for investments 509,796
sold
Receivable for fund shares 38,273
sold
Dividends receivable 36,155
Interest receivable 17,611
Other receivables 1,936
TOTAL ASSETS 49,008,813
LIABILITIES
Payable for investments $ 326,399
purchased
Payable for fund shares 59,846
redeemed
Accrued management fee 20,278
Other payables and accrued 7,095
expenses
TOTAL LIABILITIES 413,618
NET ASSETS $ 48,595,195
Net Assets consist of:
Paid in capital $ 27,007,714
Undistributed net investment 46,468
income
Accumulated undistributed net 2,672,831
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 18,868,182
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 1,028,074 $ 48,595,195
shares outstanding
NET ASSET VALUE, offering $47.27
price and redemption price
per share ($48,595,195
(divided by) 1,028,074
shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED JULY 31, 1999
INVESTMENT INCOME $ 561,804
Dividends (including $21,452
received from affiliated
issuers)
Interest 158,494
TOTAL INCOME 720,298
EXPENSES
Management fee $ 226,584
Transfer agent fees 87,362
Accounting fees and expenses 1,292
Non-interested trustees' 225
compensation
Custodian fees and expenses 604
Registration fees 330
Audit 188
Legal 136
Miscellaneous 62
Total expenses before 316,783
reductions
Expense reductions (6,981) 309,802
NET INVESTMENT INCOME 410,496
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 3,290,552
(including realized gain of
$36,835 on sales of
investments in affiliated
issuers)
Foreign currency transactions 659 3,291,211
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 2,872,613
Assets and liabilities in (23) 2,872,590
foreign currencies
NET GAIN (LOSS) 6,163,801
NET INCREASE (DECREASE) IN $ 6,574,297
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, 1999 YEAR ENDED JULY 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 410,496 $ 399,563
income
Net realized gain (loss) 3,291,211 1,972,406
Change in net unrealized 2,872,590 4,607,442
appreciation (depreciation)
NET INCREASE (DECREASE) IN 6,574,297 6,979,411
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (393,528) (397,518)
From net investment income
From net realized gain (2,186,858) (1,237,608)
TOTAL DISTRIBUTIONS (2,580,386) (1,635,126)
Share transactions Net 8,258,120 12,370,734
proceeds from sales of shares
Reinvestment of distributions 2,512,407 1,603,367
Cost of shares redeemed (10,529,866) (9,241,449)
NET INCREASE (DECREASE) IN 240,661 4,732,652
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 4,234,572 10,076,937
IN NET ASSETS
NET ASSETS
Beginning of period 44,360,623 34,283,686
End of period (including $ 48,595,195 $ 44,360,623
undistributed net investment
income of $46,468 and
$33,271, respectively)
OTHER INFORMATION
Shares
Sold 186,270 309,914
Issued in reinvestment of 63,951 43,076
distributions
Redeemed (236,535) (229,152)
Net increase (decrease) 13,686 123,838
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 43.73 $ 38.50 $ 28.20 $ 25.10 $ 22.17
of period
Income from Investment
Operations
Net investment income .39 B .41 B .46 B .49 .43
Net realized and unrealized 5.69 6.59 11.44 3.99 4.14
gain (loss)
Total from investment 6.08 7.00 11.90 4.48 4.57
operations
Less Distributions
From net investment income (.38) (.41) (.48) (.48) (.40)
From net realized gain (2.16) (1.36) (1.12) (.90) (1.24)
Total distributions (2.54) (1.77) (1.60) (1.38) (1.64)
Net asset value, end of period $ 47.27 $ 43.73 $ 38.50 $ 28.20 $ 25.10
TOTAL RETURN A 15.20% 19.06% 44.16% 18.39% 21.95%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 48,595 $ 44,361 $ 34,284 $ 19,206 $ 12,106
(in millions)
Ratio of expenses to average .68% .69% .73% .75% .78%
net assets
Ratio of expenses to average .66% C .68% C .71% C .74% C .77% C
net assets after expense
reductions
Ratio of net investment .88% 1.02% 1.43% 1.82% 2.21%
income to average net assets
Portfolio turnover rate 35% 32% 38% 41% 67%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1999
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, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
market value of the securities received. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where
recovery of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, foreign currency transactions,
non-taxable dividends and losses deferred due to wash sales. The fund
also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income orgain 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
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
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 $15,249,991,000 and $17,955,705,000, 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.
TRANSFER AGENT FEES. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the fund's transfer, dividend disbursing
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 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 $2,136,000 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 $4,867,000 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 $5,000 and $2,109,000, 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS WITH
AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE
Bard (C.R.), Inc. $ 26,012 $ - $ 3,255 $ 206,471
Bausch & Lomb, Inc. - 62,162 2,816 -
Block (H&R), Inc. 17,957 53,677 5,628 308,790
CBL & Associates Properties, - 133 4,109 54,066
Inc.
Capital Trust, Inc. - - - 6,850
Ceridian Corp. - 665 - -
Coram Healthcare Corp. - 3,831 - -
Forest Laboratories, Inc. - 15,745 - -
IMS Health, Inc. 8,616 6,176 681 478,572
Litton Industries, Inc. 8,796 6,802 - 230,322
SLM Holding Corp. 157,496 - 4,963 554,038
Unifi, Inc. 2,524 - - 61,540
TOTALS $ 221,401 $ 149,191 $ 21,452 $ 1,900,649
</TABLE>
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, 1999, 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, 1999 by correspondence
with the custodian and brokers, provide a reasonable basis for the
opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 8, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity Growth and Income Portfolio voted to
pay on September 7, 1999, to shareholders of record at the opening of
business on September 3, 1999, a distribution of $2.44 per share
derived from capital gains realized from sales of portfolio securities
and a dividend of $.10 per share from net investment income.
A total of 84% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 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
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
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
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
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
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
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Las Colinas Blvd.
Irving, TX 75039-5517
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 75039-5517
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
Richard A. Spillane Jr., Vice President
Steven Kaye, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy 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
GAI-ANN-0999 83748
1.536189.102
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Service Company, Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
FIDELITY'S GROWTH AND INCOME FUNDS
Balanced Fund
Convertible Securities Fund
Equity-Income Fund
Equity-Income II Fund
Fidelity (registered trademark) Fund
Global Balanced Fund
Growth & Income Portfolio
Growth & Income II Portfolio
Puritan (registered trademark) Fund
Real Estate Investment Portfolio
Utilities Fund
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 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)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Heaquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY
OTC
PORTFOLIO
ANNUAL REPORT
JULY 31, 1999
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 9 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 10 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 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
OF SPECIAL NOTE 29
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING 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:
In July, the steadily growing U.S. economy again sparked fears of
inflation and posed the threat of another Federal Reserve Board
interest-rate hike at its August policy meeting. Despite rising
profits and continued productivity gains at many U.S. corporations,
stock and bond markets sold off sharply toward the month's end.
Renewed jitters about inflation were sparked by a government report
that showed a larger-than-expected increase in the employment-cost
index.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
First, investors are encouraged to take a long-term view of their
portfolios. If you can afford to leave your money invested through the
inevitable up and down cycles of the financial markets, you will
greatly reduce your vulnerability to any single decline. We know from
experience, for example, that stock prices have gone up over longer
periods of time, have significantly outperformed other types of
investments and have stayed ahead of inflation.
Second, you can further manage your investing risk through
diversification. A stock mutual fund, for instance, is already
diversified, because it invests in many different companies. You can
increase your diversification further by investing in a number of
different stock funds, or in such other investment categories as
bonds. If you have a short investment time horizon, you might want to
consider moving some of your investment into a money market fund,
which seeks income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that an investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in these types of funds.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases. Of course, you should
consider your financial ability to continue your purchases through
periods of low price levels before undertaking such a strategy.
If you have questions, please call us at 1-800-544-8888, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). Total returns do not include the effect of the
3.00% sales load which was eliminated as of September 30, 1998.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED JULY 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY OTC 38.54% 226.55% 453.16%
NASDAQ 41.42% 277.32% 541.97%
Mid-Cap Funds Average 17.16% 137.46% 276.24%
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 - a market capitalization-weighted index that
is designed to represent the performance 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 Inc. The past one year average represents a peer
group of 373 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, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY OTC 38.54% 26.70% 18.65%
NASDAQ 41.42% 30.42% 20.43%
Mid-Cap Funds Average 17.16% 18.51% 13.81%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had performed at a
constant rate each year. (Note: Lipper calculates average annual total
returns by annualizing each fund's total return, then taking an
arithmetic average. This may produce a different figure than that
obtained by averaging the cumulative total returns and annualizing the
result.)
$10,000 OVER 10 YEARS
OTC Portfolio NASDAQ (Total Return)
00093 F0091
1989/07/31 10000.00 10000.00
1989/08/31 10447.23 10354.49
1989/09/30 10506.88 10446.05
1989/10/31 10152.61 10076.80
1989/11/30 10245.84 10099.50
1989/12/31 10310.10 10084.05
1990/01/31 9578.05 9232.12
1990/02/28 9844.25 9467.75
1990/03/31 10217.95 9696.87
1990/04/30 9921.04 9365.86
1990/05/31 10571.18 10246.38
1990/06/30 10591.66 10333.75
1990/07/31 10453.44 9809.37
1990/08/31 9552.46 8545.99
1990/09/30 9026.74 7736.19
1990/10/31 8836.37 7419.79
1990/11/30 9449.79 8090.08
1990/12/31 9820.25 8436.01
1991/01/31 10593.58 9359.62
1991/02/28 11414.58 10250.39
1991/03/31 12055.50 10925.00
1991/04/30 12034.31 10992.72
1991/05/31 12622.25 11490.63
1991/06/30 12013.12 10818.08
1991/07/31 12860.61 11424.74
1991/08/31 13538.60 11975.77
1991/09/30 13419.62 12016.11
1991/10/31 14003.08 12396.40
1991/11/30 13341.08 11973.75
1991/12/31 14647.83 13413.89
1992/01/31 15280.32 14202.10
1992/02/29 15309.88 14519.28
1992/03/31 14819.25 13852.04
1992/04/30 14381.83 13290.02
1992/05/31 14588.72 13455.95
1992/06/30 14269.52 12970.56
1992/07/31 14570.99 13380.79
1992/08/31 14210.41 12986.53
1992/09/30 14649.01 13464.79
1992/10/31 15194.89 13984.32
1992/11/30 16267.40 15097.54
1992/12/31 16836.18 15671.97
1993/01/31 16947.77 16135.10
1993/02/28 16284.82 15556.86
1993/03/31 16849.31 16020.27
1993/04/30 16357.02 15368.40
1993/05/31 16796.80 16292.06
1993/06/30 16816.49 16386.61
1993/07/31 17000.28 16419.38
1993/08/31 17315.34 17323.61
1993/09/30 17791.22 17804.49
1993/10/31 18025.87 18205.22
1993/11/30 17549.45 17640.80
1993/12/31 18239.22 18180.74
1994/01/31 18730.33 18751.12
1994/02/28 18533.89 18580.97
1994/03/31 17793.44 17447.74
1994/04/30 17302.33 17238.48
1994/05/31 17211.66 17286.74
1994/06/30 16576.99 16615.91
1994/07/31 16939.66 17013.77
1994/08/31 17785.88 18054.66
1994/09/30 17831.22 18040.72
1994/10/31 18239.22 18370.04
1994/11/30 17642.33 17745.81
1994/12/31 17747.60 17802.98
1995/01/31 17709.47 17898.31
1995/02/28 18639.94 18830.28
1995/03/31 19265.34 19406.38
1995/04/30 20073.78 20061.30
1995/05/31 20645.79 20570.14
1995/06/30 22247.42 22227.95
1995/07/31 23711.77 23861.36
1995/08/31 24016.84 24332.06
1995/09/30 24363.45 24911.25
1995/10/31 24231.33 24752.88
1995/11/30 24666.53 25323.65
1995/12/31 24531.70 25172.86
1996/01/31 24475.08 25373.88
1996/02/29 25348.61 26355.36
1996/03/31 25397.14 26405.07
1996/04/30 26990.53 28558.77
1996/05/31 27977.30 29845.15
1996/06/30 26998.62 28455.98
1996/07/31 25235.38 25960.83
1996/08/31 26723.62 27436.52
1996/09/30 28598.11 29502.41
1996/10/31 28482.97 29386.03
1996/11/30 30511.15 31110.22
1996/12/31 30354.30 31086.18
1997/01/31 31569.95 33238.41
1997/02/28 30029.50 31545.14
1997/03/31 27746.67 29453.70
1997/04/30 28869.52 30408.00
1997/05/31 31458.59 33786.33
1997/06/30 32303.06 34806.99
1997/07/31 35690.19 38483.30
1997/08/31 35133.40 38340.01
1997/09/30 37501.57 40728.59
1997/10/31 34401.09 38517.29
1997/11/30 34286.61 38694.47
1997/12/31 33363.49 37977.96
1998/01/31 34111.55 39178.25
1998/02/28 38579.96 42850.83
1998/03/31 39557.43 44442.92
1998/04/30 39986.31 45250.41
1998/05/31 37113.76 43097.31
1998/06/30 39607.30 45919.84
1998/07/31 39926.47 45393.68
1998/08/31 31857.39 36362.83
1998/09/30 36347.83 41097.82
1998/10/31 38011.72 42994.83
1998/11/30 41028.18 47334.62
1998/12/31 46835.67 53253.36
1999/01/31 51011.49 60875.70
1999/02/28 48724.99 55598.97
1999/03/31 51430.14 59827.79
1999/04/30 51483.82 61823.27
1999/05/31 52535.82 60080.76
1999/06/30 55391.26 65339.73
1999/07/30 55316.12 64196.65
IMATRL PRASUN SHR__CHT 19990731 19990812 120101 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity OTC Portfolio on July 31, 1989. As the chart
shows, by July 31, 1999, the value of the investment would have grown
to $55,316 - a 453.16% increase on the initial investment. For
comparison, look at how the NASDAQ Composite Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 would have grown to $64,197 - a 541.97% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
long-term growth and
short-term volatility. In turn, the
share price and return of a
fund that invests in stocks will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Federal Reserve Board monetary
policy, Internet stock mania and
Y2K concerns all played key roles
in the direction of the U.S. equity
market for the 12 months that ended
July 31, 1999. As we entered the
period, investors were still leery of
troubled overseas markets and
overall liquidity. The Fed then made
three successive interest-rate cuts
in the fall and confidence was
restored. The second quarter of 1999
saw more sharing of the market's
gains by smaller stocks, many of
which rely on borrowed money to
fund their growth. The Russell 2000
Index - a measure of small-stock
performance - handily outpaced
the large-cap oriented Standard &
Poor's 500SM Index during that time.
For the entire 12 months, though, the
S&P 500 returned 20.20%, while the
Russell(registered trademark) 2000 could only muster
7.41%. The Dow Jones Industrial
Average - an index of 30 blue-chip
stocks - returned 21.88%. Internet
stocks continued to attract investors,
with many stock valuations peaking
around April, then cooling off some
as the period ended. Technology
stocks prospered - the tech-heavy
NASDAQ index returned a tidy
41.42% during the period - as did
telecommunications stocks with
Internet exposure. Y2K concerns
mounted toward the end of the
period, as many investors
anticipated a spending freeze within
the technology sector.
(photograph of Robert Bertelson)
An interview with Robert Bertelson, Portfolio Manager of Fidelity OTC
Portfolio
Q. HOW DID THE FUND PERFORM, BOB?
A. For the 12 months that ended July 31, 1999, the fund returned
38.54%. This trailed the NASDAQ Composite Index - which returned
41.42% during the period - but topped the mid-cap funds average, which
returned 17.16% according to Lipper Inc.
Q. WHAT FACTORS CONTRIBUTED TO PERFORMANCE DURING THE PERIOD?
A. For starters, we had a favorable backdrop for many of the stocks
the fund tends to emphasize. When the period began, investors were
still concerned with global economies and liquidity within the
markets. The Federal Reserve Board made several interest-rate cuts in
the fall of 1998 and while liquidity was restored, global economies
remained a bit sluggish. This environment led investors to high-growth
sectors, and the fund was well-represented in several, including
technology, telecommunications and cable TV. In terms of the fund's
performance relative to its benchmarks, the fund lagged the NASDAQ
mostly due to its relative underweighting in technology stocks. I
pulled back on some of these holdings in December, and my decision to
do so was premature as many tech stocks continued to run. As far as
the Lipper peer group, the fund may have benefited from the fact that
it had greater exposure to high-growth names than its competitors.
Q. CAN YOU GO INTO MORE DETAIL ON YOUR TECHNOLOGY STRATEGY DURING THE
PERIOD?
A. While just under 34% of the fund's investments fell into the
technology basket at the end of the period - and many performed well -
the story was more about what the fund didn't own. For instance, the
fund had minimal exposure to the Internet craze, mainly due to my
suspicions about the viability of the business models in that area and
the lack of discrimination investors showed in gobbling up Internet
IPOs. These stocks hit their frenzied peaks around April and have
cooled off some since. Also, as I mentioned, I underweighted the fund
- - relative to the NASDAQ - in big tech leaders such as Cisco and
Intel. In hindsight, this positioning hurt the fund.
Q. THAT BEING SAID, THE FUND STILL GENERATED A STRONG RETURN. WERE YOU
ABLE TO FIND OPPORTUNITIES ELSEWHERE?
A. The fund benefited from its health care investments - particularly
in the biotechnology area - and from its cable TV positions. Biotech
names such as Biogen and Amgen performed quite nicely during the
period as both companies benefited from strong product lines and
increased sales. Biogen, for example, has seen its drug for the
treatment of multiple sclerosis emerge as a clear leader in combating
that disease. In the cable area, the fund's stakes in companies such
as Liberty Media - which merged with AT&T during the period - and
Comcast paid off handsomely. Liberty's stock rose as investors
realized the potential of the company's broad range of programming
assets, and Comcast - one of the larger cable firms in the U.S. -
executed its business plans well and was helped along by its ownership
of cable TV retailer QVC.
Q. WHAT OTHER STOCKS PERFORMED WELL DURING THE PERIOD? WHICH ONES
PROVED DISAPPOINTING?
A. Ascend Communications, which the fund no longer held at the end of
the period, worked out well as the company benefited from being
acquired by Lucent Technologies. Comverse Technology - which crept
into the fund's top-10 list of holdings during the period - also fared
well. Comverse is a market leader in voice-mail systems. On the
negative side, the fund's positions in Axent Technology and Networks
Associates - both of which are involved in the security segment of the
software industry - performed poorly as each encountered earnings
shortfalls. Axent specializes in encryption and remote-access
technology, while Networks develops anti-virus software.
Q. WHAT'S YOUR OUTLOOK?
A. In terms of the overall investing climate, the only certainty is
that there will be uncertainty. I'll be monitoring a couple of things
closely in the coming months. First, if global economies enter a phase
of simultaneous improvement, we may see additional upward pressure on
interest rates. Historically, such a development has not been kind to
growth stocks. Second, we have Y2K issues ahead of us (SEE CALLOUT BOX
ON PAGE 8). In terms of the portfolio itself, I'll continue to look
closely at all segments of the OTC market for earnings growth and
capital appreciation 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 AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: capital appreciation by
normally investing in
securities principally traded
on the over-the-counter
market
FUND NUMBER: 093
TRADING SYMBOL: FOCPX
START DATE: December 31,
1984
SIZE: as of July 31, 1999,
more than $7.2 billion
MANAGER: Bob 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
BOB BERTELSON OFFERS HIS
THOUGHTS ON AND CONCERNS
ABOUT Y2K:
"I see Y2K as being one of the most
significant issues for the
investment world over the next few
months, mainly because of the
unexpected behavior it may
produce in a variety of areas. For
example, investors may shy away
from holding risky or illiquid
investments - those that aren't
easily traded - as the millennium
nears. In addition, companies may
build up inventories in anticipation
of the event - much like
consumers tend to stock up on
groceries before a big storm -
which could cause economic
statistics to look stronger than
they really are.
"The area in which Y2K concerns
are currently most visible is
technology. Many companies, for
instance, could freeze their
technology-related spending
activity as the end of the year
approaches. Given the relatively high
valuations within the sector,
technology stocks could be
particularly vulnerable.
"For these reasons, I underweighted
the fund's technology positions
relative to the NASDAQ. At the
close of the period, the fund's 33.8%
weighting in tech stocks was
considerably lower than the
NASDAQ weighting of 58.9%."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP TEN STOCKS AS OF JULY 31,
1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE STOCKS 6 MONTHS AGO
Microsoft Corp. 8.8 9.5
MCI WorldCom, Inc. 8.0 7.8
Comcast Corp. Class A (special) 6.0 3.1
Amgen, Inc. 3.7 3.5
Biogen, Inc. 3.2 1.9
Cisco Systems, Inc. 2.7 0.5
At Home Corp. Series A 2.3 0.7
AT&T Corp. (Liberty Media 1.8 0.2
Group) Class A
Comverse Technology, Inc. 1.8 0.9
Quantum Corp. 1.6 1.8
TOP FIVE MARKET SECTORS AS OF
JULY 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS IN
THESE MARKET SECTORS 6
MONTHS AGO
TECHNOLOGY 33.8 40.3
HEALTH 15.1 13.8
MEDIA & LEISURE 12.7 11.1
UTILITIES 11.3 10.4
FINANCE 6.3 8.3
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
INVESTMENTS)
AS OF JULY 31, 1999 * AS OF JANUARY 31, 1999 **
Stocks 95.0% Stocks 92.8%
Convertible Securities 0.0% Convertible Securities 0.4%
Short-term Investments 5.0% Short-term Investments 6.8%
* FOREIGN INVESTMENTS 4.1% ** FOREIGN INVESTMENTS 2.5%
Row: 1, Col: 1, Value: 95.0 Row: 1, Col: 1, Value: 92.8
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0 Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.4
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 8, Value: 5.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 8, Value: 6.8
</TABLE>
INVESTMENTS JULY 31, 1999
Showing Percentage of Total Value of Investment in Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 95.0%
SHARES VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.6%
PAPER & FOREST PRODUCTS - 0.6%
Smurfit-Stone Container Corp. 2,000,000 $ 44,750
(a)
DURABLES - 1.2%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Modine Manufacturing Co. 200,000 6,406
PACCAR, Inc. 200,000 11,463
17,869
CONSUMER ELECTRONICS - 1.0%
Gemstar International Group 1,085,200 71,895
Ltd. (a)
TOTAL DURABLES 89,764
ENERGY - 5.6%
ENERGY SERVICES - 0.5%
BJ Services Co. (a) 1,100,000 33,619
Marine Drilling Companies, 372,000 5,557
Inc. (a)
39,176
OIL & GAS - 5.1%
Amerada Hess Corp. 1,091,000 64,574
Anadarko Petroleum Corp. 500,000 19,094
Anderson Exploration Ltd. (a) 200,000 2,582
Apache Corp. 927,700 39,369
Canadian Hunter Exploration 400,000 6,453
Ltd.
Canadian Natural Resources 200,000 4,229
Ltd. (a)
Kerr-McGee Corp. 516,600 26,605
Newfield Exploration Co. (a) 1,939,700 56,130
Noble Affiliates, Inc. 1,176,300 34,407
Penn West Petroleum Ltd. (a) 200,000 3,784
Poco Petroleums Ltd. (a) 300,000 2,639
Rio Alto Exploration Ltd. (a) 800,000 13,198
Tosco Corp. 600,000 15,825
Vastar Resources, Inc. 1,239,800 81,052
369,941
TOTAL ENERGY 409,117
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 6.3%
BANKS - 4.5%
Compass Bancshares, Inc. 300,000 $ 8,644
Fifth Third Bancorp 200,000 13,013
Marshall & Ilsley Corp. 1,804,400 116,609
Northern Trust Corp. 100,000 8,700
Peoples Heritage Financial 1,779,000 32,133
Group, Inc.
Seacoast Financial Services 337,500 3,987
Corp. (a)
UnionBanCal Corp. 1,300,000 46,800
Zions Bancorp 1,701,000 98,658
328,544
CREDIT & OTHER FINANCE - 0.3%
Concord EFS, Inc. (a) 585,400 19,940
SAVINGS & LOANS - 1.5%
Astoria Financial Corp. 234,850 8,939
Charter One Financial, Inc. 2,119,940 54,853
Golden State Bancorp, Inc. (a) 1,404,640 31,078
Golden State Bancorp, Inc. 971,540 1,518
litigation warrants 12/31/99
(a)
Washington Federal, Inc. 554,312 13,685
Webster Financial Corp. 74,100 1,954
112,027
TOTAL FINANCE 460,511
HEALTH - 15.1%
DRUGS & PHARMACEUTICALS - 11.0%
Allergan, Inc. 500,000 47,250
Amgen, Inc. (a) 3,472,700 266,964
Biogen, Inc. (a) 3,405,680 234,353
Centocor, Inc. (a) 304,500 16,976
Chiron Corp. (a) 600,000 15,038
Cytyc Corp. (a) 619,000 15,243
Forest Laboratories, Inc. (a) 407,000 20,859
Genentech, Inc. 7,000 994
Genzyme Corp. (General 100,000 5,656
Division)
Immunex Corp. (a) 927,500 104,692
Martek Biosciences (a) 300,000 2,981
Medimmune, Inc. (a) 287,200 22,940
QLT PhotoTherapeutics, Inc. 134,100 8,569
(a)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Quintiles Transnational Corp. 500,000 $ 19,000
(a)
Sepracor, Inc. (a) 317,200 23,314
804,829
MEDICAL EQUIPMENT & SUPPLIES
- - 1.7%
Biomet, Inc. 389,400 14,164
Boston Scientific Corp. (a) 2,498,000 101,325
Closure Medical Corp. (a) 120,000 2,040
PSS World Medical, Inc. (a) 500,000 5,156
U.S. Surgical Corp. rights 673 0
6/30/00 (a)
122,685
MEDICAL FACILITIES MANAGEMENT
- - 2.4%
Lincare Holdings, Inc. (a)(c) 3,162,500 94,875
Oxford Health Plans, Inc. (a) 1,100,000 19,663
PacifiCare Health Systems, 116,000 7,910
Inc. Class A (a)
Quorum Health Group, Inc. (a) 800,000 8,050
United HealthCare Corp. 300,000 18,300
Wellpoint Health Networks, 348,900 28,653
Inc. (a)
177,451
TOTAL HEALTH 1,104,965
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.9%
ELECTRICAL EQUIPMENT - 0.9%
Adtran, Inc. (a) 300,000 11,344
ANTEC Corp. (a) 400,000 16,775
Ericsson (L.M.) Telefon AB 500,000 16,031
ADR Class B
Oak Industries, Inc. (a) 200,000 8,613
Vicor Corp. (a) 700,000 14,525
67,288
MEDIA & LEISURE - 12.7%
BROADCASTING - 11.6%
AMFM, Inc. (a) 1,846,200 96,926
AT&T Corp. (Liberty Media 3,489,268 129,103
Group) Class A (a)
Cablevision Systems Corp. 650,000 45,378
Class A (a)
CAIS Internet, Inc. 502,900 7,858
Clear Channel Communications, 462,926 32,202
Inc. (a)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Comcast Corp. Class A 11,438,880 $ 440,397
(special)
EchoStar Communications Corp. 280,600 19,186
Class A (a)
MIH Ltd. 275,800 8,067
Sinclair Broadcast Group, 1,625,000 30,773
Inc. Class A (a)
USA Networks, Inc. (a) 700,000 33,556
843,446
RESTAURANTS - 1.1%
Outback Steakhouse, Inc. (a) 2,450,000 81,769
TOTAL MEDIA & LEISURE 925,215
NONDURABLES - 0.6%
FOODS - 0.6%
Nabisco Group Holdings Corp. 2,300,000 43,125
RETAIL & WHOLESALE - 3.4%
APPAREL STORES - 0.3%
Ross Stores, Inc. 416,400 20,039
GENERAL MERCHANDISE STORES -
1.4%
Costco Companies, Inc. (a) 746,400 55,793
Dollar Tree Stores, Inc. (a) 129,750 5,490
Michaels Stores, Inc. (a) 700,000 20,388
Nordstrom, Inc. 264,800 8,325
Stein Mart, Inc. (a) 1,984,400 13,209
103,205
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.7%
Bed Bath & Beyond, Inc. (a) 1,200,000 40,725
PETsMART, Inc. (a) 4,000,000 30,250
Staples, Inc. (a) 1,841,975 53,187
124,162
TOTAL RETAIL & WHOLESALE 247,406
SERVICES - 0.2%
On Assignment, Inc. (a) 178,100 5,076
Robert Half International, 300,000 7,931
Inc. (a)
13,007
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - 33.8%
COMMUNICATIONS EQUIPMENT - 5.6%
Aspect Telecommunications 1,800,200 $ 20,252
Corp. (a)
Cisco Systems, Inc. (a) 3,201,376 198,885
Newbridge Networks Corp. (a) 1,100,000 29,211
Nokia AB sponsored ADR 1,200,000 102,075
Pairgain Technologies, Inc. 100,000 944
(a)
Tellabs, Inc. (a) 1,000,000 61,563
412,930
COMPUTER SERVICES & SOFTWARE
- - 18.7%
Amdocs Ltd. (a) 300,000 7,988
Ariba, Inc. 501,900 44,967
Aspect Development, Inc. (a) 1,161,700 22,944
At Home Corp. Series A (a) 3,766,510 172,082
Audible, Inc. 104,800 1,114
Axent Technologies, Inc. 2,506,400 35,090
(a)(c)
CBT Group PLC sponsored ADR 1,300,000 36,400
(a)
Clarify, Inc. (a) 408,800 13,465
Compuware Corp. (a) 2,007,300 55,703
Concord Communications, Inc. 60,000 2,460
(a)
Electronics for Imaging, Inc. 1,153,300 63,215
(a)
Fiserv, Inc. (a) 893,925 26,650
Genesys Telecommunications 300,000 8,250
Laboratories, Inc. (a)
International Integration, 88,700 1,863
Inc. (a)
Intuit, Inc. (a) 204,400 16,722
ISS Group, Inc. (a) 102,200 2,223
Legato Systems, Inc. (a) 1,219,000 87,159
Microsoft Corp. (a) 7,484,200 642,229
National Instrument Corp. (a) 100,000 4,475
Netegrity, Inc. (a)(c) 700,000 14,700
Networks Associates, Inc. (a) 197,800 3,462
Oracle Corp. (a) 770,500 29,327
Peregrine Systems, Inc. (a) 700,000 20,913
Phone.com, Inc. 2,600 162
Synopsys, Inc. (a) 600,000 36,113
Vantive Corp. (a) 150,000 1,402
VeriSign, Inc. (a) 68,400 5,070
Veritas Software Corp. (a) 200,000 11,225
Visual Networks, Inc. (a) 50,000 1,803
1,369,176
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT
- - 5.5%
Adaptec, Inc. (a) 800,000 $ 31,100
Computer Network Technology 100,000 1,444
Corp. (a)
Comverse Technology, Inc. (a) 1,703,750 128,740
Copper Mountain Networks, 1,600 194
Inc.
Dell Computer Corp. (a) 899,200 36,755
Emulex Corp. (a) 245,300 27,627
F5 Networks, Inc. 10,700 535
Gadzoox Networks, Inc. 302,800 22,786
Juniper Networks, Inc. 12,000 1,949
Maxtor Corp. 1,900,000 10,272
Quantum Corp. (a) 5,331,700 118,964
Sun Microsystems, Inc. (a) 300,000 20,363
400,729
ELECTRONIC INSTRUMENTS - 0.2%
Applied Materials, Inc. (a) 100,000 7,194
Novellus Systems, Inc. (a) 117,000 7,532
14,726
ELECTRONICS - 3.8%
Altera Corp. (a) 233,700 8,472
Arm Holdings PLC sponsored 1,400,000 66,325
ADR (a)
Broadcom Corp. Class A (a) 141,900 17,099
Brocade Communications 226,900 26,859
Systems, Inc.
EFTC Corp. (a)(c) 870,000 2,501
Intel Corp. 1,293,200 89,231
Lattice Semiconductor Corp. 200,000 11,475
(a)
Linear Technology Corp. 200,000 12,275
Microchip Technology, Inc. (a) 200,000 10,025
PMC-Sierra, Inc. (a) 166,800 13,052
Sanmina Corp. (a) 150,000 9,797
Vitesse Semiconductor Corp. 186,100 11,887
(a)
278,998
TOTAL TECHNOLOGY 2,476,559
TRANSPORTATION - 3.3%
AIR TRANSPORTATION - 2.0%
Comair Holdings, Inc. 2,235,000 54,618
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TRANSPORTATION - CONTINUED
AIR TRANSPORTATION - CONTINUED
Midwest Express Holdings, 641,750 $ 21,338
Inc. (a)
Northwest Airlines Corp. 2,260,400 72,615
Class A (a)
148,571
TRUCKING & FREIGHT - 1.3%
Air Express International 665,800 17,810
Corp.
Expeditors International of 1,304,600 40,524
Washington, Inc.
USFreightways Corp. 560,000 27,650
Yellow Corp. (a) 500,000 8,563
94,547
TOTAL TRANSPORTATION 243,118
UTILITIES - 11.3%
CELLULAR - 1.1%
QUALCOMM, Inc. 403,600 62,962
UnitedGlobalCom, Inc. (a) 269,400 20,373
83,335
ELECTRIC UTILITY - 0.1%
Illinova Corp. 157,000 5,161
GAS - 0.3%
Columbia Gas System, Inc. 249,200 14,827
Dynegy, Inc. 200,000 4,800
19,627
TELEPHONE SERVICES - 9.8%
Intermedia Communications, 200,000 5,513
Inc. (a)
Level 3 Communications, Inc. 100,000 5,300
(a)
MCI WorldCom, Inc. (a) 7,086,204 584,612
McLeodUSA, Inc. Class A (a) 2,157,400 64,317
Metromedia Fiber Network, 911,200 29,272
Inc. Class A (a)
Pacific Gateway Exchange, 100,000 2,450
Inc. (a)
Qwest Communications 219,500 6,475
International, Inc. (a)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Time Warner Telecom, Inc. 190,000 $ 5,914
WinStar Communications, Inc. 300,000 15,750
(a)
719,603
TOTAL UTILITIES 827,726
TOTAL COMMON STOCKS 6,952,551
(Cost $4,881,728)
CASH EQUIVALENTS - 5.0%
MATURITY AMOUNT (000S)
Investments in repurchase $ 4,972 4,970
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.06%,
dated 7/30/99 due 8/2/99
SHARES
Taxable Central Cash Fund (b) 364,368,933 364,369
TOTAL CASH EQUIVALENTS 369,339
(Cost $369,339)
TOTAL INVESTMENT IN $ 7,321,890
SECURITIES - 100%
(Cost $5,251,067)
</TABLE>
LEGEND
(a) Non-income producing
(b) At period end, the seven-day yield on the Taxable Central Cash
Fund was 5.06%. 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
INCOME TAX INFORMATION
At July 31, 1999, the aggregate cost of investment securities for
income tax purposes was $5,276,833,000. Net unrealized appreciation
aggregated $2,045,057,000, of which
$2,278,852,000 related to appreciated investment securities and
$233,795,000 related to depreciated investment securities.
The fund hereby designates approximately $275,332,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNT) JULY 31, 1999
ASSETS
Investment in securities, at $ 7,321,890
value (including repurchase
agreements of $4,970) (cost
$5,251,067) - See
accompanying schedule
Receivable for investments 14,301
sold
Receivable for fund shares 14,455
sold
Dividends receivable 191
Interest receivable 1,566
Other receivables 1,621
TOTAL ASSETS 7,354,024
LIABILITIES
Payable for investments $ 27,805
purchased
Payable for fund shares 23,736
redeemed
Accrued management fee 3,198
Other payables and accrued 1,686
expenses
TOTAL LIABILITIES 56,425
NET ASSETS $ 7,297,599
Net Assets consist of:
Paid in capital $ 4,496,929
Accumulated undistributed net 729,843
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 2,070,827
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS, for 141,613 $ 7,297,599
shares outstanding
NET ASSET VALUE, offering $51.53
price and redemption price
per share ($7,297,599
(divided by) 141,613 shares)
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS YEAR
ENDED JULY 31, 1999
INVESTMENT INCOME $ 12,789
Dividends
Interest 19,224
TOTAL INCOME 32,013
EXPENSES
Management fee Basic fee $ 35,418
Performance adjustment (7,619)
Transfer agent fees 12,241
Accounting fees and expenses 881
Non-interested trustees' 31
compensation
Custodian fees and expenses 118
Registration fees 766
Audit 59
Legal 31
Miscellaneous 6
Total expenses before 41,932
reductions
Expense reductions (831) 41,101
NET INVESTMENT INCOME (LOSS) (9,088)
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 756,541
(including realized gain
(loss) of ($17,710) on
sales of investments in
affiliated issuers)
Foreign currency transactions (75) 756,466
Change in net unrealized 1,083,299
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 1,839,765
NET INCREASE (DECREASE) IN $ 1,830,677
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED JULY 31, YEAR ENDED JULY 31,
1999 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ (9,088) $ (13,687)
income (loss)
Net realized gain (loss) 756,466 564,676
Change in net unrealized 1,083,299 (90,852)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,830,677 460,137
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (266,093) (272,886)
from net realized gains
Share transactions Net 4,757,859 3,562,844
proceeds from sales of shares
Reinvestment of distributions 260,154 267,122
Cost of shares redeemed (3,777,986) (3,547,368)
NET INCREASE (DECREASE) IN 1,240,027 282,598
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 2,804,611 469,849
IN NET ASSETS
NET ASSETS
Beginning of period 4,492,988 4,023,139
End of period $ 7,297,599 $ 4,492,988
OTHER INFORMATION
Shares
Sold 108,722 94,593
Issued in reinvestment of 8,336 7,806
distributions
Redeemed (87,687) (94,757)
Net increase (decrease) 29,371 7,642
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 40.03 $ 38.46 $ 31.20 $ 31.09 $ 22.42
period
Income from Investment
Operations
Net investment income (loss) (.07) C (.12) C (.05) C .13 .09
Net realized and unrealized 13.95 4.21 11.71 1.80 8.79
gain (loss)
Total from investment 13.88 4.09 11.66 1.93 8.88
operations
Less Distributions
From net investment income - - (.08) (.02) (.09)
From net realized gain (2.38) (2.52) (4.32) (1.80) (.12)
Total distributions (2.38) (2.52) (4.40) (1.82) (.21)
Net asset value, end of period $ 51.53 $ 40.03 $ 38.46 $ 31.20 $ 31.09
TOTAL RETURN A, B 38.54% 11.87% 41.43% 6.43% 39.98%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,298 $ 4,493 $ 4,023 $ 2,635 $ 2,110
(in millions)
Ratio of expenses to average .75% .76% .85% .83% .82%
net assets
Ratio of expenses to average .74% D .75% D .84% D .82% D .81% D
net assets after expense
reductions
Ratio of net investment (.16)% (.32)% (.15)% .42% .35%
income (loss) to average net
assets
Portfolio turnover rate 117% 125% 147% 133% 62%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE FORMER 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended July 31, 1999
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 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
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 is accrued as earned. Investment
income is
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT INCOME - CONTINUED
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, 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 net investment loss and 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.
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.
2. OPERATING POLICIES - CONTINUED
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.
(FIMM), 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 $6,810,694,000 and $6,113,107,000, 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 rate of .50% of average net
assets after the performance adjustment.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD. For the period, Fidelity Distributors Corporation (FDC),
an affiliate of FMR and the general distributor of the fund, received
sales charges of $68,000 on sales of shares of the fund all of which
was retained. Effective September 30, 1998, the fund's 3% sales charge
was eliminated.
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 .22% 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 $173,000 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 $539,000 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 $285,000, 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS WITH
AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE
Aspect Telecommunications $ 1,857 $ 6,795 $ - $ -
Corp.
Axent Technologies, Inc. 15,328 - - 35,090
Davox Corp. 2,125 10,128 - -
EFTC Corp. 543 - - 2,501
Galileo Technology Ltd. 1,742 14,937 - -
Lattice Semiconductor Corp. - 1,282 - -
Lincare Holdings, Inc. 6,116 - - 94,875
Netegrity, Inc. - - - 14,700
TOTALS $ 27,711 $ 33,142 $ - $ 147,166
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Securities Fund and the Shareholders of
Fidelity OTC 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 OTC Portfolio (a fund of Fidelity Securities Fund) at July
31, 1999, 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 OTC
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,
1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 8, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity OTC Portfolio voted to pay on
September 7, 1999, to shareholders of record at the opening of
business on September 3, 1999, a distribution of $4.16 per share
derived from capital gains realized from sales of portfolio
securities.
A total of 11% of the dividends distributed during the fiscal year
qualifies for the dividends-received deduction for corporate
shareholders.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
OF SPECIAL NOTE
INTRODUCING FIDELITY'S NEW, REORGANIZED PROSPECTUS
Recently, the SEC issued new disclosure requirements for all mutual
fund prospectuses. While Fidelity could have complied by simply
following the new requirements, we saw a different opportunity. We saw
the chance to create a brand new prospectus: one that is better
organized, easier to use and more informative than ever.
The new format of the Fidelity mutual fund prospectus puts the
information you need to make informed investment decisions right at
your fingertips. In the opening pages, you will find the SEC-mandated
summary that highlights the fund's investment objectives, strategies
and risks. There's also an easy-to-read performance chart and fee
table right up front.
Inside, you will find additional features we've introduced to make the
fund prospectus a more useful tool. In our new Shareholder Information
section, for example, we have provided practical, beneficial
information - from how to buy or sell shares, key contact information,
investment services, ways to set up your account and more - all in one
convenient location.
We invite you to spend a moment and review our new prospectus. It is
designed to help make your investment decision easier, no matter which
of the Fidelity funds you invest in.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-7272 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 75039-5517
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 75039-5517
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
Bart A. Grenier, Vice President
Robert Bertelson, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy 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-0999 83750
1.536191.102
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
FIDELITY'S GROWTH FUNDS
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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)
Fidelity Automated Service
Telephone (FASTSM) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com